Singapore Global Payroll and Tax Information Guide
Singapore, officially the Republic of Singapore, is an island city-state in Southeast Asia. Singapore is known for its transition from a developing country to a developed one in a single generation.
The city ranks highly in numerous international rankings, and has been recognised as:
- the most “technology-ready” nation (WEF)
- top international-meetings city (UIA)
- city with “best investment potential” (BERI)
- world’s smartest city
- world’s safest country
- world’s most competitive economy
- third least-corrupt country
- third-largest foreign exchange market
- third-largest financial centre
- third-largest oil refining and trading centre
- fifth-most innovative country
- the second-busiest container port
The Economist has ranked it as the most expensive city to live in since 2013. Singapore ranks 9th on the UN Human Development Index with the 3rd highest GDP per capita. It is placed highly in key social indicators like education, healthcare, life expectancy, quality of life, personal safety and housing. Although income inequality is high, 90% of homes are owner-occupied. According to the Democracy Index, the country is described as a “flawed democracy”.
The city-state is home to 5.6 million residents, 39% of whom are foreign nationals. There are four official languages: English, Malay, Mandarin Chinese and Tamil. Most Singaporeans are bilingual and English serves as the nation’s lingua franca, while Malay is the national language. Pew Research Centre has found that Singapore has the highest religious diversity in any country.
Singapore is a unitary parliamentary republic with a Westminster system of unicameral parliamentary government. As one of the five founding members of ASEAN, Singapore is the host of the Asia-Pacific Economic Cooperation (APEC) Secretariat and Pacific Economic Cooperation Council (PECC) Secretariat, as well as many international conferences and events. It is also a member of the East Asia Summit, Non-Aligned Movement and the Commonwealth of Nations.
Singapore is identified as a tax haven and the currency is the Singapore dollar(S$).
In this article we have listed some of the key factors multinational companies should consider when setting up business in Singapore from a Global Payroll Perspective.
Singapore Payroll – Basic Facts
Singapore is a safe and efficient place for international companies to do their business. Currently there are over 7,000 multinationals doing business in Singapore. The process of business registration is simple and smooth and can be done on the website of Singapore’s Accounting & Corporate Regulatory Authority (ACRA).
Government approval is generally not required for foreigners to establish business in Singapore and 100% foreign ownership is permitted. There is an exception for banks and other financial institutions, which require approval from the Monetary Authority of Singapore and must obtain certain special licenses.
In-country bank account is not mandatory to make payments to employees or authorities in Singapore. An office address is a minimal requirement by law, if you plan to register a:
- Incorporated company
- Branch office (In this case you have to appoint at least two local agents which will act on your organisation’s behalf)
- Representative office
Payroll in Singapore is regulated by law and there are no payroll taxes. Employers in Singapore are responsible for submitting income tax returns and paying social taxes for employees.
According to TechCrunch, Singapore has taken steps that moved it closer to the introduction of cryptocurrencies into the economy. Employers and employees that choose to use digital currencies for their remuneration or revenue are generally subject to standard income tax rules.
The tax year matches the calendar and runs from 1st January to 31st December.
Tax and Social Security Considerations
The corporate income tax rate is 17% on chargeable income.
- For 2019 and previous years:
75% of the first S$10,000 of taxable income and 50% of the next S$290,000 of taxable income are tax-exempt. A new private company may be entitled to a tax exemption on the first S$100,000 of taxable income and 50% of the next S$200,000 of taxable income for the first three consecutive years of assessment, subject to certain conditions.
Companies will be granted a 20% Corporate Income Tax Rebate capped at S$10,000.
- From 2020:
75% of the first S$10,000 of taxable income and 50% of the next S$190,000 of taxable income are tax-exempt. The new private companies will be entitled to a tax exemption of 75% on the first S$100,000 of taxable income and 50% of the next S$100,000 of taxable income for the first three consecutive years fall in or after 2020.
Singapore’s personal income tax rates for resident taxpayers are progressive. This means higher income earners pay a proportionately higher tax, with the current highest personal income tax rate at 22%.
*Tax rates for residents only.
Non-residents are taxed at a flat rate of 22%. The employment income of non-residents is taxed at either a flat rate of 15% or at the resident rates with personal allowances, whichever yields the higher tax.
Only Singaporean citizens and permanent residents are required to contribute to the Central Provident Fund (CPF) which is the national pension scheme. Expatriates are not required to make social security contributions.
Employees are required to contribute 20% and employers are required to contribute 17% of ordinary monthly wages to social security.
- Sales Tax: The current GST rate is 7% on the supply of goods and services. Financial services including life insurance, the sale/rental of residential properties, the import and supply of investment precious metals, and exports are exempt from GST.
- Withholding Tax: Tax is not withheld on dividend, interest, royalty or technical services income paid to residents.
- Dividends – None
- Interest – 15% (for non-residents)
- Royalties – 10% (for non-residents)
- Technical Services – 17% (for non-residents)
- Payroll Tax: None
Compensation and Benefits
Minimum Wage and Wage Payment: There is no national minimum wage for all workers and employee’s salary can be negotiated by employers and employees. Salary is simply remuneration paid for work done under a contract of service. Besides traveling, food or housing allowances, it also does not include pension, expenses incurred during work as well as retrenchment benefits. Salary is paid monthly. Singapore has legislation which requires itemized payslips to be issued to all employees – it is legally acceptable to issue payslips online.
Overtime: Overtime work is any work done in excess of the normal hours of work (excluding breaks). An employee can only work up to 72 overtime hours in a month. For overtime work, you will be expected to pay at least 1.5 times the hourly basic rate of pay. Payment should be made within 14 days after the last day of the salary period.
Hours of Work: The standard workday in Singapore is eight hours and the standard workweek 44 hours.
Holidays: Employees are entitled to 11 paid holidays. The days of general and presidential elections also are considered public holidays. The list of public holidays for 2019 is available on the Ministry of Manpower’s website.
An employee who is required to work on a public holiday is entitled to an extra day’s salary at the basic rate of pay. Alternatively, the employer and employee may mutually agree to substitute a public holiday for another working day. An employer also has the additional option of granting managers and executives, earning up to a basic monthly salary of $4,500, time-off-in-lieu for working on a public holiday. The time off should consist of a mutually agreed number of hours.
- Adoption leave: Eligible adoptive mothers, including those who are self-employed, are entitled to 12 weeks of paid adoption leave to bond with and care for their adopted infants.
- Annual leave: You are entitled to paid annual leave if you have worked for your employer for at least 3 months. Your annual leave entitlement depends on how many years of service you have with your employer.
- Childcare leave: Eligible working parents of Singapore citizen children under 7 years old are entitled to 6 days of paid childcare leave per year. Parents of non-citizens can get 2 days of childcare leave a year in accordance with the Employment Act. You may also be eligible for extended childcare leave for a child aged 7 to 12 years.
- Maternity leave: As a working mother, you will be entitled to either 16 weeks of Government-Paid Maternity Leave or 12 weeks of maternity leave, depending on whether your child is a Singapore citizen and other criteria.
- Paternity Leave: From 1 January 2017, eligible working fathers, including those who are self-employed, are entitled to 2 weeks of paid paternity leave funded by the Government.
- Shared parental leave: As a working father, you can currently apply to share up to 4 weeks of your wife’s 16 weeks of Government-Paid Maternity Leave, subject to your wife’s agreement.
- Sick leave: You are entitled to both paid outpatient sick leave and paid hospitalization leave if you have worked for at least 3 months with your employer.
- Unpaid infant care leave: As a working parent, you are entitled to 6 days of unpaid infant care leave a year if your child is a Singapore citizen.
Find out more about the eligibility and entitlements for different types of leave on the Ministry of Manpower’s website.
Bonuses and Special Benefits: Annual bonuses of one month’s salary or more are common practice in Singapore, but not mandatory.
The SG Bonus was announced in Budget 2018 to share the fruits of Singapore’s development with Singaporeans. The amount of SG Bonus is tiered according to income, with more for those earning less:
*Note: Individuals who own more than one property are eligible for SG Bonus of $100.
Termination of employment: When either you or your employer wants to end the employment contract, you do so by terminating the contract of service. Termination can be with or without notice or caused by employee misconduct. Find out the guidelines for termination with or without notice and termination due to misconduct on the Ministry of Manpower’s website.
Workers’ compensation: All employees regardless of the salary level, with some exceptions, are covered under the Work Injury Compensation Act (WICA). Medical leave wages, medical expenses and lump-sum compensation for permanent incapacity or death can be claimed. Claims can be made up to 1 year from the accident. Learn about the types of compensation and their limits.
Record keeping: The employment records generally must be kept for a minimum of two years for current employees, and one year for ex-employees.
Foreign Workers in Singapore
Foreign employees are entitled to the same rights as Singapore citizens and are generally covered by the same tax and workplace laws.
Different types of visas exist for foreign workers depending on skill level. The following are the types of visas employees may apply for when working abroad in Singapore.
- Employment Pass (EP)
- Entrepreneur Pass (EntrePass)
- Personalized Employment Pass (PEP)
- Work Permit
- S Pass.
- Miscellaneous Work Pass
All visa requirements and regulations can be found on Singapore’s Ministry of Manpower website.
The employment income of non-residents is taxed at the flat rate of 15% or the progressive resident tax rates (see table above), whichever is the higher tax amount.
From 2017, the tax rates for non-resident individuals (except certain reduced final withholding tax rates) has been raised from 20% to 22%. This is to maintain parity between the tax rates of non-resident individuals and the top marginal tax rate of resident individuals.
- Director’s remuneration- 22%
- Income derived from activity as a non-resident professional (consultant, trainer, coach, etc.)-15% of gross income or 22% of net income
- Income derived from activity as a non-resident public entertainer (artists, musician, sportsman, etc.)- 10% concessionary rate (No change)
- Other income e.g. rental income derived from a Singapore property- 22%
- SRS withdrawal by a non-citizen SRS member- 22%
- Interest, royalty, etc. – Reduced final withholding tax rate (subject to conditions) as follows:
- Interest: 15%
- Royalty: 10%
- 22% if reduced final withholding tax rate is not applicable.
Singapore has entered into more than 80 income tax treaties. It has not entered into an income tax treaty and does not have a totalization agreement for social tax coverage purposes with the United States.
Payroll processing in Singapore involves specific rules and regulations and the status of foreign workers should be also taken into account. Contact the Payslip team to learn how our global payroll management software solution will help your multinational organization to reduce costs and minimize the risk of setting up your business operations in Singapore.
- Wikipedia: “Singapore”
- Inland Revenue Authority of Singapore: “Corporate Tax Rates”
- Inland Revenue Authority of Singapore: “Income Tax Rates”
- Ministry of Manpower: “Leave”
- Ministry of Manpower: “Work injury compensation”
- Ministry of Manpower: “Visa Information”
- com: “Singapore Payroll Management”
- AM Corp Blog: “9 Things You Should Know About Singapore Payroll Regulation in 2017”
- Budget 2018: “SG Bonus”