Tax-Saving Tips for Singapore Taxpayers

Singapore is known for its attractive tax regime, offering one of the most business-friendly environments in the world. With a progressive personal income tax rate that starts at 0% and caps at 22% for residents, and a corporate tax rate of 17%, taxpayers in Singapore have several ways to legally reduce their tax burden. Here are some effective tax-saving tips for individuals and businesses in Singapore.

For Individuals

1. Maximize CPF Contributions

The Central Provident Fund (CPF) is a mandatory savings scheme for Singaporeans and permanent residents. Contributions to the CPF help reduce taxable income. Individuals can make voluntary contributions to their CPF Medisave Account, which can be claimed as a tax deduction.

2. Contribute to the Supplementary Retirement Scheme (SRS)

The SRS is a voluntary scheme that provides tax benefits while encouraging retirement savings. Contributions to the SRS are eligible for tax relief, and investment returns under the scheme are tax-deferred. When withdrawing funds after the statutory retirement age, only 50% of the amount is subject to tax.

3. Utilize the Personal Reliefs and Rebates

Singapore offers various personal tax reliefs, including:

• Earned Income Relief: Based on age and taxable income
• Parent Relief: For supporting parents or grandparents
• Handicapped Child Relief: For parents with disabled children
• NSman Relief: For National Servicemen and their families
• Course Fees Relief: Up to SGD 5,500 for courses that enhance employment skills
• Life Insurance Relief: If CPF contributions are below SGD 5,000 and you pay life insurance premiums

By leveraging these reliefs, taxpayers can significantly lower their taxable income.

4. Claim Deductions for Donations

Donations to Institutions of a Public Character (IPC) qualify for a 250% tax deduction, which means for every dollar donated, SGD 2.50 is deducted from taxable income. Making strategic donations before the end of the financial year can help reduce tax liabilities.

5. Rental Income Deductions

For individuals earning rental income, expenses incurred on the property, such as maintenance, property tax, and mortgage interest, are deductible. Keeping proper records of these expenses can help reduce taxable rental income.

6. Optimize Employment Benefits

Instead of receiving taxable cash bonuses, employees can negotiate for non-taxable benefits such as:

• Employer-sponsored CPF contributions beyond the statutory requirement
• Medical and dental benefits
• Employer-paid courses for skill enhancement
• Transport and travel reimbursements (where applicable)

7. Deferring Income and Accelerating Deductions

If you expect to be in a lower tax bracket next year, consider deferring taxable income or bonuses. Conversely, if you anticipate higher income in the future, accelerating deductible expenses, such as SRS contributions and tax-deductible donations, can be beneficial.

8. Invest in Tax-Efficient Investments

Capital gains are not taxed in Singapore. Investing in instruments such as stocks, unit trusts, and real estate that appreciate in value (rather than generate taxable income) can be a tax-efficient strategy.

For Businesses

9. Utilize the Partial Tax Exemption for Startups

Startups can enjoy a partial tax exemption (PTE) as follows:

• 75% exemption on the first SGD 100,000 of chargeable income
• 50% exemption on the next SGD 100,000 of chargeable income

Newly incorporated companies can benefit from this for the first three consecutive years.

10. Claim Productivity and Innovation Credit (PIC) and R&D Deductions

While the PIC scheme has ended, businesses investing in research and development (R&D) can still claim deductions and tax incentives. Singapore offers a 250% tax deduction for R&D expenses.

11. Apply for the Start-Up Tax Exemption (SUTE) Scheme

Startups in Singapore can claim significant tax exemptions under SUTE. To qualify, companies must be:

• Incorporated in Singapore
• Tax residents of Singapore
• Not engaged in investment holding or property development

12. Claim Capital Allowances

Businesses can claim capital allowances on fixed asset purchases such as machinery and equipment. The following capital allowances apply:

• One-Year Write-off: 100% deduction for low-value assets (up to SGD 5,000 per item)
• Three-Year Write-off: Equal deductions over three years for general plant and machinery

13. Leverage the Corporate Tax Rebate and Carry Forward Losses

Companies can carry forward unutilized capital allowances and losses to offset future taxable profits, reducing overall tax liabilities. The carry-forward mechanism allows businesses to smooth out tax payments over fluctuating financial years.

14. Benefit from Tax Treaties and Avoidance of Double Taxation

Singapore has Double Taxation Agreements (DTAs) with multiple countries, allowing businesses to avoid being taxed twice on the same income. Companies operating overseas should leverage these agreements when structuring their tax liabilities.

15. Make Use of GST Schemes

Businesses can register for GST voluntarily if their annual turnover is below SGD 1 million. Registered companies can claim GST input tax on business expenses. Additionally, businesses can apply for GST exemptions or deferment schemes such as:

• Major Exporter Scheme (MES)
• Approved Import GST Suspension Scheme (AISS)

16. Consider Group Relief

Companies under the same corporate group can transfer unutilized losses, capital allowances, and donations between entities. This allows the overall group to optimize tax positions by reducing the taxable income of profitable entities.

17. Plan for Dividends vs. Salaries for Directors

Company directors should evaluate the tax implications of drawing income as salary versus dividends. Salaries are subject to personal income tax, while dividends paid from after-tax profits are tax-free.

18. Opt for Tax-Friendly Business Structures

Different business structures in Singapore come with varied tax implications. Sole proprietors and partnerships pay personal income tax rates, while corporations pay a flat 17% corporate tax. Structuring your business strategically can minimize tax liabilities.

19. Consider Relocation Incentives and Industry-Specific Tax Exemptions

Singapore offers various tax incentives for businesses in high-value industries such as fintech, biotechnology, and manufacturing. Companies can apply for:

• Pioneer Certificate Incentive (PCI)
• Development and Expansion Incentive (DEI)
• Finance and Treasury Centre (FTC) Incentive

Final Thoughts

Singapore’s tax system is one of the most efficient in the world, but careful planning is required to maximize tax savings. Whether you are an individual taxpayer or a business owner, taking advantage of tax reliefs, exemptions, and deductions can result in substantial savings. Consulting a tax professional can further enhance your ability to optimize your tax position within legal frameworks.

By implementing these strategies, Singapore taxpayers can significantly reduce their tax burden while remaining compliant with the Inland Revenue Authority of Singapore (IRAS) regulations.