Taxation of share options in singapore

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All income tax information is based on the Singapore Income Tax Act chapter and the prevailing practices of the Inland Revenue Authority of Singapore. Forms for the return of income are usually issued during February through March of the following year and are required to be completed and filed to the Inland Revenue Authority of Singapore IRAS by 15 April unless an extended deadline has been granted by the IRAS.

Assessments are made by way of notices of assessment. The tax is normally due for payment within one month from the date of issue of the notice of assessment. What are the current income tax rates for residents and non-residents in Singapore? Income tax is calculated by applying a progressive tax rate schedule to chargeable income as follows. A non-resident individual is generally subject to tax at flat rates, depending on the type of income.

For employment income, tax is charged at a flat rate of 15 percent or at the resident rates, whichever is higher. For the purposes of taxation, how is an individual defined as a resident of Singapore? Under the two-year administrative concession, a foreign employee who exercises employment in Singapore for a continuous period of at least days straddling two years would be treated as a resident of Singapore for both years. This concession applies to foreign employees who have entered Singapore from 1 January Is there, a de minimus number of days rule when it comes to residency start and end date?

An employer is required to notify the IRAS if a non-citizen employee including a Singapore Permanent Resident who is leaving Singapore permanently ceases or is about to cease employment in Singapore. The employer can only release the monies withheld to the employee upon receiving permission from the IRAS or until 30 days after notification of the employment cessation was made, whichever is earlier. An exception would be if the employer is on tracking option, where the employer will track the income realization event to report to the IRAS.

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In determining the tax residency and period of employment exercised, the time spent in Singapore throughout the calendar year would be considered. Do the immigration authorities in Singapore provide information to the local taxation authorities regarding when a person enters or leaves Singapore? In general, the IRAS have the power to authorize any person to assist in the performance of any specific duty imposed by the Income Tax Act.

Will an assignee have a filing requirement in the host country after they leave the country and repatriate? Do the taxation authorities in Singapore adopt the economic employer approach 1 to interpreting Article 15 of the OECD treaty?

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If no, are the taxation authorities in Singapore considering the adoption of this interpretation of economic employer in the future? There is no indication as to whether the IRAS would adopt this approach in the future. Are there a de minimus number of days before the local taxation authorities will apply the economic employer approach?

If yes, what is the de minimus number of days? Employment income or profits for employment services rendered in Singapore are taxable regardless of whom or where the employer may be or, to whom or where the employment income may be paid.

Typical items of an expatriate compensation package, such as the following, are taxable unless otherwise indicated. In either case, the taxable benefit is reduced by any payment made by the employee towards the accommodation. If the employer provides the employee with household furniture and assets, the employee is regarded as having derived a taxable benefit. The taxable value of such benefit is computed at standard rates prescribed by the IRAS.

Commencing 1 January , the tax treatment for accommodation mentioned above would cease to apply. The taxable values for accommodation provided by the employer will be derived as follows:. For housing accommodation, the taxable benefit will be the annual value of the premises, less any rent paid by the employee. The taxable value of the Furniture and Fittings is assessed based on whether the premises is fully furnished or partially furnished. The applied rate is at: Partially furnished refers to only fittings eg.

Value of Hotel Accommodation is assessed based on the actual costs incurred by the employer for the hotel stay, less the amount paid by the employee.

There are a number of tax incentives given to employee equity-based remuneration plans provided certain conditions are met.

The incentives are as follows:. Qualified Employee Equity-Based Remuneration QEEBR Scheme; b. Equity Remuneration Incentive Scheme Small and Medium Enterprises ERIS SMEs 2; c. Equity Remuneration Incentive Scheme All Corporations ERIS All Corporations 3; and d. Equity Remuneration Incentive Scheme Start-Ups ERIS Start-Ups. The ERIS schemes that currently provide for a partial tax exemption on gains arising from Employee Share Option Plans or Employee Share Ownership Plans will be phased out upon the expiration of the respective schemes:.

For stock options or share awards granted to employees on or before the respective expiration dates, the partial tax exemption accorded under the relevant schemes will still be applicable, as long as the gains are derived on or before 31 December Are there any areas of income that are exempt from taxation in Singapore? If so, please provide a general definition of these areas. Interest income derived on or after 1 January by any individual from deposits with an approved bank or a finance company licensed under the Finance Companies Act in Singapore, is exempt from tax.

Interest from debt securities and income from certain annuities, life insurance policies, distributions from certain collective investment schemes, fee or compensatory payments from securities lending or repurchase arrangements, derived from Singapore on or after 1 January by an individual may be exempt from tax.

However, if the interest income is derived through a partnership in Singapore or is derived from the carrying on of a trade, business or profession, such income is taxable. With effect from 1 January , all overseas income remitted by individuals resident in Singapore is not taxable However, this exemption does not apply if the foreign-sourced income was received through a partnership in Singapore.

An Avoidance of Double Taxation Agreement between Singapore and another country serves to prevent double taxation of income earned in one country by a resident of the other country.

On the other hand, where the individual is employed to perform services entirely outside Singapore e. From the year of assessment , any interest income derived by any individual from the deposit of monies with an approved bank or a licensed finance company would be tax exempt.

Any interest by any individual from debt securities derived on or after 1 January is also exempt from tax. With effect from 1 January , all dividends paid by Singapore-resident companies would be dividends under the one-tier corporate taxation system and are exempt from tax in the hands of the shareholders. An individual is required to declare the gross rental income for each property.

This includes the rental of furniture and fittings, and service charges received from the tenant. The individual can only claim expenses incurred during the period of tenancy, including property tax, mortgage interest, fire insurance, repairs, and maintenance, and so on. Principal residence gains and losses are generally capital in nature and are neither taxable nor deductible respectively. Gifts cash and non-cash from employers are taxable benefits-in-kind. However, under the administrative concession granted by the IRAS, gifts given on festive and special occasions which are not substantial in value SGD or less per occasion and generally available to all staff are not taxable.

Are there additional capital gains tax CGT issues in Singapore?

If so, please discuss? Capital gains are not taxable in Singapore unless the individual is regarded as a dealer or trader.

Expenses are tax deductible only if they are wholly and exclusively incurred in the production of the income, are not capital in nature and their deduction is not prohibited by statute. In general, there are very few deductions that can be claimed against employment income. Some of the personal reliefs applicable for the Year of Assessment are summarized as follows.

What are the tax reimbursement methods generally used by employers in Singapore? In a tax equalization scheme, a hypothetical amount of home country tax is calculated on certain elements of compensation that is, excluding assignment-related compensation.

At the end of the year, the final hypothetical tax liability is calculated and any under, or over-payment of hypothetical tax is paid by, or reimbursed to, the employee. Consequently, the executive who has been transferred is no better or worse off than before the assignment. For example, Pay-As-You-Earn PAYE , Pay-As-You-Go PAYG , and so on. Is there any Relief for Foreign Taxes in Singapore?

For example, a foreign tax credit FTC system, double taxation treaties, and so on? Please refer to Double Taxation Treaties below for a list of countries with which Singapore has treaty agreements. What are the general tax credits that may be claimed in Singapore? This calculation assumes a married taxpayer resident in Singapore with two children whose three-year assignment begins 1 January and ends 31 December In this case, Article 15 relief would be denied and the employee would be subject to tax in the host country.

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Tax returns and compliance When are tax returns due? That is, what is the tax return due date? What is the tax year-end? What are the compliance requirements for tax returns in Singapore?

Tax rates What are the current income tax rates for residents and non-residents in Singapore? Residents Income tax is calculated by applying a progressive tax rate schedule to chargeable income as follows.

Income tax table from the Year of Assessment to Taxable income bracket Total tax on income below bracket Tax rate on income in bracket From SGD To SGD SGD Percent 0 20, 0 0 20, 30, 0 2 30, 40, 3. Non-residents A non-resident individual is generally subject to tax at flat rates, depending on the type of income.

Residence rules For the purposes of taxation, how is an individual defined as a resident of Singapore?

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What if the assignee enters the country before their assignment begins? Termination of residence Are there any tax compliance requirements when leaving Singapore? What if the assignee comes back for a trip after residency has terminated? Communication between immigration and taxation authorities Do the immigration authorities in Singapore provide information to the local taxation authorities regarding when a person enters or leaves Singapore?

Economic employer approach Do the taxation authorities in Singapore adopt the economic employer approach 1 to interpreting Article 15 of the OECD treaty? The IRAS has not adopted the economic employer approach as of yet. Types of taxable compensation What categories are subject to income tax in general situations? Salary, wages, bonuses, and allowances.

Accommodation provided by the employer is a taxable benefit-in-kind and the taxable value is derived as follows: From Year of Assessment Commencing 1 January , the tax treatment for accommodation mentioned above would cease to apply. The taxable values for accommodation provided by the employer will be derived as follows: Place of Residence or Serviced Apartment not within hotel building For housing accommodation, the taxable benefit will be the annual value of the premises, less any rent paid by the employee.

Hotel Accommodation Value of Hotel Accommodation is assessed based on the actual costs incurred by the employer for the hotel stay, less the amount paid by the employee. Remission of leave passage may be available to expatriate employees of company that is awarded or granted extension, prior to 1 January , of certain incentive status such as pioneer, operational headquarters, and so on.

Any fares other than the above are taxable in full. If an employer pays for the insurance premiums for a personal insurance policy where the employee is the policyholder, the premium paid by the employer would be taxable in the hands of the employee. For group insurance in which the employee is contractually entitled to the payout in the event of a claim, the insurance premium paid by the employer would constitute a taxable benefit to the employee.

An administrative concession applies to employers who are not investment holding companies, tax exempt bodies or service companies where the qualifying conditions are met. For group insurance in which the employee is not contractually entitled to the payout in the event of a claim, the premiums paid by the employer would not be taxable. However, if the employer subsequently disburses the payout to the employee, the payout is taxable as additional remuneration, unless it is received by way of death gratuity or as compensation for death or injuries which is tax-exempt under the law.

If the employer bears the cost of tax for the employee, this is regarded as a taxable benefit and is computed on a tax-on-tax basis. The employee will be taxed on the full amount of the gain or the profit derived from the exercise, assignment, or release of the right or benefit to acquire shares. The taxable gain is the difference between the open market value of the shares and the price paid to acquire the shares on the exercise date.

The law connects the taxability of the gains to the employment source. In addition, the deferral on the taxation of gains is allowed where shares are subject to a moratorium and a deemed exercise rule applies to certain unexercised stock options, or unvested share awards for departing expatriates, unless the tracking option alternative applies.

The incentives are as follows: The ERIS schemes that currently provide for a partial tax exemption on gains arising from Employee Share Option Plans or Employee Share Ownership Plans will be phased out upon the expiration of the respective schemes: ERIS Start-ups Expiry date: The concessionary tax treatment will cease to apply with effect from Year of Assessment if the employer is a tax exempt body or an investment holding company.

If the employer is a service company adopting a cost plus mark up basis of assessment, the concessionary tax treatment will cease to apply from Year of Assessment i. If the employer makes a loan to the employee at a zero or reduced interest rate, the value of the interest reduction is taxable income to the employee.

However, as an administrative concession, such benefit would not be taxable if the loan scheme is available to all employees and the employee does not have substantial shareholdings, control, or influence over the company. Tax-exempt income Are there any areas of income that are exempt from taxation in Singapore? Exemption of interest income Interest income derived on or after 1 January by any individual from deposits with an approved bank or a finance company licensed under the Finance Companies Act in Singapore, is exempt from tax.

Remittances of offshore funds With effect from 1 January , all overseas income remitted by individuals resident in Singapore is not taxable However, this exemption does not apply if the foreign-sourced income was received through a partnership in Singapore. Double taxation agreement An Avoidance of Double Taxation Agreement between Singapore and another country serves to prevent double taxation of income earned in one country by a resident of the other country.

Capital gains tax There is no capital gains tax in Singapore.

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Expatriate concessions Are there any concessions made for expatriates in Singapore? Salary earned from working abroad Is salary earned from working abroad taxed in Singapore?

Taxation of investment income and capital gains Are investment income and capital gains taxed in Singapore? Dividends, interest, and rental income Rental income derived in respect of property located in Singapore is taxable. Foreign exchange gains and losses Foreign exchange gains and losses are neither taxable nor deductible. Principal residence gains and losses Principal residence gains and losses are generally capital in nature and are neither taxable nor deductible respectively.

Capital losses Capital losses are generally not tax-deductible. Gifts Gifts cash and non-cash from employers are taxable benefits-in-kind. Additional capital gains tax CGT issues and exceptions Are there additional capital gains tax CGT issues in Singapore? Are there capital gains tax exceptions in Singapore? Pre-CGT assets Capital gains are not taxable in Singapore unless the individual is regarded as a dealer or trader.

Deemed disposal and acquisition Capital gains are not taxable in Singapore unless the individual is regarded as a dealer or trader. General deductions from income What are the general deductions from income allowed in Singapore? Supplementary Retirement Scheme SRS Capped at 29, for foreigners Capped at 35, for foreigners from YA A non-resident individual is not entitled to personal reliefs.

Tax reimbursement methods What are the tax reimbursement methods generally used by employers in Singapore? Tax equalization In a tax equalization scheme, a hypothetical amount of home country tax is calculated on certain elements of compensation that is, excluding assignment-related compensation.

Pay-as-you-go PAYG withholding Not applicable. PAYG installments Not applicable. Relief for foreign taxes Is there any Relief for Foreign Taxes in Singapore? General tax credits What are the general tax credits that may be claimed in Singapore? Sample tax calculation This calculation assumes a married taxpayer resident in Singapore with two children whose three-year assignment begins 1 January and ends 31 December Other assumptions All earned income is attributable to local sources.

Bonuses are paid at the end of each tax year, and accrue evenly throughout the year. The company car is used for business and private purposes and originally cost USD50, The employee is deemed resident throughout the assignment. Tax treaties and totalization agreements are ignored for the purpose of this calculation. FOOT NOTES 1 Certain tax authorities adopt an "economic employer" approach to interpreting Article 15 of the OECD model treaty which deals with the Dependent Services Article.

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By using this website, you agree to the use of cookies as outlined in KPMG's online privacy statement. Spouse living with or maintained by taxpayer and spouse's income is not more than SGD4, With effect from Year of Assessment , the Dependent parents relief may be shared with other claimants provided no one else is claiming any other relief except Grandparent Caregiver Relief on the same dependent.

Capped at 29, for foreigners Capped at 35, for foreigners from YA