Tax Write-Up: Individual Income Tax Concession

By: Teng Kuan, Chloe, Jing Jie (Research and Training Department)

In this month’s publication, we refer to an article by International Tax Review on the phasing out of tax concessions that were provided in light of travel restrictions imposed by various countries, including Singapore, as a countermeasure against COVID-19.

From the article, the tax concessions were relevant to 2 key demographics. The first category includes Singapore citizens and Singapore permanent residents (SPRs) who were physically present overseas for their employment but returned to Singapore to work remotely under the same employment due to travel restrictions in 2020. To mitigate the unintended tax consequences resulting from international travel constraints, the Inland Revenue Authority of Singapore (IRAS) provided that the employment income for individuals in this category would be tax-exempt until 30 June 2021 if the necessary conditions were met. While these concessions are in the process of being phased out, they can still be approved and exercised on a case-by-case basis beyond 30 June 2021, provided the following extenuating circumstances are present:

1. The overseas country that the individual is primarily based to work prohibits entry of travelers or it is impracticable to travel due to the unavailability of travel options; and

2. The individual will leave Singapore as soon as he or she is allowed to

The IRAS has prescribed a list of information and documents that need to be submitted for IRAS’ review. The onus is on affected individuals to write in to IRAS with the required information and documents. Upon approval from IRAS, the tax concession can then be granted to affected individuals beyond 30 June 2021.

The second category includes non-resident foreigners who were in Singapore for business assignments but were subsequently stranded due to travel restrictions imposed. IRAS is clear that the employment income attributable to the assignment period remains taxable in the absence of opposing factors, and it is only employment income from the period of extended stay beyond the business assignment that is tax-exempt. Even for the latter, it is only available in 2020, provided the necessary conditions are met. Non-resident foreigners who have continued working remotely in Singapore beyond 2020, will be subject to tax in Singapore, unless the tax exemption for short-term business assignments or that under a relevant tax treaty can apply. Specifically, a non-resident employee may seek respite from tax via a relevant tax treaty provision between his/her country of residence and Singapore. Given that this is subject to a set of conditions being met, affected non-residents are reminded to maintain all relevant documentation and records as proof of satisfying stated requisites, and provide the same upon the IRAS’ request.

In general, such provisions by IRAS aim to facilitate a smooth phasing out of tax concessions without handicapping deserving individuals.

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