Ways expats can pay less income tax in Singapore

Legal Expat Singapore - Legal Online Consultations > Others > Ways expats can pay less income tax in Singapore

Singapore is one of the most tax-friendly places for expats: no capital gains, no inheritance tax, and foreign income kept offshore is generally tax-free. But how much you pay is not fixed. Your residency, pay structure, and exit timing all factor into how much you pay.

Tax Residency Status

Firstly, you must determine whether you are a tax resident in Singapore. Tax residents get lower rates and access to personal reliefs (e.g. earned income, spouse, child, parent, and course fees relief), while non-residents typically pay a flat rate of 15% on their income and cannot claim reliefs.

To be considered a tax resident in Singapore, you need to satisfy one of the following criteria:

      • The 183 Day Rule: A foreign employee qualifies as a tax resident if they are physically present in Singapore for 183 days or more during the calendar year before the tax year
      • The 3 Year Concession: You are a foreign employee who has worked in Singapore for a continuous period of 3 consecutive years. You are treated as a resident for all three years, even if you spend fewer than 183 days in the first or last year
      • The 2 Year Concession: You are a foreign employee who has worked in Singapore for a continuous period of two calendar years, and your total period of stay is at least 183 days. This does not apply to company directors, public entertainers, or self-employed professionals.

Ways To Reduce Your Tax Bill

After establishing tax residency in Singapore, you may consider the following approaches to minimise your tax liability.

Tax residents can claim a range of reliefs that directly reduce your taxable income. The total cap is S$80,000 per Year of Assessment. Common examples include earned income relief, spouse or child relief, course fees relief, and parent relief.

When you file your tax return electronically via the myTax Portal, you will be prompted to declare your eligibility and enter the amounts for the reliefs you wish to claim.

You may also consider contributing to the Supplementary Retirement Scheme (“SRS”). The SRS is a tax-deferred savings scheme open to foreigners in Singapore. For every S$1 you put into your SRS account, your taxable income for that year goes down by S$1. This is capped at  S$35,700 per year. Furthermore, your contributions grow tax-free until withdrawal.

When you withdraw your SRS savings at retirement age (currently 63), only half of the amount you take out is taxed. If you are an expat leaving Singapore permanently, you can withdraw your entire SRS balance in one go, as long as your account has been open for at least 10 years. Only half of the amount is taxable. However, if you withdraw early (before age 63 and before the 10 year period is up), you will face a 5% penalty, and the full amount you withdraw will be taxed, not just half.

All SRS contributions and other personal reliefs you claim are subject to an overall cap of S$80,000 per year. This means the total amount of tax relief you can get from all sources (i.e. SRS, CPF, and other reliefs) cannot exceed S$80,000 in any single year.

As a tax resident, foreign income not brought into Singapore is generally not taxable. Where possible, keep overseas earnings abroad.

It is important to note that this does not apply to the following:

      • Income from overseas work that is part of your Singapore job (e.g., business trips);
      • Income from a business operated in Singapore, including its overseas activities;
      • Income received through a Singapore-based partnership;
      • Income earned while working in Singapore for a foreign employer; or
      • Income from working overseas for the Singapore Government.

The Foreign Tax Credit (“FTC”) system allows Singapore tax residents to claim a credit for foreign taxes paid on income that is also taxable in Singapore, up to the lower of the foreign tax paid or the Singapore tax payable.

To claim, you must file your annual Income Tax Return and provide supporting documents (e.g., foreign tax receipts) proving that tax was paid overseas.

How your pay is structured can affect how much tax you owe. If you hold unvested shares or options and you leave Singapore permanently before they vest, IRAS may treat them as taxable income on your last day of employment under the “deemed exercise” rule, even though you have not yet received them.

For more detail on this, see our separate article: What Happens to Your Unvested Shares When You Leave Singapore?

If you have income from multiple sources, investments abroad, or complex cross-border arrangements, a qualified tax advisor can help you identify every relief available to you, avoid double taxation, and stay fully compliant.

Conclusion

Singapore offers expats significant opportunities to reduce their tax bill, but you need to plan ahead. The first step is to ensure you qualify as a tax resident. Once you are a resident, you can reduce your taxable income by claiming all eligible reliefs, contributing to the SRS, keeping foreign income overseas, and claiming the Foreign Tax Credit for taxes paid abroad.

Disclaimer: This article provides general information and does not constitute legal advice. Please seek professional advice for your specific situation.

Do reach out to us at Legal Expat if you require professional advice. We have a team of qualified lawyers that can assist you. Email us at: info@legalexpat.sg or drop us a WhatsApp at: +65 8093 4393 if you require assistance.