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What to Know Before Filing Your Income Tax Returns in Singapore 

Filing your income tax returns is an essential ritual in Singapore every year. But it doesn’t have to be a headache; it can be a little fun, too. It’s also more accessible than you think: if you know exactly what information is needed and what to look out for.  

You should consider many things before filing your taxes, especially if you expect a tax refund. However, not everyone knows this, and as a result, the IRAS receives around 80% of tax returns after the extended deadline of July 31st.  

This means that many people have not yet filed their taxes! To make things even better for you, here are some valuable tips on making this process easy. 

1. Understand the basics of tax calculation 

Taxes are calculated on your income, defined by your wages, business earnings, and investment income. When you file your taxes for the year, you’ll need to know how much you earned during the year and how much tax you owe.  

The amount of tax you owe is calculated using a formula known as the “marginal tax rate.” A marginal tax rate is the amount of tax you owe on your last dollar of income. For example, earning $20,000 annually, the first $20,000 is taxed at 10%, and the final $1,000 is taxed at 20%. The total amount of tax you owe is, therefore, $2,100. 

Tax calculations can be daunting, especially when dealing with a large corporation. However, when faced with problematic filing tax returns, you may consider hiring third-party companies like a1corp.com.sg to help you through the entire process. They have a dedicated team of professionals that can help prepare your business and personal tax statements at affordable fees and make the process seamless. 

2. Which form should you use? 

Singapore has a progressive income tax system, which means that your total income is taxed at different rates depending on how much you earn per year. If you earn $25,000 per year, you don’t owe the same taxes as someone who earns $250,000.  

Different tax forms allow you to report your earnings and calculate the amount of taxes you owe. The amount of tax you owe differs depending on the form you use. Singaporeans use either the “Income Tax and Assessment” form or the “Income Tax and Assessment for Individuals (ITA)” form.  

You’ll need to use the “Income Tax and Assessment for Business” form if you earn money from self-employment. For non-Singaporeans, you’ll need to use the “Income Tax and Assessment for Non-Residents” form. 

3. Know the tax-deductible items you can claim in your returns 

Before we start discussing the items that can bump up your tax returns, let’s first discuss the items that can bump up your tax payable. As an individual, you can be held liable for paying taxes on the following items: Your monthly salary, your bonus income, interest earned from bank and investment accounts, dividends from shares and stocks, rental income from your properties and your share of profits earned from your business ventures.  

When filing your taxes, you can deduct several itemized expenses from your taxable income to reduce your overall tax amount. These include payments for medical expenses, interest paid on your housing loan, educational fees, investments and charitable donations. Note that your employer will provide you with a statement of benefits detailing all the deductions you can make from your gross salary before the tax is calculated. 

 While you can use this document as a reference, we strongly suggest that you do your research to avoid paying too much taxes. You can do so by referring to the official Income Tax Act and the Singapore Customs Act. 

4. Watch out for non-taxable incomes that can bump up your tax payable 

While we’ve covered the items you can deduct from your taxable income, there are also a few items that are non-taxable in Singapore. These can include payment due to a lawsuit, gifts and inheritances, and prizes.  

While the first three items are non-taxable because they are not part of your normal income, the last item is taxable. However, the amount you earn from a prize is usually much lower than the amount you’re expected to pay in taxes. 

This means you may pay more taxes than necessary if you don’t adjust for this when filing your income taxes. If you receive non-taxable incomes, it’s in your best interest to keep track of these amounts to adjust your taxes accordingly. 

5. Keep track of your CPF and UDA payments throughout the year. 
 

Since you’ve probably been making central provident fund ( CPF) payments since you were a teenager, you may be tempted to assume that the amount you’ve paid so far should be applied to your income taxes.  

However, this is not the case. To reduce your tax payable, you should keep track of your CPF and urban redevelopment authority (UDA) payments throughout the year.  

If employed, you can reduce your tax payable by as much as $4,000 if you make your CPF payments throughout the year.  

If you’re self-employed, you can reduce your tax payable by a maximum of $16,000 by making CPF payments throughout the year. If employed under the UDA scheme, you can reduce your tax payable by a maximum of $2,000. 

 If you are self-employed under the UDA scheme, you can reduce your tax payable by a maximum of $12,000. By keeping track of your CPF and UDA payments, you can reduce the amount you have to pay in taxes. 

6. Include bonus income and other benefits you received 

In addition to the items you can deduct from your taxable income, you should also include the bonus income you’ve received throughout the year. This can consist of commissions, bonuses, and gifts that you’ve received from your friends, family, and employers.  

You should also include the benefits you’ve received from your employers throughout the year. These include transportation funds, medical benefits, and educational funds. Including these benefits in your tax returns can reduce the amount you must pay in taxes.  

However, you should remember that you can only claim these payments above $2,500. 

Conclusion 

Filing your taxes in Singapore is an important ritual you should not take lightly. Taxes fund public services and infrastructure that Singaporeans enjoy. You should file taxes and pay the correct amount if you earn money. However, before you dive into filing your income taxes, you must ensure that you’re prepared for the task. You’ll need to gather all the necessary documents, keep track of the deductions you’re eligible for, and consider the non-taxable incomes you’ve received throughout the year. If you do so, you can reduce the amount you must pay in taxes. If you need any help with your income taxes, you can always enlist the help of an Income Tax preparation agency. 

Ahsan Khan
Ahsan Khan
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