Singapore has the most progressive tax system in the world. The government has ensured that taxation remains competitive and progressive to encourage innovation, enterprise, and employment. Personal tax in Singapore is determined by the annual income you have.
The government has also established personal income tax reliefs in line with the country’s social objective, such as saving for retirement and caring for elderly parents. Tax relief will reduce your taxable income. However, a personal income tax relief ensures the tax system remains progressive and capped at S80,000 per year of assessment.
With tax filing season around the corner, there are different ways you can lower your taxes in Singapore. Here is deep dive on how to get tax relief in Singapore:
What Is a Tax Relief in Singapore?
In personal finance, tax relief in Singapore refers to specific allowances offered by the government to reduce a citizen’s taxable income. Simply put, it’s a provision that enables you to pay less tax. Each taxpayer in Singapore has unique reliefs based on their circumstances and lifestyle factors, such as whether they are married, have children, or support aged parents.
The government encourages certain behaviors or activities beneficial to society or the economy through tax relief. For instance, Course Fee Relief promotes continuous learning and skills enhancement by allowing deductions for courses, examination fees, seminars or conferences relevant to your employment and cash donations approved by the IPCs.
Understanding the nuances of tax relief can seem daunting. For example, if you fall under the median income of Singapore residents, utilizing the appropriate tax reliefs can help you decrease your taxable income significantly.
However, it’s crucial not to claim these reliefs without fully comprehending their implications. No matter how seemingly straightforward, every financial decision carries a certain level of complexity. Engaging a tax professional or advisor can ensure you optimize your tax relief benefits while staying within the legal and regulatory framework.
Types of Tax Reliefs
When discussing tax reliefs in Singapore, it’s essential to note that there are various types, each with unique requirements and benefits. These tax reliefs are designed to cater to different demographics and life stages, helping reduce eligible individuals’ chargeable income.
Here are the types of tax reliefs:
1. Earned Income Relief
Earned income relief is based on the taxable earned income and your age in the previous year.
|Your Age As of 31 Dec of the Previous Year||Maximum Amount Claimable|
|55 to 59||$6,000|
|60 and above||$8,000|
2. Earned Income Relief On Handicapped Person
As shown below, people with any physical disability will get a higher earned income relief. Persons with a physical disability require assistance dressing, washing or bathing, toileting, feeding, or mobility.
Persons with mental disability include people with a problem in the following areas: self-care and activities of daily living, education, or work, or must comply with psychiatric treatment.
|Your Age As of 31 Dec of the Previous Year||Maximum Amount Claimable|
|55 to 59||$10,000|
|60 and above||$12,000|
3. Spouse Relief / Handicapped Spouse Relief
Spouse relief / handicapped spouse relief recognized female and male taxpayers supporting their spouses. Taxpayers are eligible for this relief if they are living with their spouses or when their spouse is disabled. Legally separated spouses might claim relief only if they had made maintenance payments under a deep separation or court order. However, divorced spouses who pay alimony to their spouses are not eligible to claim relief.
Here is the amount of spouse relief you can expect:
|Spouse Relief||Handicapped Spouse Relief||Legally separated spouses must make maintenance payments under a Court Order or Deed of Separation.|
4. Foreign Domestic Worker Levy (FDWL) Relief
The FDWL relief encourages married women to stay in the workforce by employing a foreign domestic worker. Married men and singles are not eligible for this relief. You and your husband must have employed a foreign domestic worker to be eligible for this relief. You have to live with your husband, separated, divorced, or widowed, and have children who live with you.
Here is the amount of relief you can claim in 2023:
|No. of months maid levy paid in 2022||12||12|
|Total levy paid in 2022||$3,600 (*$300 x 12 months)
$5,400 (*$450 x 12 months)
|$720 ($60 x 12 months)|
|Maximum FDWL Relief for YA 2023||$7,200 (2 x $3,600)
$10,800 (2 x $5,400)
|$1,440 (2 x $720)|
5. Central Provident Fund (CPF) Relief For Employees
The CPF relief is designed to encourage people to save for retirement. Employees who are Singapore permanent residents or Singapore residents can claim CPF relief on the full retirement sum. It is capped by the amount of compulsory CPF contributions made on the Ordinary Wages and Additional Wages under the CPF Act. You may claim CPF relief for making contributions on wages that do not exceed the Ordinary Wage ceiling and additional wage ceiling that was increased to $8,000 from $ 6,000 in budget 2023.
6. Central Provident Fund (CPF) Relief For Self-Employed Or Employees Who Are Self-Employed
Self-employed people who are also employees are allowed relief on the contributions made to their CPF accounts. You are eligible for self-employment CPF relief with an assessable net trade income.
7. NSman Self Relief
To qualify for national serviceman relief, you must have completed your National service under the Enlistment Acts (Cap 93), or you should have been deemed to have completed such service by the proper authority, including the Singapore Police Force and Singapore Civil Defence Force.
8. NSman Relief (Self, Wife, and Parent)
All National Service (NSmen) are eligible for NSman tax relief schemes. It is designed to recognize their contribution to the National Services. NSman Parent and NSman Wife reliefs are given to parents and wives of the NSmen, respectively, to recognize the support they have offered to their family members.
9. Parent Relief/Handicapped Parent Relief
Parent Relief/Handicapped Parent Relief supports people supporting their parents, parents-in-law, grandparents, and grandparents-in-law. You have to fulfill the following conditions to be eligible for this relief:
- The dependant is living with you in your household in Singapore
- The dependant is 55 years old or above
- The dependant is mentally or physically disabled
- The dependant does not have an annual income exceeding $4,000
Here is the amount of relief to expect. Please note you can only claim up to 2 dependants.
|Type of Parent Relief||Parent Relief||Handicapped Parent Relief|
|Taxpayer stays with dependant||$9,000 per dependant||$14,000 per dependant|
|The taxpayer does not stay with a dependant||$5,500 per dependant||$10,000 per dependant|
10. Grandparent Caregiver Relief
Also known as GCR, grandparent caregiver relief is for working mothers to help care for the parents, parents-in-law, grandparents, and grandparents, including those of their ex-spouses. Please note single or male taxpayers are not eligible for the grandparent caregiver relief. Here you may claim $3,000 on your parent, grandparent, parent-in-law, and grandparent-in-law.
11. Qualifying Child Relief (QCR)/Handicapped Child Relief (HCR)
Qualifying Child Relief and Handicapped Child Relief is designed for parents to recognize their efforts in raising their children. Here is the relief to expect:
|Qualifying Child Relief (QCR)||Handicapped Child Relief (HCR)|
|$4,000 per child||$7,500 per child|
12. Working Mother’s Child Relief (WMCR)
The WMCR is designed to encourage women to remain in the workforce after having children, encourage parents to take Singapore citizenship for their kids, and reward families with children that are Singapore citizens.
Below is a table explaining how WMCR is calculated:
|Child Order||WMCR Amount|
|1st||15% of the mother’s earned income|
|2nd||20% of the mother’s earned income|
|3rd and beyond||25% of the mother’s earned income|
13. Handicapped Brother/Sister Relief
This relief is given to recognized people caring for their disabled siblings or sibling-in-law. To be eligible, you must live in the same household with them, and the dependant has to be physically or mentally disabled. You can claim $5,500 for every dependant you have.
Who Are Eligible for Tax Reliefs?
Eligibility for tax reliefs in Singapore is primarily determined by residency status, income type, and personal circumstances. Generally speaking, most reliefs are available to tax residents of Singapore.
A tax resident in Singapore is defined as a Singaporean citizen, a Singapore Permanent Resident, or a foreigner who has stayed or worked in Singapore for 183 days or more in the tax year. Tax residents are taxed on a progressive income tax rate, while non-residents are taxed at either a flat rate or the progressive resident rate, whichever results in a higher tax amount.
Certain types of income, like employment income, are eligible for tax relief. However, types of income, such as rent and royalties, do not qualify for tax relief.
Personal circumstances such as having a non-working spouse, children, aged parents, or handicapped dependents also significantly determine eligibility for specific tax reliefs. For instance, an individual with a non-working spouse can claim spouse relief, while a parent with a child pursuing full-time education can claim Qualifying Child Relief.
It’s worth noting that some reliefs, like the Course Fees Relief, are available to all taxpayers who engage in further education or training related to their employment.
However, as with any financial decision, it’s important not to rush. A thorough understanding of the tax relief eligibility criteria is crucial to optimizing your benefits while ensuring you stay within the boundaries of the law. Engaging a tax professional or advisor can help clarify these nuances.
Singapore has many tax relief schemes that help you reduce tax deductions in your chargeable income. Here are a few scenarios to help you learn the kind of tax deductions to expect.
1. Singaporean, Female, Single, Employed, No Children
A single female in Singapore will only enjoy tax relief on their rental expenses. You may claim deductions on rent expenses based on 15% of the gross rent and the mortgage interest on the loan taken to buy the tenanted property.
If you have a disabled brother or sister, you are eligible for a S$5,500 tax relief.
2. Singaporean, Male, Married, Employed, with Children
You will be eligible for up to S$16,0000, i.e., S$8,000 for yourself and S$8,000 for family members on CPF cash top-up for Special/ Retirement and Medisave accounts. If you have a handicapped brother or sister, you are eligible for a S$5,500 tax relief.
You will also enjoy Parenthood Tax Rebate (PTR), which can be shared between the married couple as agreed.
3. Singaporean Female, Married, Employed With Children
On top of the tax relief above, you will also be eligible for working mother’s child relief and a foreign domestic worker levy relief if you need the help of your maid to take care of your kids.
You are also eligible for working mother’s child relief for 15% for the first child, 20% on the second child and 25% for the third and subsequent child.
Understanding tax reliefs in Singapore is an integral part of managing personal finances. These reliefs, ranging from Earned Income Relief to Course Fees Relief, are designed to ease the tax burden and support specific demographics and life stages. Therefore, it’s essential to be thoroughly informed about each tax relief, its eligibility criteria, and its implications.
- Tax reliefs in Singapore, such as Earned Income Relief or Course Fees Relief, help reduce tax burdens. It’s crucial to understand these to optimize your tax planning effectively.
- Eligibility for tax relief depends on factors like residency status, income type, and personal circumstances. Knowing these criteria is vital for determining which reliefs apply to you.
- Tax reliefs come with their complexities and specific conditions. Therefore, fully comprehending each relief’s details is essential to make informed decisions.
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