As we gear up for the end of a whirlwind 2020, ways to reduce taxes will be at the top of our minds.
For tax period YA 2021, you will be paying taxes for the income earned in 2020. We put together a checklist of the details you need to know when filing your income tax.
Taxes are considered contributions towards nation-building in Singapore. During Budget 2020, the Deputy Prime Minister and Finance Minister Heng Sweet Keat announced a slew of support measures from the government to aid businesses, families and individuals in Singapore.
Across the world, tax rates vary across countries. Here, in Singapore, with a progressive tax system in place, here’s all you’d need to know when filing this Year of Assessment (YA) 2020 for the year that ended on 31 December 2019.
- 5 Ways to reduce income tax
- Who needs to pay income tax
- What is taxable and what is not?
- How much tax will you need to pay?
- What is the deadline for you to file your income tax?
- How to file your income tax?
- What happens if you file your taxes late or if you do not file your tax?
- Income tax payment methods
- What happens if you pay your tax late?
- Useful IRAS links
Ways to reduce income tax
Here are 5 was to reduce your income tax before 31 December 2020.
#1 Contribute to your Supplementary Retirement Scheme (SRS) account: Singaporeans and PRs can contribute up to $15,300 while foreigners can contribute up to $35,700. SRS contributions are eligible for tax relief and can be invested to help you prepare for retirement.
#2 Top up your CPF Special Account (SA) voluntarily: CPF SA top ups enjoy dollar-for-dollar tax relief. This tax relief is capped at $7,000 for yourself and another $7,000 when you top up the SA of your loved one, potentially lowering your taxable income by $14,000. What’s more, the money in your CPF SA earns an interest rate of 4% p.a.
#3 Voluntarily contribute to your Medisave account: Similarly, contributions to your Medisave account are also eligible for tax relief, provided you have not met your Basic Healthcare Sum (BHS). Your Medisave money can be used to help offset medical bills and also earn 4% p.a.
#4 Make donations to approved institutions: Enjoy 250% tax deduction for qualifying donations until 31 December 2021. These donations can be in cash, shares, computers and more.
#5 Sign up for an eligible course: Not only do you enjoy course fees relief of up to $5,500 each year, you can also upgrade your skills and increase your employability at the same time. Talk about win-win!
You can also enjoy various tax reliefs which you can find later in this article.
Do keep in mind that there is a personal income tax relief cap of $80,000 for each Year of Assessment. This applies to the total amount of all tax reliefs claimed, limiting the amount of tax relief you can enjoy.
Who needs to pay income tax in Singapore?
You will need to pay income tax if you earn, derive or receive income in Singapore, unless specifically exempted under the Income Tax Act or by an Administrative Concession. Also, you must file an Income Tax Return if you receive a letter, form or an SMS from the Inland Authority of Singapore (IRAS) informing you to do so.
More specifically, these are the following groups of people that will need to pay tax in Singapore:
1. Individuals working in Singapore: Those who receive payments (whether in the form of cash or benefits-in-kind) for any service rendered in or any form of employment from Singapore
2. Individuals doing business in Singapore: Self-employed individuals such as sole-proprietors, partners, freelancers, taxi drivers, hawkers, commission agents, among others, who derive their income in Singapore.
3. Individuals with investments in Singapore: Those who derive income from their investments in property, shares, unit trusts, fixed deposits, etc. in Singapore (unless their investment is specifically exempted under the Income Tax Act).
4. Individuals working outside Singapore:
- Individuals working outside Singapore whose overseas employment is incidental to their Singapore employment; or
- Individuals working outside Singapore on behalf of the Singapore Government; or
- Individuals who receive income through a partnership in Singapore
5. Individuals who are not working but receiving income: This includes income from investments, NSman income (including all awards and allowances including IPPT monetary incentives), Part-time income, Royalty income, Pension, or Supplementary Retirement Scheme (SRS) withdrawals.
You will not need to pay income tax if you are earning gross income of $22,000 or less in a year, or if you do not derive or receive any income in Singapore. If you receive a letter or SMS informing you that you have been selected for No Filing Service, you are not required to file a tax return.
You can also check your filing requirement if you have not been contacted by IRAS.
What is taxable and what is not?
You are taxed based on the income earned in the preceding calendar year. This means that for income earned in 2019, you will be taxed in the Year of Assessment (YA) which is 2020.
Taxable income refers to:
- Gain or profits from any trade or business
- Income from investment such as dividends, interest or rental
- Royalties, premiums and any other profits from property
- Other gains that is revenue in nature
Income that is non-taxable include:
- Capital gains, such as gains on sale of fixed assets; and gains on foreign exchange on capital transactions
- Income specifically exempted from tax under the Income Tax Act
How much tax will you need to pay?
Singapore has a progressive income tax system in place for resident taxpayers. This means that higher income earners pay proportionately more tax. The current highest personal income tax rate for the higher earners is 22%.
Here’s the resident tax rates that you can refer to in order to find out how much you will need to pay in taxes.
What is the deadline for you to file your income tax?
Previously, you had to file your taxes before:
- 15 April (for paper filing) or
- 18 April (for e-filing, if you do it online)
In 2020, the filing deadline for the Year of Assessment 2020 was extended to 31 May 2020.
After filing, you will receive a copy of your tax bill (Notice of Assessment) for YA 2020 from end-April 2020 onwards. This will show you how much tax you need to pay. You might also receive an SMS alert once your tax bill is finalised and ready for online viewing, if you have updated your mobile number with IRAS.
You have one month from the date of the Notice of Assessment (NOA) to pay your taxes.
How to file your income tax
To file your tax return, please log into myTax Portal using your SingPass. You can do so either on your desktop or on your mobile phone. You will need SingPass 2FA to login to myTax Portal.
There are 5 parts to filing your income tax.
Declare your income. This includes employment income, trade, business, profession or vocation income, rental income and any other income. If your employer is participating in the Auto-Inclusion Scheme (AIS) for Employment Income, you do not need to declare your employment income information, and this information will be pre-filled in the form. However, if your employer is not participating in the AIS, you would have received a IR8A form from your employer and you will have to input details such as your income and bonuses. You should also have records of your income on hand to help you accurately declare it in your tax return.
3. Reliefs/rebates available to all taxpayers
These tax reliefs help promote specific social and economic objectives. For example, making a donation at a registered charity is eligible for tax relief. The reliefs under this section for individuals include:
- Course fees relief
- CPF cash top up relief, CPF relief
- Earned income relief
- Handicapped brother/sister relief
- Life insurance relief
- NSman (self) relief
- Parent/handicapped parent relief
- Supplementary Retirement Scheme (SRS) relief
These tax reliefs on your income tax, assessed in YA 2020, has to be undertaken during the year in which you earned your income (2019 in this case). This is something you can keep in mind before 2021 arrives.
4. Additional reliefs/rebates available to married/divorced/widowed taxpayers
- NSman (parent) Relief
- Parenthood Tax Rebate
- Qualifying/Handicapped Child Relief
- Spouse/Handicapped Spouse Relief
5. Additional reliefs/rebates available to married/divorced/widowed female taxpayers
- Foreign Maid Levy Relief
- Grandparent Caregiver Relief
- NSman (wife) Relief
- Working Mother’s Child Relief
There is a personal income tax relief cap of $80,000 for each Year of Assessment. You can find the full list and information on deductions for individuals (reliefs, expenses, donations) here.
What happens if you file your taxes late or if you do not file your tax?
Firstly, IRAS could do the following if you fail to file your taxes by 31 May 2020.
- Impose a late filing fee not exceeding $1,000;
- Issue an estimated Notice of Assessment (NOA); and/or
- Summon you to Court.
If IRAS issues an estimated NOA based on the your past years’ income or information available to IRAS, you must:
- Pay the estimated tax within one month from the date of the NOA.
- File your Tax Return. You should file your tax return immediately. Upon revision of the estimated assessment, any excess tax paid will be refunded.
Income tax payment methods
When you receive a copy of your tax bill (Notice of Assessment) for YA 2020 sometime after the end of April 2020, you will have to pay the amount indicated in the tax bill.
There are a few ways you can pay your income tax:
- Electronic payment modes (such as iBanking, ATM, AXS, SAM, NETS etc.)
- Credit card
- Telegraphic transfer
Here are all the details on the tax payment modes available for individuals. You get one month from the date of the Notice of Assessment (NOA) to pay your taxes (even if you have filed an objection and are awaiting the outcome).
If you are planning to use a credit card to pay for your taxes, do note that for most credit cards exclude tax payments from earning credit card rewards. However, there are still ways to work around that limitation, by paying an administrative fee (as a percentage of your tax deduction amount) or applying for a payment facility to use your credit card for tax payments. This fee ranges from 0.5% to 3% of the payment amount.
Here are the options available:
- Bank of China: If you plan to use your BOC card, you will have to mail this form to the bank.
- CardUp: CardUp enables users to pay for big expenses using credit card, in places where credit cards are usually not accepted. Not exclusive to any particular bank, you can continue to earn your credit card rewards by paying your taxes with CardUp, while incurring a small CardUp fee.
- Citi PayAll: Use your Citibank credit card to earn miles or reward points for a small fee.
- DBS: DBS has an Income Tax Payment Plan that allows you to pay your taxes with a DBS credit card for a one-time processing fee of 3%.
- HSBC: The administrative fee charged differs based on the HSBC credit card you use.
- Standard Chartered Tax Payment Facility: An income tax payment facility specifically for existing Visa Infinite Credit Cardholders.
- Standard Chartered EasyBill: For a small processing fee, get awarded cashback and/or 360° Rewards Points on eligible taxes paid to IRAS with your Standard Chartered credit card.
- UOB PRVI Miles Payment Facility: For those that hold a UOB PRVI Miles credit card.
For miles-chasers, check out this article by MileLion on how to earn miles when paying your income tax.
What happens if you pay your tax late?
Similar to a credit card bill or monthly repayment for loans, you will incur late charges. If you miss the payment due date, you will incur a late payment penalty of 5% and subsequently an additional 1% for every month (up to a maximum of 12% of the tax outstanding). A letter will be sent to you regarding this 5% late payment penalty. You will have to make payment before the due date stated on the letter to avoid further penalties.
If the tax continues to remain unpaid, further enforcement actions could be done for IRAS to recover the taxes, such as:
- Appointing agents like your bank, employer, tenant or lawyer to pay the money to IRAS
- Issuing a Travel Restriction Order (TRO) to stop you from leaving Singapore; and/or taking legal action
With just a few days left to file your income tax, it’s a good time to visit myTax Portal to get started and get yourself familiarised. You could also use this handy guide by IRAS for step-by-step instructions on e-Filing via MyTaxPortal.
All the IRAS links you need:
Here are all the IRAS links that could come in handy as you file your taxes.
- Late Filing or Non-Filing of Income Tax Returns
- No filing service
- Taxable and non-taxable income
- Your tax bill (Notice of Assessment)
- Income tax rates
- Deductions for individuals (reliefs, expenses, donations)
- SRS withdrawals
- Tax payment methods
- Step-by-step instructions on e-Filing
Read these next:
Guide To Supplementary Retirement Scheme (SRS) And Tips To Maximise It
Pros And Cons Of Keeping Your Savings In Your CPF Special Account
Endowus Review: Investing Your Cash, CPF And SRS Money At Low Fees
Paying Income Tax: Are CardUp, ipaymy, and Citi PayAll Worth the Admin Fee?
Guide To Real Estate Investment Trusts (REITs), And Whether You’re Ready For It
By Ching Sue Mae
A flat white, an adventure-filled travel and a good workout is her fuel. This Manchester United fan enjoys sharing knowledge on personal finance while chasing the dream of financial independence.