How to legally save/reduce your Singapore personal income taxes in 2019 – Common question asked by many people in Singapore especially since the year has ended for the year of 2018 and we have about 3 months plus to start worrying about how much taxes you are needed to contribute to the building of our nation!
According to the IRAS website: https://www.iras.gov.sg/irashome/web/pages/taxCalendarListing.aspx , the due date for your personal income tax is 18 April 2019, for those who are not into e-filing, 15 April 2019 is the deadline for paper filing! So remember this date and do your filing as soon as possible, preferably now!
If you are filing through e-filing, here is the link: https://mytax.iras.gov.sg/ESVWeb/default.aspx
With the links provided and aside, lets start on the ways of How to legally save/reduce your Singapore personal income taxes in 2019, while we explain how Singapore’s tax works.
Singapore personal income tax rate from IRAS website
Singapore follows a progressive income tax system where the lower income group pay little or no income tax whereas the rich will pay more of a percentage of their income as taxes. Taxes contribute to the public goods that everyone in Singapore uses. Singapore mainly derives her tax revenue from personal income tax, corporate tax and goods and services tax.
So based on this chart for those who make an income below $20,000 is exempted from paying any tax.
Whereas someone with an income above $320,000 pays 22% of the subsequent amounts in personal income taxes.
So lets take a scenario where you are a desk bound job holder working in the CBD making $3,500 per month.
Based on that figure: $3,500 x 12 = $42,000, your tax rate will be ($550 for the first $40,000) + (7% x the remaining $2,000) = $690
*did you know you do not need to pay your income taxes at one go and instead could pay through GIRO monthly? Use this link to do it: https://www.iras.gov.sg/irashome/Quick-Links/Payments/Applying-for-GIRO/*
So for someone who makes in excess of $40,000, the tax rate starts to climb sharply and there are legal ways to reduce taxes, this is very different from evading taxes! Do not confuse the two different terms. Also note that the best way to reduce taxes is actually to do your tax planning earlier on in the year. Your tax is calculated from the 1st of January of the year to the 31st of December of the the year being assessed. So even if you missed out on doing some of this moves in 2018, read this article and do something about reducing taxes in 2019! You can work with us as your SME Accounting Services firm in Singapore.
So lets begin.
1. Contribute more into your personal or your parent’s CPF account
Everyone in Singapore who holds a full time job in Singapore contributes to their on personal Central Provident Fund savings. (CPF) So this is also one of the main means of savings for your retirement.
The ordinary wages limit for contribution is $6000 for CPF. And the annual voluntary contribution limit is $37,740.
You could contribute to your parent’s CPF accounts to increase that limit because remember, when you contribute to CPF, you get to get some relief from it.
2. Donating to a charitable cause
Not every charitable cause is tax deductible. For those that are clear cut deductible, make sure they are institutions of public character: https://www.charities.gov.sg/setting-up-a-charity/Pages/About-Charities-And-IPCs.aspx
Donations can be counted as relief for you to reduce your tax burdens for the year.
So make more donations to causes you care about today! Oh and don’t forget the official receipt as proof.
3. Claim NSmen relief if you’re married
If the husband is a key appointment holder, you can claim up to $5,000 of relief, and for the married person, wives can claim $750 relief on their income.
Of course the relief amounts are higher for Key Appointment holders and also when they are active. For those who are not familiar, here is the link to learn more about NSmen relief and also spouse relief for NSmen: https://www.iras.gov.sg/irashome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/NSman-Relief–Self–Wife-and-Parent-/
4. Working mother child relief
For anyone who has studied Singapore taxes and tax relief, the working mother child relief (WMCR) is definitely the single most effective and powerful tax relief anyone can get.
As the name implies, you need to be a mother and have a child. Either you own, or adopted. Sorry gentlemen, this doesn’t apply for you.
So according to the link on IRAS website for this relief: https://www.iras.gov.sg/irashome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/Working-Mother-s-Child-Relief–WMCR-/
The Working Mother’s Child Relief (WMCR) is given to:
- Reward families with children who are Singapore Citizens
- Encourage parents to take up Singapore citizenship for their children
- Encourage married women to remain in the workforce after having children
Single or male taxpayers are not eligible for this relief.
||15% of mother’s earned income
||20% of mother’s earned income
|3rd and beyond
||25% of mother’s earned income
So the amount of a mother’s income that can be deducted can be seen from the table above. For the first child you get to deduct 15% of the amount of earned income to be taxed, the second child you add another 20% and 25% for the 3rd child onward. Do note that there is a cap on the amount of relief you can claim on a child and also the amount you can claim personally, so there is a limit to this!
5. There is a relief cap for total tax relief
Currently the tax relief is capped at $80,000. So the ones that are affected will be those who are definitely making more than $80,000 a year and able to claim a relief of more than $80,000.
Here is the link for the relief information: https://www.iras.gov.sg/irashome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals–Reliefs–Expenses–Donations-/#title7
Here are 5 easy ways to help you legally reduce taxes if you’re making an income from either a salaried job or a directorship.
For self employed persons or business owners, there are ways where you could use the startup tax exemptions of Private limited companies to reduce taxes legally as well. There are also expenses that can be legally claimed if you decide to start up a business at home and contribute towards corporate taxes instead of personal taxes.
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If you are keen to get some assistance on tax advisory services or tax planning services, do set up a meeting for discussion.
How to legally save/reduce your Singapore personal income taxes in 2019