For non-residents, all Singapore-sourced income will be subject to tax, with exception to a few instances such as foreign income received in Singapore etc. Generally, income will be taxed at a flat rate of 20%, except in certain cases – for example, employment income will be taxed at the higher of 15% or the applicable resident rate.
For non-residents, the special taxation schemes available are:
1) The Not Ordinarily Resident (NOR) Scheme
- The Not Ordinarily Resident (NOR) Scheme extends favourable tax treatment to qualifying individuals for a period of five years of assessment, subject to fulfilment of the scheme’s qualifying criteria. One of the concessions given is the time-apportionment concession, wherepayment of tax is based on income proportionate to the time spent in Singapore
- To qualify for the NOR scheme for a particular Year of Assessment, you must satisfy the following criteria:
i. You are a tax resident for that YA; and
ii. You were taxed as a non-resident for three consecutive YAs immediately before that.
2) Area Representative Scheme
- An area representative is taxed in Singapore on the proportion of total remuneration that corresponds to the proportion of working days spent in Singapore during the year. However, benefits-in-kind provided in Singapore are not pro-rated as they are wholly related to Singapore employment. Certain criteria will apply to this scheme.
- To qualify as an Area Representative, you must satisfy these four criteria below:
i. You must be employed by a non-resident employer
ii. You are based in Singapore for geographical convenience;
iii. You are required to travel outside of Singapore in the course of your duties; and
iv. Your remuneration is paid by your foreign employer and not charged directly or indirectly to the accounts of a permanent establishment in Singapore.
(Note : A permanent establishment refers to a fixed place where a business is wholly or partly carried on, e.g. a place of management, a branch, an office, a factory etc.)
Dual Employment Contracts
In some cases, dual employment contracts that clearly demarcate the parameters between duties performed in Singapore and outside Singapore can be opted for. This is so that any foreign or offshore income can easily be excluded from Singapore tax. However, these cases will be subject to the scrutiny of IRAS so that the justification behind such an arrangement can be ascertained.
A non-resident is liable to pay income tax on Singapore-sourced income. Under the law, when a person makes payment of a specified nature to a non-resident, he has to withhold a percentage of that payment and pay the amount withheld to IRAS. The amount withheld is called the withholding tax.