Changes in Singapore’s 2018 Tax System
1. Personal Income Tax Relief Cap
Singaporean government has announced that as of YA 2018, the total amount of personal income tax is subject to an annual relief cap of $80,000. This cap on personal income tax relief applies to the total amount of all income tax reliefs claimed, which also includes any relief on voluntary CPF contributions made. Therefore, individuals who have met the qualifying conditions should continue to claim the personal reliefs.
In effect, Singapore expects to generate $100 million worth of additional tax revenue a year. It also triggers a more progressive tax system, affecting only 1% of tax-resident individuals. SMU Professor Sum Yee Loong, a former Deloitte tax partner, remarked that the cap was a wise move and will affect high income earners who make S$150,000 or S$300,000 a year. On the contrary, the middle-income bracket, or those earning S$50,000 to S$80,000 a year, is not likely to be implicated. However, this change also impacts working mothers who are higher wage earners with two children, as well as some lower-income taxpayers. Moreover, taxpayers who have parents, grandparents and disabled family members in their care can also expect to take up additional burden.
All things considered, Singapore’s personal income tax burden remains low and most Singaporeans are in support of the new cap. Additionally, this tackles a potential loophole in the tax system and prevents further exploitation from certain group of taxpayers, referring to self-employed individuals who divert a portion of their earnings to their spouses. That is to say the aforementioned spouses are not entirely responsible in income generation.
2. Removal of tax concession on home leave passages for expatriate employees
The 20% tax concession for the value of home leave passages for expatriate employees shall be removed with effect from YA 2018.
The home leave passages provided to expatriate employees, their spouses and children are taxable in full.