Contracting in Singapore requires an understanding of the Singaporean tax system, because both contractors and permanent employees have to pay tax on all in-country earnings. Depending on the applicable Singapore tax treaties, you might also still be eligible to pay some tax in your home country. This potentially means paying tax overseas as well as paying tax in Singapore. Obviously you want to avoid double taxation in Singapore if possible. It will depend on your nationality and the nature of your assignment in Singapore. The best way to come to terms with income tax in Singapore is to use a local specialist. They will help you to understand your options and work out the best way to organise your affairs.
Almost 44% of the Singaporean workforce is made up of foreign nationals, so for foreigners to be getting paid through their tax system is nothing new. Fortunately it has one of the least corrupt governments in the world so there is very little to worry about.
Paying Income Tax in Singapore through Your Employer
Permanent employees in Singapore will be processed through a PAYE (pay-as-you-earn) system. Your employers HR / payroll department will calculate your taxes and other deductions including public health insurance and social security. They deduct it from your gross salary and pay the net amount, generally in SGD (Singapore dollars) into your bank account. It is very easy and made even more attractive by Singapore's low income tax rates of 2-20%. However often this route isn't possible for contractors as they are never employed directly by the end client. Furthermore the recruitment agency that places them and invoices the client might not even have an office in Singapore. This is especially true for the large specialist contract recruiters in telecommunications, IT, Engineering or Oil and Gas who are often based in the UK.
Working Out Income Tax in Singapore Yourself
Without the option of PAYE you may be tempted to file your own tax return. This makes sense if you are well established and have a good understanding of the Singaporean tax law. It is not recommended for those who aren't staying a long time. If you are (or will be) in Singapore less than 183 days you may still be tax resident elsewhere. Then you need to know if there is a tax treaty between that country and Singapore. If you get professional tax advice you can understand how to take advantage of your status to reduce your burden. For many people it is best to get tax residency in Singapore as quickly as possible because local income tax is a maximum of 20 percent.
Using an Umbrella Company for Income Tax in Singapore
For contractors in Singapore there is little appeal in doing your own taxes. Rather than wade through forms and reading up on tax legislation you can use a local umbrella company. In fact this is often a requirement if the recruitment agency involved isn't located in Singapore. A Singaporean umbrella company can act as your "employer" during your stay in the country whilst still allowing you the freedom of a contractor. So you send them your timesheets, they invoice the client and then process your earnings through PAYE. They calculate and pay taxes for you and supply payslips. They will also process and deduct any relevant business expenses which might be able to offset your taxable income. You can net up to 86% of your gross earnings using an umbrella company. All you need to focus on is getting your timesheets in and watching your salary hit your bank account.
Umbrella companies are experts in Singapore taxation - especially as it applies to international contractors. This is a great advantage when trying to maximise your earnings. Crucially they will also ensure you comply 100% with Singaporean tax law, including dealing with the Singaporean tax office or tax department directly on your behalf (for example if you need a tax refund processed). This can be done for as little as 5% of your daily rate.
How We Can Help You with Tax in Singapore
Our partner companies in Singapore are umbrella companies specialised in dealing with contractors. They are experts in tax and immigration laws. So they can answer any of your questions about tax and payment in Singapore. We have a range of partners from local specialists to the Singaporean offices of multinational contractor management companies - which means we can match you with a provider who has the right services for you. If you have any questions please get in touch, we don't charge you anything for advice on tax in Singapore. Our partners have recently helped contractors in IT, Finance, telecommunications and management consultants get tax efficient payment. Many of them also received Singapore work permit sponsorship for an additional fee. If you want to be paid in Singapore without dealing with the Singaporean tax authorities, get in touch with us today!