Reducing tax liability while working in Singapore involves utilizing various tax reliefs, deductions, and strategies provided by the Inland Revenue Authority of Singapore (IRAS). Here are some options:
1. Personal Reliefs and Deductions
- Earned Income Relief: Available for all working individuals, with higher relief for elderly and disabled workers.
- Spouse Relief: Available if you have a spouse who is not working and has little or no income.
- Child Relief: Qualify for this relief if you have children, including qualifying conditions such as age and income thresholds.
- Parent Relief: Claimable if you support your parents, grandparents, or great-grandparents.
- Handicapped Dependent Relief: Available for supporting a handicapped spouse, child, sibling, or parent.
- Working Mother's Child Relief (WMCR): Available for working mothers with Singaporean children. 1st child is 15%, 2nd child is 20%, 3rd child is 25%.
- Life Insurance Relief: Applicable if the total annual CPF contribution is less than the mandatory CPF contribution for someone with the same income. Max is $5k per year but if you have contribute more than that you will not be able to claim the relief.
2. CPF Contributions
- Central Provident Fund (CPF) Contributions: Contributions to CPF accounts are mandatory for Singapore citizens and permanent residents and provide tax relief. This is capped at $102k per year or $20.4k per year contribution.
3. Supplementary Retirement Scheme (SRS)
- Contributions to the SRS are voluntary but offer tax benefits. Contributions are eligible for tax relief, and investment returns are tax-free until withdrawal, which is partially taxed. Max relief is $15.3k per year which i advocate to only contribute only by end of the year.
4. Charitable Donations
- Donations to approved Institutions of Public Character (IPCs) can be claimed for tax deductions at 2.5 times the amount donated.
5. Course Fees Relief
- Relief for courses that enhance your skills and knowledge relevant to your employment. The maximum amount claimable is SGD 5,500 per year.
6. NSman (Self/Wife/Parent) Relief
- Available for National Servicemen (NSmen), their wives, and parents.
7. Rental Expenses
- Deduct rental-related expenses from the rental income if you earn income from renting out property.
8. Not Ordinarily Resident (NOR) Scheme
- If you qualify as a NOR taxpayer, you can enjoy time apportionment of employment income and tax exemption on employer's contributions to non-mandatory overseas pension funds. This scheme is applicable for a maximum of 5 years and has certain qualifying conditions.
9. Foreign Tax Credit (FTC)
- If you pay taxes on foreign-sourced income, you may be eligible for FTC to avoid double taxation.
10. Tax Exemptions and Incentives
- Equity Remuneration Incentive Scheme (ERIS): Provides tax incentives for gains derived from Employee Share Options (ESOP) and Employee Share Ownership (ESOW).
- Double Tax Deduction for Internationalisation (DTDi): For businesses investing in overseas expansion.
Tax Planning Strategies
- Timing of Income: Consider timing the receipt of income to a different tax year if it reduces tax liability.
- Income Splitting: If feasible, distribute income among family members to benefit from lower marginal tax rates.
- Tax-Efficient Investments: Invest in schemes and instruments that offer tax benefits.
Consultation with a Tax Advisor
- Given the complexity of tax regulations and individual circumstances, it’s often beneficial to consult with a tax advisor or accountant who can provide tailored advice and help optimize your tax situation.
By leveraging these reliefs, deductions, and strategies, you can effectively reduce your tax liability while working in Singapore
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