Employment income - Taxable employment income includes cash remuneration, wages, salary, leave pay, directors’ fees, commissions, bonuses, gratuities, perquisites, gains received from employee share plans and allowances received as compensation for services. Benefits-in-kind derived from employment, including home-leave passage, employer-provided housing, employer-provided automobiles and children’s school fees, are also taxable.
Under the NOR scheme, a resident employee whose resident status is not accorded under the two-year administrative concession (see Who is liable) may benefit from the following concessions for five consecutive assessment years:
- Time apportionment of employment income
- Tax exemption (with certain exceptions) for the employer’s contributions to non-mandatory overseas pension funds or social security schemes, subject to the CPF maximum contribution limits for “ordinary” and “additional” wages
The NOR scheme has since ceased and the last NOR status granted is from the 2020 assessment year to the 2024 assessment year. Individuals who have been accorded the NOR status will continue to enjoy NOR tax concessions until their NOR status expires if they continue to meet the conditions of the concessions.
To qualify for the NOR scheme, an employee must meet the following conditions:
- They must be a resident for tax purposes in the assessment year in which they wish to apply
- They must not have been a resident for tax purposes in the three assessment years immediately preceding the assessment year in which they wish to apply
To benefit from the time apportionment of employment income, the employee must meet the following additional conditions:
- They must spend at least 90 business days in the calendar year outside Singapore with respect to their Singapore employment
- The employment income of the individual must be at least SGD160,000
- The tax on the apportioned income must be at least 10% of the total Singapore employment income
The time apportionment concession applies to both cash compensation and benefits-in-kind, other than directors’ fees and Singapore tax paid by employers.
Self-employment and business income - Self-employment income subject to tax is based on financial accounts prepared under generally accepted accounting principles. Adjustments are made to the profits or losses according to tax law. Business income is aggregated with other types of income to determine taxable income.
From the 2024 assessment year, the income tax rate for non-resident taxpayers (except on employment income and certain income taxable at reduced withholding rates) will be increased from 22% to 24%.
Income from a trade, business, profession or vocation paid to a non-resident is taxed at 24%.
Income from professional services paid to a non-resident is taxed at 15%. This is a final withholding tax on the gross amount, unless the non-resident professional elects to be assessed at a rate of 24% on net income.
Losses and excess capital allowances from the carrying on of a trade, business, profession or vocation may be offset against all other chargeable income of the same year. Any unused trade losses and capital allowances can be carried forward indefinitely for offset against future income from all sources, subject to certain conditions.
Relief is also available for the carry back of current year unused capital allowances and trade losses, subject to the satisfaction of certain conditions.
Investment income - Under the one-tier system, dividends paid by Singapore tax-resident companies are exempt from income tax in the hands of shareholders, regardless of whether the dividends are paid out of taxed income or tax-free gains.
Dividends, other than tax-exempt and one-tier dividends, are taxed at the applicable income tax rates.
Singapore-source investment income (that is, income that is not considered to be gains or profits from a trade, business or profession) derived directly by individuals from specified financial instruments, including standard savings, current and fixed deposits, is exempt from tax. Examples of such income include interest from debt securities, annuities and distributions from unit trusts.
Interest (excluding tax-exempt interest from approved banks, finance companies, qualifying debt securities and qualified project debt securities) paid to non-residents is generally taxed at 15%.
Royalties for the use of, or right to use, movable property and scientific, technical, industrial or commercial knowledge or information paid to non-residents are generally taxed at 10%.
Net rental income is aggregated with other types of income and taxed at the applicable rates.
Rental income or other payments for the use of movable property paid to non-residents is taxable at 15%.
Taxation of employer-provided stock options and share ownership plans - Employer-provided stock options are taxed at the time of exercise, not at the time of grant. Share awards are taxable at the time of award or at the time of vesting, if a vesting period is imposed. The taxable amount is the open market value of the shares at the time of exercise, award or vesting, less the amount paid by the employee, if any.
Stock options and share awards granted during overseas employment are not subject to tax even if the stock options are exercised or the share awards are vested while the taxpayer is exercising employment in Singapore. The non taxable position also applies even if the gains derived are remitted into Singapore while the employee is a tax resident, because all foreign-source income received in Singapore (other than through partnerships) by resident individuals is exempt from tax.
Stock options and share awards granted on or after 1 January 2003 while the employee is engaged in employment in Singapore are subject to tax, regardless of where the options are exercised or shares are vested. The is a complex area and professional advice should be sought. Any additional gain derived from the subsequent sale of the shares is normally capital in nature and is not taxable.
