Who doesn’t dream of reducing their personal income tax in Singapore? Singapore has a variety of different tax relief initiatives that you can leverage to save some money. We have put together a list of 7 different ways you can reduce your income tax.
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How Reducing Your Singapore Income Tax Works
Singapore’s income tax system is progressive, which means that the more you earn, the more you will be taxed. The idea is to find things you can either write off or claim tax relief for. While there are various ways to do that, there is also a personal income tax relief cap. This limit is currently set at S$80,000 and is the total amount of your tax relief for any given year of assessment.
Calculate your personal income tax here.
1. Do a Course and Upgrade Your Skills
This first point is unknown to many Singaporeans. However, it is possible to get tax relief on courses that you have attended in 2022 – as long as the course is relevant to your employment and you can prove that you have paid for it yourself. If that’s the case, you can get up to S$5,500 in tax relief.
If you have taken a course that will enable you to switch careers, you can still claim it. For example, if you are transitioning from an administrative role into finance, and you have taken a course that will help you in your new career, you can use it for your tax relief.
2. Make a Charitable Donation
Talk about killing two birds with one stone. In order to get tax relief, you can make a donation to any charity that is registered as an IPC (Institute of a Public Character) in Singapore. You can get 250% in tax deductions based on the amount donated. This deduction lasts till 31 December 2023.
Read about how the different forms of donations can reduce your tax.
3. Top Up Your CPF
This is another great way to help yourself – give yourself money and pay lesser taxes. Sounds great? Simply top up your CPF Special Account. Once done, your tax will be automatically deducted. Bear in mind that the maximum cash top-up is capped at S$7,000 for yourself.
You can also top up your parents’ CPF accounts as well (maximum value of S$7,000) and receive additional tax relief for that. Thus the maximum tax relief is a total of S$14,000 per assessment year.
4. National Service Gives Back: NSman Relief
The country is grateful for your service as an NSMan of the Singapore Armed Forces and will reward you through this tax relief.
Depending on whether you have performed NS duties in 2022, your tax relief as a key appointment holder (KAH) ranges from S$3,500 to S$5,000. General population NSMan (Non-KAHs) can enjoy tax reliefs of up to S$3,000.
As long as you are eligible for this tax relief, your spouse and parents will automatically receive S$750 in tax relief for that year of assessment.
5. Life Insurance Relief
If you are unemployed or self-employed, then your CPF contributions for the past year may have probably been very low. If the total compulsory employee CPF contributions, self-employed Medisave/voluntary contributions, and voluntary contributions to your Medisave account are below S$5,000, you can qualify for this life insurance tax relief on the premiums that you have paid for your own or the life insurance policy of your spouse.
*Take note that premiums paid on accident and medical policies are not applicable.
Related Read: What Is IR8A? Your Guide to Filing Employee Earnings in Singapore 2023
6. Business Expenses Deductibles
Every business owner will know that there are always extra and operational costs – regardless of whether you run a small shop or a tech startup.
However, the good news is that you can claim these business expenses. Some examples of tax-deductible business expenses include accounting fees, advertising, CPF contributions, skills development levies, foreign worker levies, and many more.
7. Rental Expenses Deductions
Last but not least, you can also earn some tax relief on your rental expenses. This refers to the expenses you have generated in incurring the rental income. These expenses based on 15% of the gross rental income can be claimed.
Related Read: How to Reduce Your Personal Taxes
Singapore Income Tax Deductibles In a Nutshell
|1. Do a course||Up to S$5,500|
|2. Make a charitable donation to IPC||250% of the amount you donated|
|3. Top up your CPF||Up to S$14,000 per assessment year
|4. NSman Relief
(Available for both wives and parents of an eligible NSman)
|Up to S$5,000 for key appointment holders having performed NS duties in 2022
Up to S$750 for wives and parents of NSman
|5. Life insurance relief||7% of the policy value|
|6. Business expenses deductibles||Depending on your expenses|
|7. Rental expenses deductions||15% of your gross rental income|
One of the most important aspects of applying for tax relief and deductions is documentation. Make sure to plan ahead and organise your receipts for everything. If you are not exactly sure how to navigate reducing taxes, we are here to guide you and help you with your income tax filing process.
This article is contributed by ValueChampion.
Related Read: Guide to Singapore Personal Income Tax 2023
FAQs on Reducing Income Tax
- Singapore adopts a progressive income tax system where the income tax rate ranges from 0%-22%.
- For foreigners working in Singapore, the following conditions are applicable for the taxability of your income in Singapore:
- If you work in Singapore for 60 days or less in a calendar year, you will be exempt from tax on your earnings here. This exemption does not apply to non-resident company directors, public entertainers, professionals including foreign experts, speakers, queen’s counsels, consultants, trainers, coaches, etc.
- If you stay or work in Singapore for 61 to 182 days in a calendar year, your income will be taxed at 15% or resident rates for individuals, whichever gives the higher tax.
- If you stay or work in Singapore for 183 days or more in a calendar year, your income will be taxed at resident rates for individuals.
- If you stay or work in Singapore for a continuous period of at least 183 days over two years, your income will be taxed at resident rates for individuals.
- If you stay or work in Singapore for three consecutive years, your income for all years will be taxed at resident rates.
- In Singapore, there are various tax reliefs that can help you reduce your personal income taxes. Some common ways you can do so are by:
- Making a charitable donation to an IPC
- Topping up your CPF Special Account
- Doing a course to upgrade yourself
- In order to get tax relief for making a charitable donation, you have to first ensure that the charity is registered as an IPC (Institute of a Public Character) in Singapore. You can then get up to 250% in tax deductions based on the donated amount.
Reduce Your Income Tax with Ease
Our team of tax experts can assist you with the tax filing requirements seamlessly.
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