Singapore is by far one of the best places in Southeast Asia to reside in. The taxes that we pay are what keeps society running, and enables the government to make continual improvements and strive to keep this country in pole position.
If you are a Singapore citizen, permanent resident, or a foreigner who has stayed and worked in Singapore for more than 60 days in that particular year, you will have to contribute income tax. Singapore’s personal income tax rates are also progressive, meaning the more you earn, the more you will need to contribute.
For 2017, the personal tax rate can go up to 22% if you’re a high-income earner. Depending on the tax bracket that you’re in, the amount you need to contribute might be more or less.
Here’s how income tax is calculated. Basically, you are taxed based on your chargeable income for that year, which is the amount left after deducting any personal relief from your assessable income. According to the Inland Revenue Authority of Singapore (IRAS), assessable income is defined as “your total income after deducting allowable expenses and approved donations.”
In order to keep your chargeable income for the year low, you should certainly invest some time into figuring out how to obtain more personal income tax relief, and legally reduce your income tax.
For foreigners, however, the rules are slightly different. If you are in Singapore for between 61 to 182 days, you are considered as a non-resident for tax purposes, and therefore are not eligible to claim personal reliefs. Also, your employment income will be taxed at 15% or the progressive resident tax rate, whichever gives rise to a higher tax amount.
If you stay in Singapore for 183 days or more, then you are considered as a tax resident and are therefore eligible for tax reliefs.
We’ve done the research – here are 5 strategies that will help you to get more income tax relief in Singapore.
1) Claim all applicable personal tax relief items
Did you know that there is a huge list of tax reliefs and rebates that automatically apply to you, as long as you are a Singapore citizen and meet the corresponding criteria? Below are some notable items:
- Parent / Handicapped Parent Relief: You can claim this relief as long as you have support dependents such as your parents, grandparents, parents-in-law, and grandparents-in-law for that year, and met the various criteria list on the page.
- NSman Relief (Self, Wife, and Parent): If you had completed your National Service, and performed any NS activities that year, your spouse, parents, and self are eligible for various reliefs under this item.
- Earned Income Relief: As long as you keep proper records, you can claim relief on your earned income for that year, minus allowable expenses (such as entertainment or transportation expenses). The maximum amount claimable ranges from $1,000 to $8,000, depending on your age. For those who are handicapped with permanent physical or mental disabilities, the range increases to $4,000 to $12,000.
- Life Insurance Relief: This item applies to insurance premiums paid on your own policies or those bought on your wife’s life. These are all eligible for tax relief, but only if your total CPF contribution for the year was less than $5,000.
- Foreign Maid Levy Relief: This one’s for the women who have hired a foreign maid, regardless of whether you are married, divorced or widowed with school children. You may claim twice the foreign domestic worker levy that you paid in the previous year on one foreign domestic worker.
- Course Fee Relief: Taking a course, or attending a seminar or conference to up your game professionally? Well, you can now claim the actual course fees incurred by yourself up to a maximum of $5,500 each year.
- Deductions on Rental Expenses: From any income, you receive the rental of a property, you will need to pay tax accordingly. However, you can also claim any expenses that you incur from renting it out, too. Some of the rental expenses you can claim to include interest paid on your housing loan, premiums paid on fire insurance, any repairs done to restore the proper back to its original state, and costs incurred in the process of securing a tenant.
Related article: How to be tax savvy
2) Contribute to the Supplementary Retirement Scheme (SRS)
The Supplementary Retired Scheme (SRS), a voluntary scheme created to address the retirement needs of people residing in Singapore via tax-deductible contributions, deserves special mention. Why? Because all contributions made to the SRS account can be used for investment purposes as well.
All investment gains made through SRS funds are tax-free – you only need to pay tax on 50% of the amount withdrawn upon retirement, which certainly makes it worth your while.
As of 2017, Singapore citizens and permanent residents can get tax relief up to $15,300, while foreign individuals can put in a larger sum at $35,700. You can open an SRS account at any one of the three local operators: DBS, OCBC, or UOB.
3) Voluntarily top-up your CPF
You probably know that every dollar that you contribute to your CPF is eligible for tax relief. But did you know that, beyond mandatory contributions, you can voluntarily contribute more until the limit is met, and hence be eligible for further tax relief?
As of 2017, the CPF contribution limit stands at $37,740. You can opt to contribute to all three accounts – the Ordinary Account, Special Account, and Medisave Account – or just the Medisave Account alone.
To take full advantage of this, be sure to top-up all 3 accounts. This will ensure you and your loved one’s contributions to the Medisave Account and Special Account are maxed out, and you can snag that extra 4% interest per annum for both. Under the CPF Investment Scheme, you can even use the money in your Ordinary Account for investment purposes, but that’s a story for another day.
4) Donate to a tax-deductible charity
It’s a great thing to have the capacity to donate to a good cause, and now you have one more reason to do so. Cash donations made to approved Institutions of Public Character (IPCs) qualify for tax deductions immediately.
In fact, to encourage and foster civic-mindedness, the government is upping tax deductions to 250% for qualifying donations made between 1 January 2016 to 31 December 2018, which gives us several more reasons to give more generously this year.
5) Claim business expenses
Finally, if you are self-employed, you can claim tax deductions on all expenses incurred while running your business and generating an income. This might include costs such as transportation or setting up of your website. Naturally, these must be supported by the relevant documents, so be sure to keep those receipts and invoices carefully.
If all this is too overwhelming for you, we can help you get the job done. Our job at Asiabiz is to make sure that income tax filing is done right and on-time.
Related Article: Filing tax returns for Singapore companies
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