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Topic 1
INTRODUCTION TO
SINGAPORE TAX SYSTEM
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Associate Professor Wu Bang Wen

T: 6592 1047
Email: wu.bangwen@singaporetech.edu.sg
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OUTLINE
• Introduction & Overview (Module Profile)

• Legislative Framework for Taxation

• Income Tax Administration

• Structure of Income Tax Act

• Basic Tax Concepts

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LEGISLATIVE FRAMEWORK
• Main Tax Statutes
- Income Tax Act
- Goods and Services Tax Act
- Economic Expansion Incentives (Relief from Income
Tax) Act
- Stamp Duties Act

• Subsidiary Legislation
- Comprehensive Tax Treaties
- International Transport Agreement
- Income Tax Regulations, Rules, Orders
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LEGISLATIVE FRAMEWORK
• IRAS Press Statements and e-Tax Guides
- How IRAS interprets and applies certain tax provisions
- Concessions
- Not binding on the Board of Review or the courts

• Case Law
- Board of Review
- High Court
- Court of Appeal
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TAX ADMINISTRATION
• Administered by the Inland Revenue Authority of Singapore (IRAS)

• The Comptroller of Income Tax (CIT) is responsible for the

assessment and collection of income tax

• Scope of taxes
* Income Tax (Personal & Corporate)
* Goods and Services Tax (GST)
* Property tax
* Stamp Duty
* Betting Taxes
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TAX ADMINISTRATION
Types of Returns

Individuals - Form B / B1
Non-Resident Individuals - Form M
Companies - ECI and Form C / C-S
Partnerships - Form P
Clubs, Mgt Corporations and
Pension and provident funds - Form P1
Trusts & Estates - Form T
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Filing deadline (in a nutshell)

Deadline
Individuals / Sole proprietorship, self Paper file 15 April
employed E-file 18 April
Trust, clubs, associations 15 April
Companies YA 2021 Tax returns (FY ending 30 Nov
2020) onwards – E file only

• Companies with FY ending 31 December 2020 (YA 2021) will be required to e-File their
Corporate Income Tax Returns by 30 Nov 2021
• For Company A which has a FY ending 31 March 2020, when is the filing deadline? 30 Nov
2021
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TAX ADMINISTRATION
Employer’s Reporting Requirements for employees
• Form IR8A (Return of Employee’s Remuneration), Appendix 8A,
Appendix 8B and Form IR8S – to give to employee by 1
March.
• Keep proper records for 5 years
• Foreign and Singapore PR employees leaving Singapore - file
Form IR21 (Notification of a non- citizen employee’s cessation of
employment or departure from Singapore) one month prior to
cessation of employment
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Estimated Chargeable Income (ECI)

• All companies must file Estimated Chargeable Income (ECI) within three
months from the end of their financial year except for those that qualify for
the administrative concession and those that are specifically not required
to file.

• ECI is an estimate of the company's taxable income (after deducting tax-

allowable expenses)

• ECI filing is exempted:

i. Annual revenue is not more than $5 million for the financial year; and
ii. ECI is NIL for the YA.
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Estimated Chargeable Income (ECI) - application

Basis Due Date Qualifies

Financial
Period for for YA Revenue ECI for Waiver
Year End
YA 2021 Filing ECI to File ECI?

30 Sept 1 Oct 2019 31 Dec 2021 $5 million $100,000 No

2020 to 30 Sept 2020
2020 $5.1 million Nil No

$5 million Nil Yes

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TAX ADMINISTRATION
Types of Assessment
• Original Assessment
• Additional Assessment
• Amended Assessment
• Advance Assessment
Assessments can be issued within 4 years after the Year of
Assessment, e.g. YA 2020 assessments must be raised latest by
31 Dec 2024
No time limit for fraud
Assessment waived if tax is $15 or less
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TAX ADMINISTRATION
Tax Payment
• Individual and corporate taxpayers can elect to pay their
current YA tax liability by instalments via GIRO
• Individuals – Max 12 interest free monthly instalment
• Companies: instalments depends on when and how the
ECI is furnished:
No. of Instalments Given

Tax payable on first ECI filed within e-Filers Paper-filers

1 month from financial year end 10 5

2 months from financial year end 8 4

3 months from financial year end 6 3

After 3 months from financial year end No instalments allowed

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TAX ADMINISTRATION
Objection to Assessment

• Object within 2 months* from date of service of the notice

of assessment, unless valid reasons for delay
• In writing using a Prescribed objection form
• State the precise grounds of objection
• Tax must be paid within 1 month of the issue of the notice
of assessment, notwithstanding objection
* 30 days for individuals
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TAX ADMINISTRATION
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Late payment penalty

• Tax charged in an assessment should be settled within
one month after the service of the notice of assessment
• Penalty of 5% is added to the tax payable and a demand
note (Form IR 17) is issued
• Penalty must be settled within one month of its issue
• Additional penalty of 1% for each completed month on the
amount of tax outstanding is payable if the tax remains
unpaid 60 days after the issue of Form IR 17. Max
additional penalty imposed cannot exceed 12%
• Legal proceedings if the full tax is not settled after the
expiry of 15 months from the date of issue of the notice of
assessment
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How is the late payment penalty calculated

(IRAS SOURCE)
Example 1: Calculation of 5% late payment penalty
Company Y received a Notice of Assessment (NOA) dated 18 Oct 2017
and payment was made on 20 Nov 2017. The due date for the tax payable
of $10,000 is 18 Nov 2017 (one month from the date of NOA). As
Company Y did not pay the tax by 18 Nov 2017, a 5% penalty of $500 (i.e.
5% x $10,000) was imposed.

Corporate
5% Penalty
Date of NOA Income Tax Due Payment date Tax Payable
Imposed
Date

18 Oct 2017 18 Nov 2017 20 Nov 2017 $10,000 $500

https://www.iras.gov.sg/irashome/Businesses/Companies/Paying-Corporate-Income-Tax/Late-Payment-or-Non-Payment-of-Taxes/
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How is the late payment penalty calculated (IRAS SOURCE)

Example 2: 1% additional penalty
Company Z did not pay the tax payable of $10,000 by the due date on the NOA, and received a
late payment penalty letter (demand note) dated 8 Jun 2017 informing the company of the overdue
tax and the 5% late penalty. The due date for payment of tax and penalty (i.e. $10,500) on the letter
was 8 Jul 2017 (one month from the date of the late payment penalty letter). Company Z eventually
paid the tax and penalties on 15 Sep 2017.

The payment was overdue by more than two months after the late payment penalty notice due date
i.e. Aug and Sep. The total penalty imposed was $700 (i.e. 5% penalty x $10,000 plus 1%
additional penalty x $10,000 x 2 months).
Late Payment
5% Penalty Additional 1%
Penalty Letter Payment Date
Imposed Penalty Imposed
Due Date

8 Jul 2017 15 Sept 2017 $500 Additional penalty of 1% if the tax $200
($10,000 x 5%) remains unpaid 60 days after ($10,000 x 1% x 2
the issue of Form IR 17 (letter is
dated 8 Jun, thus the deadline is 8 months)
Aug)

https://www.iras.gov.sg/irashome/Businesses/Companies/Paying-Corporate-Income-Tax/Late-Payment-or-Non-Payment-of-Taxes/
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TAX ADMINISTRATION
Error and Mistake Relief

• Possible to reopen an assessment previously considered

final and conclusive where a genuine error or mistake has
been made
• Must apply to Comptroller within 4 years from the end of
the YA within which assessment was made
• Provided under S93A
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TAX ADMINISTRATION
Appeal Process

• Submit Notice of Objection to an assessment

• Request CIT to issue a Notice of Refusal to Amend
• Lodge Notice of Appeal with the Income Tax Board of
Review within 30 days from the Notice of Refusal to
Amend
• Submit Petition of Appeal within 30 days from Notice of
Appeal
• High Court
• Court of Appeal
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TAX ADMINISTRATION
Offences and Penalties
• General non-compliance
- Max fine of $1,000 or max jail term of 6 months in default
of payment.

• Incorrect tax return or provide incorrect info

- Penalty of 100% of tax undercharged.

• Negligence or without reasonable excuse

- Penalty of 200% of tax; and
- Max fine of $5,000; and/or
- Max jail term of 3 years.
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TAX ADMINISTRATION
Offences and Penalties

• Tax evasion or assist in evasion

- Penalty of 300% tax; and
- Max fine of $10,000; and/or
- Max jail term of 3 years.

• Serious fraudulent tax evasion

- Penalty of 400% tax; and
- Max fine of $50,000; and/or
- Max jail term of 5 years.
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TAX ADMINISTRATION
Advanced Ruling System
• Objective is to give tax certainty to taxpayer
• Section 108 together with Seventh Schedule were enacted in
November 2005.

• Applicable to both income tax and GST matters

• Written interpretation of how a provision or certain provision

of the Income Tax Act applies to a specific taxpayer and a
proposed arrangement.
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TAX ADMINISTRATION
Advance Ruling System
• Ruling binding to both the taxpayer and CIT (Clients’ details not released to
the public.

• IRAS will publish a summary of advance rulings to enhance taxpayers’

understanding of the IRAS’ interpretation and application of tax laws in
specific scenarios. This will apply to corporate income tax, individual
income tax and GST.
• Ruling will only apply to the taxpayer and the particular arrangement that
was the subject of the ruling request
• Ruling will bind CIT to apply those statutory provisions in the manner set
out in ruling
• Ruling is final and cannot be appealed
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STRUCTURE OF INCOME TAX ACT (ITA)

Parts of the ITA
*I Preliminary (S. 2 Interpretation)
* II Administration (S.4 Powers of Comptroller)
* III Imposition of Income Tax (S.10 Charge of income tax)
* IV Exemption from Income Tax (S.13 Exempt Income)
*V Deductions against income
(S.14 Deductions allowed)
(S.15 Deductions not allowed)
* VI Capital Allowances (S.16 to S.24)
* VII Ascertainment of Certain Income
* VIII Ascertainment of Statutory Income
(S.35 Basis of computing SI)
* IX Ascertainment of Assessable Income
(S.37 Assessable income)
(S.37C Group relief for S’pore companies)
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STRUCTURE OF ITA
Parts of the ITA (contd..)
*X Ascertainment of Chargeable Income
and Personal Reliefs
(S.38 Chargeable income)
(S.39 Reliefs for resident individuals)
* XI Rates of Tax
(S.42 Rates of tax - individuals)
(S.43 Rates of tax - companies & others)
* XII Deduction of tax at source
(S.44 Deduction from dividends deleted)
(S.45, 45A, 45B Withholding tax)
* XIII Allowances for tax charged
* XIV Relief from Double Taxation
(S.48 Commonwealth tax relief deleted)
(S.49 Double tax arrangements)
(S.50 Tax credits)
(S.50A Unilateral tax credits)
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BASIC CONCEPTS
Tax Systems

* Worldwide tax system

- tax all income sourced in and outside the country, eg. USA

* Territorial tax system

- tax income sourced within the country
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BASIC CONCEPTS
Singapore Tax System - territorial

* Tax on income of any person “ (1) accruing in or derived from

Singapore or (2) received in Singapore from outside Singapore”
[Section 10 of ITA]
(1) Local income – accrual basis
(2) Foreign income - remittance basis
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BASIC CONCEPTS
Tax Entities

* Person – includes a company, a body of persons and

a Hindu joint family [Section 2 of ITA]

* A body of persons means “any body politic, corporate or

collegiate, any corporation sole and any fraternity,
fellowship or society of persons… but does not include a
company or a partnership.”
[Section 2 of ITA]
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BASIC CONCEPTS
Tax Entities

• General Partnership – not a taxable entity but individual

partners are taxed in their own capacity on their share of
partnership income

• Limited Liability Partnership (LLP) and Limited Partnership

(LP) – legally with limited liability but treated as a
partnership for tax purposes and accorded tax
transparency treatment
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BASIC CONCEPTS
Tax Year [Year of Assessment (YA)]

* Runs from 1 January to 31 December annually

* Known as “Year of assessment”

E.g. Year of assessment 2020 means from 1.1.2020 to

31.12.2020.
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BASIC CONCEPTS
Basis Period

• The period the profits of which tax for that year falls to
be assessed.

• Preceding year basis –The basis period for any YA is the

immediate preceding year,

Example, a company’s financial year ending 31 December 2019.

 YA is YA 2020
 basis period is 1.1.2019 to 31.12. 2019.
 Profits generated during the financial period 1 Jan 2019 to 31
December will be taxed
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BASIC PERIOD
• For companies: The trade, business, profession or vocation (TBPV) income
and non-TBPV income (interest, royalties, rental etc), basis period is the
preceding accounting year
e.g., Trading profit for the year ended 31.3.2020 (i.e. 1.4.2019 to 31.3.2020)
is taxable in the YA 2021
• For individuals, the accounting year basis shall apply only to TBPV income
carries out in sole proprietorship or partnerships
• For non TBPV income such as employment, rental income, basis period is
the preceding calendar year - for e.g., YA 2021 employment income: for
1.1.2020 to 31.12.2020.
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EXAMPLES
• ABC Co. has trade income and interest income from fixed deposits.
The company’s accounting y/e is 30 June 2020. What is the basis
period for the trade and interest income for YA 2021? (Same basis
period for Trade and non-trade (int income): 1 July 2019 – 30 June
2020)

• Ms Tan has trade income from her home based bakery business (with
accounting y/e 31 March) and employment income from her job as an
accountant in a company. What is the basis period for her income in
YA 2021? (Trade: 1 April 2019 – 31 March 2020 / Non trade
(employment income: 1/1/2020 – 31/12/2020)
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BASIC CONCEPTS
• Statutory Income
The Statutory Income of a person for any YA shall be the
aggregate of his income from each source for the year
preceding the YA

• Assessable Income
Statutory Income less any loss incurred in TBPV and
qualifying donations

• Chargeable Income
Assessable Income less reliefs (personal reliefs only
claimable by resident individuals or group relief by
companies)
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BASIC CONCEPTS
Resident Individuals
- Progressive rates 0% to 22% (Part A 2nd Schedule)

Non Resident Individuals

- Generally 22% except employment income
- Employment income taxed at 15% or what a resident taxpayer pays, whichever is higher.
- Income derived from short term employment of 60 days or less in a calendar year is exempt

Resident and Non Resident Companies

- 17%
- Partial exemption:
75% on 1st $10,000 of CI, further 50% on next $190,000
- Tax Rebate:
No rebate for YA 2021 (per Budget 2021)
25% capped at $15,000 for YA 2020
20% capped at $10,000 for YA 2019
40% capped at $15,000 for YA 2018
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Example (Partial Exemption calculation)

CI of $300,000 (YA 2020)
$ $

CI (before exemption) 300,000

Less: Exempt Amount
10,000 @75% 7,500
190,000 @50% 95,000 102,500

CI (after exemption) 197,500

Tax @17% $33,575
Less: CIT Rebate(25%) 8,394
$25,181
Effective tax rate = 8.4%
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New Companies - Start-Up Tax Exemption

Applicable to all new companies (except companies that are
investment holding or undertake property development for sale, for
investment, or for both investment and sale) and the exemption is
available only for the first 3 YAs of incorporation

Qualifying conditions:
• The company must be incorporated in Singapore;
• The company must be a tax resident in Singapore for that YA;
• The company’s total share capital is beneficially held directly by no more than
20 shareholders throughout the basis period for that YA where:
 all of the shareholders are individuals; or
 at least one shareholder is an individual holding at least 10% of the issued ordinary shares
of the company.
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New Companies - Start-Up Tax Exemption

Chargeable Income % Exempted from Tax Amount Exempted from Tax

First $100,000 75% $75,000

Next $100,000 50% $50,000

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RESIDENCY
Tax Residence - Individual

* Section 2 ITA defines an individual resident in S’pore to be

“ a person who, in the year preceding the YA, (1) resides in

S’pore except for temporary absences therefrom as may be
reasonable and not inconsistent with a claim by such person
to be resident in S’pore, (Qualitative test)

and

includes a person who is (2) physically present or who

exercises employment (other than as a director of a company)
in S’pore for 183 days or more during the year preceding the
Y/A.” (Quantitative test)
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RESIDENCY
Foreigners Working in Singapore

• Income from short term employment (60 days or less) not taxable (NA
for directors and public entertainers).

• For employment covering 3 or more consecutive YAs, foreigner could

be treated as resident from the first YA, even though the quantitative
test is not satisfied.

Subject to furnishing banker’s guarantee or letter of undertaking

from Singapore company or established branch.
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RESIDENCY (3 YAs concession example)

For employment covering 3 or more consecutive YAs, foreigner could be
treated as resident from the first YA, even though the quantitative test is not
satisfied.

A foreigner stayed or worked in Singapore from 1 November 2017 to 30 April

2019. Advise if he qualifies to be a Singapore tax resident in the respective YA?
YA 2018 1 Nov – 31 Dec 2017 61 days Qualify as a Singapore tax resident
under the concession

YA 2019 1 Jan – 31 Dec 2018 365 days Tax resident – more than 183 days

YA 2020 1 Jan – 30 April 2019 120 days Qualify as a Singapore tax resident
under the concession
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RESIDENCY
• 2-Year Administrative Concession for determining
residence status for foreign employees who entered
Singapore.

• Concession to be treated as resident for both years

so long as (1) employment in Singapore is straddled
2 calendar years and (2) period of stay is at least 183
days
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RESIDENCY (2 YAs concession)

Mr A, a foreign employee (not a director of a company, public entertainer or
professional), worked in Singapore from 1 Nov 2018 to 30 April 2019. He
remained in Singapore for holiday and left Singapore on 31 May 2019. Does
he qualify as a Singapore tax resident?
YA 2019 1 Nov – 31 Dec 2018 61 days
YA 2020 1 Jan – 31 May 2019 151 days

Normal rule: Treated as a NR as he failed the 183 days test and also the 3 years admin concession

Mr A qualified as a Singapore tax resident as he worked in Singapore for a period straddling two calendar
years and his total period of stay in Singapore was at least 183 days i.e. physical presence immediately
before and after his employment.
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RESIDENCY - company
• A company is tax resident in Singapore if the control and
management of its business are exercised in Singapore
[Section 2 ITA]

• General rule – the place where the company will be deemed

resident is the place where its directors manage and control
its business and where they hold their board meetings.

• Subsidiary vs Branch (always a NR as the control and

management is outside of Singapore)
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IN SUMMARY….
Basic legislative requirements
• Types of returns and assessments
• Filing due dates
• Tax payment and assessment objection / appeal process
• Income Tax Act

Basic Tax Concepts

• Territorial Basis of Taxation
• Preceding year basis of assessment – Basis Period , Year of Assessment
• Types of tax entities
• Tax residency
• Tax rates
• Statutory, assessable and chargeable income
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