Tips for expat's tax efficient remuneration planning in Singapore
Being a global destination, Singapore is regarded as one of the best cities to live in. Especially for the expatriates. Although expensive in the Asian context, Singapore provides a clean western lifestyle and vibrant cultural mix. Based on the InterNations Expat City Ranking 2020, Singapore is ranked 5th globally and holds a numero uno position in Asia.
There is no doubt that Singapore has one of the most efficient governance systems in the world. This includes its tax laws. Apart from being a country with low effective tax rates, its business supportive policies have been based on a long-standing expatriate reputation. Singapore's simple to implement efficient tax laws and rules are ideal for the professionals looking to venture into the country.
Indeed! all seems to be very enticing. But mind it, you are dealing with the law made by one of the smartest economies. Thus, before your jump concluding your terms of employment, do take note top 6 tips to reduce a tax bill in Singapore:
(1) Dual contracts: If you intend to continue with the same multi-national company and move is a part of you taking additional responsibilities, have separate contracts to demark. Singapore tax will only apply to the remuneration earned for service performed in Singapore.
(2) Timing of employment: This is important if you are coming for a limited period. Thus if you can plan your physical presence in Singapore, you can distribute the tax liability in different years.
(3) Relocation: Ensure that the employer directly pays your relocation expenses, as cash paid in lieu will be taxable as your income.
(4) Benefits: Avoid structuring cash allowances or reimbursements and take benefits-in-kind instead. This will help you reduce your tax bills as concessionary benefits are available, like on the employer-paid housing provision.
(5) Limit the reimbursements: Only company-related expenses are allowable, that too mainly for club subscriptions, entertainment, and travel/transportation. Rest may get taxed as fringe benefits.
(6) Ensure medical expenses are covered: Medical cost is not cheap in Singapore, so ensure your employer covers the maximum possible cost for you and your family. This won't be taxed in your hand.
One must do proper tax diligence before accepting a Singapore offer. This is because you can plan your tax bill based on all critical points in your employment contract, right from the date of joining to remuneration break-up.
Singapore laws are efficiently planned to avoid causing unnecessary holes in your pockets. Yet, every penny saved is equal to a dollar earned!