Singapore, officially the Republic of Singapore, is a sovereign island country and city-state in maritime Southeast Asia. The country's territory is composed of one main island, 63 satellite islands and islets, and one outlying islet.
Singapore is a parliamentary republic with a Westminster system of unicameral parliamentary government and a common law legal system.
Singapore has a highly developed market economy based historically on extended re-exported trade.
The country has been identified as a tax haven for the wealthy due to its low tax rates on personal income and tax exemptions on foreign-based income and capital gains.
Singapore is one of the five founding members of the Association of Southeast Asian Nations (ASEAN) and strongly supports the ASEAN Free Trade Area (AFTA) and the ASEAN Investment Area (AIA). It is also the host of the APEC Secretariat and maintains membership in other regional organizations.
Despite its small size, Singapore has a diversity of languages, religions, and cultures. Racial and religious harmony are considered a crucial part of Singapore's success and played a part in building a Singaporean identity.
Government approval is generally not required for foreigners to establish a 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 special licenses.
An in-country bank account is not mandatory to make global payroll payments to employees or authorities in Singapore. An office address is a minimal requirement by law if you plan to register the following:
- Incorporated company
- Branch office (you must appoint at least two local agents that will act on your organization’s behalf)
- Representative office
Global 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.
Singapore does not have a national minimum wage, so employers can negotiate employee salaries. Singapore follows the Progressive Wage Model (PWM), which mandates a minimum monthly wage for employees in certain economic sectors. As of September 2022, the PWM applies to workers in the retail, cleaning, security, and landscape sectors.
The standard workday in Singapore is eight hours and the standard workweek is 44 hours.
For employees who are covered by the Employment Act, overtime is 150% of the hourly basic pay rate.
There is a “13th month payment” but it is not compulsory.
The Employment Act of Singapore (Chapter 91) is the principal statute that regulates the employer/employee relationship. It expresses the terms and conditions for the employee covered by the Act.
Singapore has two categories of employees:
- Employees who are covered under the Employment Act (covers most employees in the service of an employer).
- Employees who are not covered under the Employment Act (include seafarers, domestic workers, civil servants, and statutory board employees).
Singapore follows a progressive resident tax rate starting at 0% and ending at 22% above S$320,000. There is no capital gain or inheritance tax. Individuals are taxed only on the income earned in Singapore. The income earned by individuals while working overseas is not subject to taxation barring a few exceptions.
Income tax rates depend on an individual's tax residency status. An individual will be treated as a tax resident for a particular Year of Assessment (YA) if they are within any of the following categories:
- Singapore Citizen or Singapore Permanent Resident who resides in Singapore except for temporary absences
- Foreigner who has stayed/worked in Singapore:
- For at least 183 days in the previous calendar year
- Continuously for three consecutive years, even if the period of stay in Singapore may be less than 183 days in the first year and/or third year
- For a continuous period straddling two calendar years and the total period of stay is at least 183 days. This applies to employees who entered Singapore but excludes directors of a company, public entertainers, and professionals.
If an individual does not meet the conditions stated above, they will be treated as a nonresident of Singapore for tax purposes.
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%.
Nonresidents are taxed at a flat rate of 22%. The employment income of nonresidents is taxed at either a flat rate of 15% or at the resident rates with personal allowances, whichever yields the higher tax.
How Withholding Works
There are no withholding obligations in Singapore for employers, however, contributions to social security schemes, the Skill Development Levy (SDL), and the Foreign Workers Levy are required.
Domestic corporations paying certain types of income to nonresidents are required to withhold tax. Unless a lower treaty rate applies, interest on loans and rentals from movable property are subject to withholding tax at the rate of 15%. Royalty payments are subject to withholding tax at the rate of 10%.
Returns, Tax Credits
IRAS will automatically refund tax credits and pay interest on tax credits not refunded within 30 days from the date the tax credit arises unless it is a situation where an automatic tax refund will not be made.
Tax credits are refunded via GIRO, PayNow—Individual income tax, Goods and Services Tax (GST), and corporate income tax only—telegraphic transfer or cheque.
Social Insurance, Contributions
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.
The corporate income tax rate is 17% on chargeable income.
For services performed on or after 1 January 2023, the GST rate is 8%. Singapore is increasing its GST rate in 2024 from 8% to 9%. The last time the GST rate was increased was 15 years ago.
The following dividends are subject to income tax:
- Dividends paid by co-operatives
- Foreign-sourced dividends derived by individuals through a partnership in Singapore. (Note: Such dividends may qualify for tax exemption if certain conditions are met.)
- Income distribution from Real Estate Investment Trusts (REITs) derived by individuals through a partnership in Singapore, or from the carrying on of a trade, business, or profession in REITs.
National holidays: Employees are entitled to 10 paid holidays. The days of general and presidential elections also are considered public holidays (see Table).
2023 Singapore National Holidays
Any 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.
Annual leave: An employee is entitled to paid annual leave if they have worked for the employer for at least three months. Their annual leave entitlement depends on how many years of service they have with the employer.
Maternity leave: A working mother is entitled to either 16 weeks of government-paid maternity leave or 12 weeks of maternity leave, depending on whether their child is a Singapore citizen and other criteria.
Paternity leave: Eligible working fathers, including those who are self-employed, are entitled to two weeks of paid paternity leave funded by the government.
Sick leave: An employee is entitled to both paid outpatient sick leave and paid hospitalization leave if they have worked for at least three months with the employer.
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 their 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