Singapore Tax Law

Singapore is one of the most popular destinations for global talents to move in. Aside from being a truly international country, its tax policies are also a key attraction. While many tax-haven nations do not impose personal income tax (“PIT”), few high-net-worth individuals (“HNWIs”) would consider relocating to these countries due to factors such as living environment, education, and healthcare. Although Dubai also exempts PIT, it rarely grants citizenship, failing to provide the necessary assurance of global identity. Therefore, it’s no wonder that Singapore is so appealing.

I. Personal Income Tax in Singapore

1. Advantages of Singapore's PIT Compared to China's

Singapore’s PIT system, or Singapore National Income Tax, offers at least ten major advantages over other countries:

• Territorial Tax Principle: Singapore adopts a territorial tax principle, meaning foreign-source income is generally exempted. In contrast, most of the countries tax individuals on their worldwide income.
• Capital Gains Exemption: Singapore generally does not tax personal capital gains. In comparison, most of the countries including US, China and UK impose tax on capital gains.
• Exemption on Dividends: Singapore does not tax individuals on domestic dividend income. In contrast, most of the jurisdiction charge income tax on dividends.
• Tax Incentives for Equity Gains: Singapore offers tax incentives for individuals receiving equity or options from the employer.
• Royalties Tax Incentives: Singapore provides attractive tax benefits for royalties that meet specific criteria.
• Broader Tax-Exempt Income Categories: Singapore exempts more types of income from PIT than most of the countries.
• Allowable Deductions: Singapore allows many types of expenses to be deducted from PIT.
• Childbirth Incentives: Singapore offers up to SGD 20,000 in rewards for having children to boost up its falling birth rate.
• Lower Maximum Tax Rate: Singapore’s top PIT rate is only 22%, applicable to incomes exceeding SGD 320,000 (approximately RMB 1.55 million). In comparison, China’s top PIT rate is 45%, starting at RMB 960,000. Even if Singapore raises its top rate to 24%, it will still be far below China’s.
• No Advance PIT Payment: Individuals in Singapore pay PIT only after filing their annual tax returns. In contrast, most of the taxes on wages requires advance payments or withholding payments.

Among these ten advantages, the most significant for HNWIs are the exemptions on foreign-source income and capital gains. This means their income and capital gains from other countries will not be taxed in Singapore. For non-HNWIs, the remaining eight advantages hold greater appeal. Therefore, Singapore’s PIT advantages are highly attractive to different groups of individuals, making it a popular immigration destination.