Each year, hundreds of tax deductions and credits may go unclaimed due to the lack of taxing knowledge. To prevent that, here are 5 Tax Deductibles You Need To Know based on the Inland Revenue Authority of Singapore.
FOR THE EMPLOYEE
1. EMPLOYMENT EXPENSES
A good news for all employees—employment expenses can be claimed as long as they satisfy these three conditions:
a. Expenses are sustained when carrying out official duties.
b. Expenses are not reimbursed by the employer.
c. Expenses are not private in nature.
For instance, traveling expenses on public transportation that are not reimbursed by the company may be deducted from the tax. Also, entertainment expenses that occurred while pleasing the clients may be deducted from the tax.
FOR THE EMPLOYER
2. STARTUP TAX EXEMPTION (SUTE)
A start-up company, have enough financial worries in your plate. What should you do then?
Take on the SUTE. Suited by SUTE, a start-up company that meets the required conditions can claim for full tax exemption on the first S$100, 000 of normal chargeable income for each of its first three consecutive years.
3. CORPORATE TAX INCOME REBATE (CTIR)
Since 2013, all Singapore companies are eligible to take on the CTIR. No! There is no catch. This scheme aims to help companies to cope with the rising costs in businesses. Suited by CTIR, companies will receive 30% rebate or up to S$30, 000 off the tax bill from 2013-2015.
OTHERS
4. ANGEL INVESTORS TAX DEDUCTION SCHEME
Be an angel, invest in start-up companies in Singapore to receive a huge tax benefit from the Angel Investors Tax Deduction Scheme.
Enjoy 50% tax deduction on the investment costs at the end of a two-year holding period. This is up to S$500, 000 of investments in each Year of Assessment. Investments made from March 1, 2010 until March 31, 2015 are eligible for this scheme.
5. DONATIONS
Want to double your tax deduction? Be generous and donate in all forms. The following types of donations will qualify you for a double tax deduction (twice the amount of the donation):
a. Cash Donations
b. Shares Donations
c. Computer Donations
d. Artefact Donations
e. Public Art Tax Incentive Scheme
f. Land and Building Donations
For instance, a donation to the Singapore museums that have obtained the Approved Museum Status with the National Heritage Board is tax deductible.
Image Credits: TaxCredits.net via Flickr
Equipped with these tax deduction knowledge, prepare to be impressed with your managed taxes now!
Income tax filing day are just months away and i know you hate the reminder.
Even while i’m here writing this – you would have paid for your dinner that comes with a Good and Services Tax, leaving you 17% of the cost of the meal poorer.
You may also have to pay for the property or road tax that are due.
For those that smoke and drink, thanks for the additional contribution of excise duties and tobacco tax. And for once, we are proud of you.
For the rest, i can fully understand your resentment as no one likes to fork out extra money from their own pocket for something they cannot feel or touch.
Some of you may fret because you don’t know what exactly you are paying for and what the government is going to do with the taxes collected.
Here is the breakdown for the second quarter of 2014:
(Source: Economic Survey of Singapore, 2nd quarter of 2014)
As you can see above, most of the tax revenues are spent on social development and security purposes.
Taxes are necessary for the development of an economy of a country. Without taxes, you would still be living in the kampong your parents lived in and there is no SMRT or Uber but only Rickshaw Pte Ltd.
I like to pay taxes. With them, I buy civilization. – Oliver Wendell Holmes Jr
At least in a country with the least corrupt government, you are assured that ultimately the money will come back to benefit us in other ways.
Let’s take a look at how most of the funds are spent and why you should love paying taxes:
Building the ‘Great Wall’ of Singapore
(Image credit: asiaone.com)
In tiny Singapore with limited land and resources, what we have to defend ourself is to build a strong military force to be reckoned with. Defence spending has been steady and amounts to billion of dollar each year. So the next time you grunt over your income taxes, make yourself feel better to know that the money goes into the next Leopard tanks or a Next-gen fighter jet that defends you in a place you call home.
Live as long as the Japanese
(Image credit: seniorsworldchronicle.com)
Japan has the most centenarians and that’s probably due to having one of the best healthcare system in the world. No doubt, Singapore also has one of the best quality healthcare system and Finance Minister Tharman Shanmugaratnam has said that healthcare spending will hit S$12b by 2020 in Budget 2014.
There is no such thing as free and cheap healthcare system anywhere in the world, because the public ends up paying for it, either through taxes or hefty insurance premiums.
Perhaps it’s time to substitute your Char Kway Teow and Mee Goreng with seaweed and sashimi? Stop drinking your Starbucks or Coca-Cola, drink Matcha.
Cultivate more Albert Einsteins
(Image credit: ST)
Next on the list of government expenditure is education spending. As the government spend more money building schools and training teachers, don’t you feel proud when Singaporeans are ranked the most intelligent in the world with a IQ score of 108% by British psychologist Richard Lynn and Finnish political scientist Tatu Vananen. Singapore has always top the ranks in the Trends in International Mathematics and Science Study (TIMSS) and who say we can’t produce Albert Einsteins of our own?
Singapore has spent close to $10 billion on education in 2013.
Build a Sing-kansen
(Image credit: gopixpic.com)
Late in the 19th century, Singapore’s main mode of transport to get around in by the rickshaw puller. There is no such thing as the MRT (or SBS, ERP, COE, PIE, etc). The fact that you can see modernised roads and expressways as well as MRT tracks and bus interchanges is due to the taxes you paid. Around $5 billion are spent on transport each year.
If you look at it a bit longer within the next 15 years, by 2030, the network will double and nearly 8 in 10 households will be within a 10-minute walk from an MRT station – so you just walk a short distance and you are there. – PM Lee Hsien Loong
And as Singapore gets more ambitious, besides cars and roads, we also want a Shinkansen (bullet train) of our own as you can see from the KL-Singapore High Speed Rail project which is estimated to cost RM40 billion.
Remembering Silk Road
(Image credit: worldportsource.com)
Singapore’s economy is largely dependant on trade. With no natural resources to boast about, we make use of our strategic location along key shipping routes and deepwater ports. Trade and commerce accounts for up to a quarter of our country’s GDP
Thus, it makes sense to invest the money in the area where we have advantage in. Mainly high-end manufacturing such as electronics, semi-conductors and machinery.
Assembling LEGO bricks
(Image credit: ST)
LEGO? Well, not literally. National Development forms part of the government expenditure and that’s also the reason you see more HDB flats, development of new malls and Garden by the Bay instead of kampong or shacks.
The Ministry of National Development (MND) aims to provide quality and affordable homes, good community bonding, development of green spaces and creation of identity marker through planning and management of land resources.
Act as Robin Hood
(Image credit: missedinhistory.com)
In Singapore, we use the progressive tax system where the rich get taxed more than the poor. It is viewed as a fair and equitable way since the rich spend lesser proportion of their income on necessities. If you earn higher income, you basically pay more tax. Income inequality is a social ill and leads to more crimes and social unrest.
For the lower and middle income group, there is a GST voucher given out every year since 2012 as a form of transfer payment. So for 800,000 HDB households, look forward to the GST vouchers that is coming your way this month in January 2015.
In conclusion
So everyone, a pat on your back for your contribution to Singapore throughout the years. Smile and pay your taxes due without any reproach for you have done your part in the betterment of the society. Tax is not that bad after all, isn’t it? Think positively.
Benjamin Franklin once said nothing in life is certain but only two things are: death and taxes.
In the unlikely event of your death, have you made sufficient planning so that your last wish could be fulfilled? Dying without a will, also known as intestacy, could give your family and loved ones a hard and frustrating time to sort out what you left behind. (I hope you left assets and not debts) Therefore it is crucial to make sure that you have done your estate planning when you are still around and have a sound mind.
In a survey done few years ago, 8 out of 10 Singaporeans do not have a will. This also means that the heirs belonging to this group of the population could face delay and roadblocks in getting a grant of probate from the Court.
If you do not have a will, your assets will be distributed according to the Intestate Succession Act.
The question now is whether you need a will drafted since there is law in place to distribute your assets?
You can answer this by following the checklist below:
1. First, understand the intestacy rules of distribution
You left behind surviving spouse with no issue (children) and parent
Spouse get 100%
2
You left behind surviving spouse with children
Spouse get 50%
3
You left behind surviving spouse with children
Children get 50%
4
You left behind surviving spouse and parents
Spouse get 50%, Parents get 50%
5
You left behind no spouse and children
Parents get 100%
6
You left behind no spouse, children and parents
Siblings get 100%
7
You left behind no spouse, children, parents and siblings
Grandparents get 100%
8
You left behind no spouse, children, parents, siblings and grandparents
Uncles and aunts get 100%
9
You left behind without any next-of-kin, Government get 100%
2. Ask yourself if you are agreeable to the intestacy law
After going through the list, now you need to decide if the law concur with your wish? There are people who may want to will more or less of their assets to an individual and that is when you don’t have a will, it gets tricky. For example, you may wish to distribute part of your asset to your incapacited sibling but without a will, the intestacy rules may fail to adequately provide for your needy dependant.
3. Do you have someone or an organisation in mind?
You may want to provide for your children from your previous marriage, a good friend or a charity. Without a will drafted, these group of people whom you care about will not be getting anything after you leave this world.
4. Do you have a complex and complicated family?
With the growing complexity of family structure, family relationship can get ugly over the tussle of inheritance. This can be problematic when you do not state your wish in a will. The dispute of the will and probate will likely cause stress and feud amongst your family members. Not to mention, the court and legal fees associated that could easily takes up to 5%-10% of your estate.
5. Do you have any minor children?
What happen to your children should there be no surviving spouse? The law requires the appointment of a guardian or trustee until your child reaches the legal age of 21. This person must be someone you trust to ensure your child’s financial is well taken care of. A will allows more flexibility in the appointment of the right person.
You don’t need a lawyer to draft a will and you can actually pen the will yourself. However, to proceed with caution as small mistakes could end up costing your beneficiary more in the future.
When the year is coming to a close, the taxman dress up as Santa Claus and comes knocking on your door. If you have earned at least $22,000 in a year, you will receive a notification from IRAS to file your tax return between February and March.
Nobody like to pay tax. Let’s admit it.
Fortunately, there is a way to not pay it or reduce the total tax liability payable. No and this guide is not going to teach you how to evade tax which is illegal in Singapore.
First thing first, before you learn the various ways on how to reduce your income tax, you need to know how the taxman calculate your taxable income.
There is a nifty calculator in Excel on IRAS website that you can download. There is also an iPhone App call IRAS SG that you can use to calculate your income tax payable.
In short, your chargeable income is calculated as (Employment Income – Employment Expenses) + (Other Income) – (Approved Donations) – (Personal Reliefs). If you are a parent, you can further reduce the tax by claiming Parenthood Tax Rebate (PTR).
From the equation, it is obvious that besides being poor, there are three things you can work on – approved donations, personal reliefs and rebates to reduce or eliminate your income tax payable.
1. Approved Donations
If you are not aware, you can claim 2.5 times the donated amount. For example, if you have made donation of $10,000 to an approved Institutions of Public Character (IPC). Your tax deduction would be $25,000. You can check if an organisation is an IPC here.
Things that you can donate are cash, shares, computer peripherals, artefacts, public art, land and building.
2. Personal Reliefs
There are many reliefs which you can claim to reduce your income tax payable. Let’s take a look at the various reliefs.
a. Earned Income Relief
This is basically a relief to recognise individuals who receive income from work. This will be automatically deducted if you are eligible up to a certain cap. You do not need to claim for this.
b. Spouse/handicapped spouse relief
You can claim for this if your spouse is earning less than or equal to $4,000 a year. You can claim $2,000 for spouse relief and $3,500 if your spouse is handicapped. (From YA2015, you can claim $5,500 for handicapped spouse)
c. Qualifying/handicapped child relief (QCR/HCR)
Likewise, if you have kids you can claim $4,000 per child or $5,500 for handicapped child. (From YA2015, you can claim $7,500 for handicapped child)
d. Working mother’s child relief
This relief is to encourage women to remain in the workforce after having children. The amount you can claim ranges from 15-25% depending on the number and order of children. Please note that there is a cap of $50,000 per child, which includes QCR/HCR.
e. Parent/handicapped parent relief
This relief is to promote filial piety and you can claim for this if the dependant shared the same roof as you. If the dependant is staying in a different household, you must have incurred at least $2,000 in supporting him/her to be eligible for a claim.
If dependant is staying in your household, you can claim up to $7,000 per dependant (or $11,000 for handicapped parents). If dependant is not staying in your household, you can claim up to $4,500 per dependant (or $8,000 for handicapped)
f. Grandparent caregiver relief
This relief is for mother who are working and have engaged their parents/grandparents or in-laws to look after the children. The amount claimable is $3,000 on one parents/grandparents/in-laws.
g. Handicapped brother/sister relief
If your siblings are handicapped and you are supporting them, you can eligible to claim $3,500 for each sibling. (From YA2015, you can claim up to $5,500) Note: If your parents have claimed HCR on your brother/sister, you cannot claim for this relief.
h. CPF Relief
CPF relief is given to encourage individuals to save for their retirement. You can claim on your compulsory employee CPF contribution and any voluntary contributions to your Medisave account. If your employer is in the Auto-Inclusion Scheme then this will be automatically calculated. If not, you will need to claim this yourself. Please note that you can only claim if your employee CPF contributions has not exceeded the Ordinary and Additional Wage Ceiling. OW is currently $5,000 a month. Additional wage refers to annual bonus and leave pay and the formula used to computer AW ceiling for 1 Jan 12 – 31 Dec 13 is $85,000 minus total OW. AW is subject to a cap of $37,000.
For more details on the calculation, refer to IRAS website.
i. Life Insurance Relief
You can claim for this if you have bought insurance for yourself and your wife. If you are a married female and satisfy the various conditions, you can only claim for your own life policies and not your husband’s. The amount claimable is the lower of $5,000 less your CPF Contrition or up to 7% of the insured value. Note: If you contributes more than $5,000 for CPF, you are not eligible for this.
j. Course Fee Relief
The government wants the workforce to be equipped with the necessary skills and encourages individuals to constantly upgrade themselves through course so as to enhance employability. You can claim up to a maximum of $5,500 per year.
k. Foreign Maid Levy Relief
Foreign Maid Levy (FML) relief is given to encourage married women to continue to be in the workforce. Thus, if your household has employed a maid, you are eligible for this levy. You can claim twice the amount of levy on one domestic worker paid in the previous year.
l. CPF Cash Top Up relief
This relief is to encourage individuals to top up their Retirement or Special Account under the CPF Minimum Sum Topping Up Scheme. You are also entitled to the relief if your employer made the top-up for you. You can claim up to a cap of $7,000 for self and an additional $7,000 if you top up the account of your spouse, siblings, parents, grandparents and your in-laws.
m. Supplementary Retirement Scheme (SRS) Relief
If you have contributed to SRS, you can claim the amount up to the maximum cap of SRS contribution of $12,750 if you are a Singaporean/PR or $29,750 if you are a foreigner.
n. NSman (Self/Wife/Parent) Relief
For the guys, here’s another bonus for you if you have completed your national service. The general population can claim up to $3,000 if you have performed NS activities in the preceding years or $1,500 if you haven’t. For key appointment holders, you can claim up to $3,500 and $5,000 respectively.
For the ladies and parents of Neman, you can claim a deduction for $750 for the support you have given to your husband/son.
3. Parenthood Tax Rebate (PTR)
Lastly, you can claim a rebate from your tax payable if you qualify for PTR. This should be differentiated from tax relief which reduce your chargeable income. It is offered to married Singapore tax residents as an incentive to encourage them to have more children. You can claim up to $5,000 for the 1st child, $10,000 for the second and $20,000 for the 3rd and beyond. This amount can be shared between you and your spouse to offset the tax payable.
