The tax system in Singapore is very straightforward and beneficial for businesses. The Singapore tax rate for individuals starts from 0% and is capped at 22%. The government also has a personal income tax relief cap set at S$80,000. That means the maximum tax relief you can get in any assessment year is S$80,000.
In addition to Singapore’s beneficial tax exemptions, it doesn’t hurt to pay less taxes. Read more for four valuable tips that will help you reduce your income tax in Singapore.
Upgrade Your Skills With Additional Learning Courses
What do learning courses have to do with income tax? If you’re not sure, you’re not alone. Many people are unaware that it can be a great way to reduce annual taxes.
If you’re attending any learning courses relevant to your current employment or career, you can receive tax benefits. You can get tax relief up to S$5,500 if you take any course in the same field of your work and you have paid the fee yourself (not your company). Additionally, if you take any learning course that helps you switch careers, you can claim the benefit. For example, if you want to switch your job from human resources and join the administrative team, you can take up an administrative course and claim the tax benefit when you file your income tax returns.
Donate to a Charitable Organization
Donating to a charity that’s registered as an Institute of Public Character in Singapore can help you get tax benefits on your taxable income. According to the 2021 budget announced by the Minister of Finance, the qualifying charitable donations will receive a 250% tax deduction till 31 December 2023.
That means if you donate $100 to a qualifying charitable fund, you can deduct $250 from your taxable income. Furthermore, the 250% tax deductions you receive after donating to a charity are extended to the next two years.
Include Your Business Expenses
There are many costs involved in running a business. From operational expenses to hidden costs like legal fees, you can receive tax deductions on your business expenses. Whether you own or operate a small grocery store or an emerging startup, you can claim tax benefits by filing your business expenses. Some major business expenses you can issue include:
- Skill development levy
- CPF contributions
- Accounting fees
- Foreign worker levy, etc.
Top Up Your CPF or Retirement Funds
It’s always a good idea to plan finances for your retirement. Many Singaporeans opt for CPF accounts to put funds away for retirement. It’s a great way to reduce your taxes in Singapore.
You might be surprised to learn that every dollar you put in your retirement accounts reduces a dollar from your chargeable income. Remember to top up your CPF account a year before you file your taxes, or you may not be able to get the tax benefits.
Reducing your income tax in Singapore has never been so easier. Make sure you list all your business expenses, charitable contributions, and educational expenses while filing your taxes. Your contributions to your retirement funds also make a difference in the final tax amount. By including all these expenses and contributions in your filing, you can reduce your income tax payments to a great extent.