Determining Your Tax Residency Status – Why It Matters

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Your tax residency status plays a pivotal role in determining whether an individual staying in Singapore is eligible for paying personal income tax.

• Non-tax residents are taxed at a flat rate of 24% (except for Singapore employment income which is taxed at a flat rate of 15%, and some types of income are taxed at a reduced withholding rate)
  
  versus

• Much lower progressive tax rates for tax residents

  • For instance, a Singapore tax resident with an annual income of up to S$100,000 would pay roughly 6% in effective tax rate.

Broadly, your tax residence is determined by your period of stay and the number of days you’re under employment in Singapore.

Tax Resident Singapore

You are classified as a tax resident if you stay or work in Singapore:

• For at least 183 days in a calendar year

• For at least 183 days for a continuous period of 2 years

• Continuously for 3 consecutive years

In calculating your days of Singapore employment, weekends and public holidays are usually considered. Temporary absence from Singapore due to travels like vacation, leave, or business trips are also included.

As a Singapore tax resident, you will be:

• Taxed on annual income earned in Singapore (taxable income)

• Taxed on income after tax relief deductions (or any tax deduction) at progressive resident rates

• Taxed on foreign sourced income brought in Singapore before 1st Jan 2007

Exempted from tax for foreign sourced income or individual income brought in Singapore on or after the 1st Jan 2007 as long as it is not received through partnerships in Singapore.

Non tax resident Singapore

Non-tax residents refer to individuals who have stayed and worked in Singapore for less than 183 days. A non-resident individual is required to file for income tax returns by filling out form M and failing to do so would incur a late penalty from IRAS. Business owners who manage their Singapore business remotely or frequently travel in and out of the city belong to this group. Oftentimes, a convenient option would be to outsource to a professional tax preparation services provider.

As non-tax residents:

• You are only taxed on individual income earned in Singapore

• You are not entitled to tax relief

• Your employee income is taxed at a flat 15% personal income tax rate or the progressive resident rates, whichever is higher.

• Other income earned from Singapore or directors fee is taxed at a prevailing non resident tax rate of 24% for YA 2024 and onwards.