The Ultimate Guide to Paying Income Tax
Paying bills suck and it just screams “ADULTHOOD” but did you know that the personal income tax rate in Singapore is one of the lowest globally? Let’s just heave a sigh of relief for a moment. To put into perspective, Singapore’s personal income tax rate is around 22% compared to Japan which is around 55.97%! To take some stress off your shoulders, here is a guide on how to pay income tax so you have one less thing to worry about.
You will have to pay taxes for any Year of Assessment if you derive or receive income in Singapore through a full time job, self-owned business, investments etc… and yes, even if you are working outside of Singapore under a Singapore employment status.
Additionally, if you earn $22,000 or more annually, you are either a Singaporean or Permanent Resident or you are a foreigner who has either stayed or worked in Singapore for at least 183 days before the Year of Assessment, you will have to pay taxes.
Good news, not everything is taxable, yay! Let’s find out what we have to pay taxes for and what we don’t.
Income from your job be it through employment or self-owned business, salary bonuses, income from rental or director’s fees are all considered taxable income.
While, income for CPF LIFE payouts, gains from stock and property investments and windfall profits such as winnings from your 4D and TOTO are not considered taxable income.
Singapore’s income tax rates are progressive, meaning the more money you make the more income tax you pay. The highest percentage now being at 22%. To calculate your income tax, click here for the IRAS Income Tax Calculator.
Do not worry, for people under certain circumstances, the government does provide some form of tax relief! Here is a list of the some tax reliefs that are available, for more information of the different types of reliefs and whether or not you qualify click here.
- CPF Relief
- Parent Relief
- Child Relief
- Grandparent Caregiver Relief
If you top up your Special, Retirement or Medisave Account, you can have tax relief of up to $8000. Plus, if you top up your family member’s Special, Retirement and Medisave Account, you can get an additional $8000 of tax relief under the CPF Tax relief scheme.
For Parent Relief, your parent must have been living in your house in Singapore or if he/she does not stay with you, you must have spent at least $2000 or more supporting him/her. In addition to that, he/she must be at least 55 years old and not have an annual income of more than $4000.
The amount of tax relief depends on whether or not your parents stay with you. If they do then the amount of tax relief you get is $9000 and if they do not the amount of relief is $5500.
To be eligible for Qualifying Child Relief (QCR), your child would have to be born by you/ a step-child/ legally adopted, below 16/ studying full-time and not have an annual income of $4000 and above. The amount of tax relief for QCR is $4000/child.
For handicapped children, your child would have to be mentally disabled/ physically disabled and be either born by you/ a step-child or legally adopted. The amount of tax relief for handicapped children is $7500.
In order to get GCR, you would have to be a working mother, that is either married/ divorced or widowed.
Next, your parent, grandparent, parent-in-law or grandparent-in-law would have to be living in Singapore, looking after your child that is below 12/ unmarried handicapped children (Children must be a Singapore Citizen).
Finally, no one else has claimed GCR with you being the caregiver. The amount of relief you can get is $3000.
Phew, that was a mouthful. These are just some examples of the most common tax reliefs that people apply for and good news is that there are many more! To know more on what you can apply for, take some time to explore the IRAS website.
Taxes can be filed online at the IRAS website via the myTax Portal anytime between 1st March - 18th April every year. The income tax you are filing for is for the income you have earned from the previous year. If you are not filing your tax online, you will have to send in the hardcopy version of the form to IRAS Headquarters by 15th April.
Most people would pay their income tax via GIRO either through a one-time payment or through 12-month interest free instalments. Payment can also be made using e-payment modes such as internet / phone banking, Paylah, Paynow, AXS, SAM or NETS (at post offices).
Not paying your taxes on time is considered an offence and if that happens you will incur a composition amount, not exceeding $5000, and may be summoned into court.
On the other hand, if it is past the deadline, you will have a month from the date of the Notice Of Assessment(NOA) to pay your income tax. There will also be a late penalty of 5% for the first month and an additional 1% per month after that.
To add on even more damage…if you do not pay your taxes 60 days after the 5% late penalty was imposed, you can be imposed a higher tax of up to 12% on your unpaid taxes!
So remember everyone, please pay your taxes on time, not good to make the gahmen angry ok?