In this article, we will cover:
- In which case can you be taxed from Singapore while working abroad?
- Administrative concession for SG and PR working abroad
- More about the tax residency in Singapore
- Conclusion
The IRAS will remove the administrative tax concession for Singapore citizens and PR (Permanent Residents) working abroad which allowed them the choice of being treated as non-residents, from the year of assessment 2021. As a result, all Singapore citizens or Permanent Residents working overseas will be regarded as tax residents.
In which case can you be taxed from Singapore while working abroad?
The implication is that income from overseas employment will be subject to Singapore income tax when remitted to Singapore.
An individual who is a resident of Singapore for tax purposes is taxable on his income derived from Singapore as well as income from overseas remitted to Singapore. A non-resident individual is taxable on his income derived from Singapore only. A Singaporean who goes on his own or is sent by his employer to work overseas is treated as a tax resident during the period of his overseas employment because he intends to return to Singapore. Consequently, he is taxed in Singapore on that portion of his overseas employment income which he remits to Singapore.
Should his overseas employment be already taxed there, credit for the foreign tax is allowed if the country he works in has a tax treaty with Singapore or is one of the countries where credit for foreign tax is allowed without a tax treaty.
Administrative concession for SG and PR working abroad
To remove any disincentive for Singaporeans to work abroad, IRAS had, as an administrative practice, been allowing individual taxpayers the choice of being treated as non-residents for any year of assessment where they have been employed abroad during the whole of the year preceding the year of assessment. In this way, they were not taxed on the foreign income that they remitted to Singapore during the year of absence.
IRAS has announced that the administrative concession will be removed with effect from YA 2021 (i.e. calendar year 2020).
Singapore citizens and PR should plan their expatriation efficiently to avoid double taxation in their country of residence and in Singapore. In this connection, Singaporeans working overseas should avoid extending personal home trips into work days in Singapore. Additionally, employers and/or employees would need to keep track of the work days spent in Singapore to help ensure tax reporting requirements are complied with.
More about the tax residency in Singapore
Tax residency in Singapore refers to the status of an individual or a company for tax purposes. Being a tax resident in Singapore can have significant benefits such as access to tax incentives, a lower tax rate, and ease of doing business.
Criteria for Tax Residency in Singapore
You are a tax resident for a particular Year of Assessment if you are a:
- Singapore Citizen or Singapore Permanent Resident (SPR) who normally resides in Singapore except for temporary absences; or
- Foreigner who has stayed/worked in Singapore:
- for at least 183 days in the previous calendar year; or
- continuously for 3 consecutive years; or
- Foreigner who has worked in Singapore for a continuous period straddling 2 calendar years and your total period of stay* is at least 183 days. This applies to foreign employees who entered Singapore but excludes directors of a company, public entertainers or professionals.
- * including your physical presence immediately before and after your employment.
Advantages of Being a Tax Resident in Singapore
Being a tax resident in Singapore has several advantages:
- Capital gains tax exemption – Singapore does not have a capital gains tax, which means that tax residents are not taxed on gains from the sale of investments, such as stocks or property.
- Foreign-sourced income exemption – Singapore provides tax exemption for foreign-sourced income received by tax residents in Singapore, subject to certain conditions.
- Lower tax rate – Singapore has a progressive tax system, and the tax rates for residents are lower than those for non-residents.
- Ease of doing business – Tax residents in Singapore enjoy several benefits such as lower corporate tax rates, access to tax treaties, and a business-friendly environment.
How to apply for a Certificate of Residence
All Certificate of Residence (COR) applications have to be filed via mytax.iras.gov.sg, except for specific circumstances.
You can apply for a COR via mytax.iras.gov.sg for:
- The current calendar year
- Up to 4 back calendar years
For example, in the calendar year 2021, the company may apply for a COR for the calendar years 2020 to 2017. The company may also apply for a COR for 1 advance calendar year starting from Oct of the current calendar year.
Conclusion
In summary, the IRAS’s decision to remove the administrative tax concession for Singapore citizens and PRs working abroad means that they will now be regarded as tax residents, subject to Singapore income tax on overseas employment income remitted to Singapore. This underscores the need for careful tax planning to avoid double taxation. Understanding tax residency criteria and leveraging available exemptions and treaties will be crucial. Despite the challenges, staying informed and proactive in tax planning can help individuals navigate these changes effectively.
If you need further clarification or additional information regarding these updates, please feel free to reach out to MBiA without delay! We’re here to assist you.
