Taxation of foreign employees working in Singapore

Singapore is known for being a global business hub, attracting businesses and workers from all over the world. As a result, the Singapore government has put in place a robust tax system that aims to ensure that everyone, including foreigners working in Singapore, contributes their fair share of taxes to the economy. In this article, we will explore the Singapore Income Tax for Foreigners and what foreign employees working in Singapore need to know about it.

Tax Rates for Foreign Employees

Singapore has a progressive tax system, which means that the more a person earns, the higher the tax rate they pay. The tax rates for foreigners working in Singapore are the same as those for Singapore citizens and Permanent Residents (PRs). However, the tax rates for non-tax residents are higher, as they do not receive personal reliefs and are not eligible for certain tax exemptions.

For tax residents, the tax rates range from 0% to 22%, depending on the amount of income earned. The first $20,000 of income is tax-exempt, and there are various personal reliefs and tax exemptions available to reduce the tax burden for tax residents.

Taxation of Employment Income

Employment income refers to income earned from employment, including salaries, bonuses, and allowances. Foreign employees working in Singapore are taxed on their employment income, regardless of whether the income is paid in Singapore or overseas. This includes income earned while working from home in Singapore during the COVID-19 pandemic.

Foreign employees may also receive benefits such as stock options, housing allowances, and relocation allowances. These benefits are also taxable, and the tax treatment depends on whether the employee is a tax resident or non-tax resident.

Taxation of Foreign-sourced Income

Foreign employees working in Singapore may also have income from overseas sources, such as rental income from a property in their home country. In general, foreign-sourced income is not taxable in Singapore for non-tax residents. However, tax residents are taxed on their foreign-sourced income, but they may be eligible for foreign tax credits to avoid double taxation.

Foreign Tax Credits and Double Taxation Agreements

To avoid double taxation, Singapore has signed Double Taxation Agreements (DTAs) with over 90 countries. These agreements ensure that foreign employees are not taxed twice on the same income by both Singapore and their home country. Under DTAs, foreign employees may also be eligible for foreign tax credits, which allow them to offset taxes paid in their home country against their Singapore tax liability.

Tax Filing Obligations

Foreign employees working in Singapore are required to file their taxes annually by April 15th of the following year. Taxpayers can file their taxes online using the Inland Revenue Authority of Singapore (IRAS) website. Taxpayers are also required to keep accurate records of their income and expenses for at least five years, in case of an audit.

Foreign employees working in Singapore are subject to Singapore Income Tax, and their tax residency status determines which types of income are taxable. Tax residents are taxed on their income earned in Singapore and overseas, while non-tax residents are only taxed on income earned in Singapore. The tax rates for foreign employees are the same as those for Singapore citizens and PRs, but non-tax residents may have a higher tax burden. To avoid double taxation, foreign employees may be eligible for foreign tax credits and DTAs. Find out more about the taxation policy of Singapore on foreigners.