If you are a foreigner living or working in Singapore, it is important to understand the tax system in the country. This guide will provide you with all the essential information you need to know about Singapore’s tax system, including the types of taxes you need to pay, the tax rates, and the tax exemptions that are available to foreigners.
Introduction
Singapore is known for its low tax rates and simple tax system, making it an attractive destination for foreign investors and expatriates. The country has a territorial tax system, which means that taxes are only imposed on income earned within Singapore. In this article, we will discuss the different types of taxes that foreigners need to pay in Singapore and the exemptions that they may be eligible for.
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Types of Taxes in Singapore
Personal Income Tax
Foreigners who work in Singapore are subject to personal income tax, which is calculated based on their taxable income earned in Singapore. The tax rates for foreigners are progressive, ranging from 0% to 22%.
Corporate Tax
Foreign companies that operate in Singapore are subject to corporate tax, which is currently at a flat rate of 17%. This tax is imposed on the company’s profits earned in Singapore or foreign-sourced income that is remitted to Singapore.
Goods and Services Tax (GST)
GST is a value-added tax imposed on the sale of goods and services in Singapore. The current GST rate is 7%, and it is charged on most goods and services, including imports.
Property Tax
Foreigners who own property in Singapore are subject to property tax, which is calculated based on the annual value of the property. The tax rates range from 0% to 20%.
Withholding Tax
Withholding tax is a tax on income earned by non-residents in Singapore. The tax is deducted by the payer and remitted to the Inland Revenue Authority of Singapore (IRAS).
Tax Exemptions for Foreigners
Not Ordinarily Resident (NOR) Scheme
Foreigners who are not ordinarily resident in Singapore may be eligible for tax exemptions under the NOR scheme. Under this scheme, only income earned in Singapore is subject to tax, and foreign-sourced income is exempt.
Double Taxation Agreements (DTAs)
Singapore has signed DTAs with more than 80 countries to avoid double taxation of income earned by foreigners. Under these agreements, foreign-sourced income may be exempt from tax in Singapore or taxed at a reduced rate.
Avoidance of Double Taxation (ADT) Scheme
Foreigners who are not eligible for the NOR scheme or DTAs may still be eligible for tax exemptions under the ADT scheme. Under this scheme, foreign tax paid on income earned overseas may be credited against the Singapore tax payable on the same income.
Conclusion
In conclusion, Singapore’s tax system is relatively simple and attractive to foreigners. Foreigners who work or invest in Singapore should understand the different types of taxes that they are subject to, as well as the tax exemptions that they may be eligible for. By doing so, they can minimize their tax liability and maximize their returns.
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