Understand how the Inland Revenue Authority of Singapore (IRAS) taxes local and foreign-sourced income, what’s taxable, what’s exempt, and how it impacts residents and non-residents.
📌 Overview of Singapore’s Tax System
Singapore follows a territorial basis of taxation. This means taxes are levied primarily on income earned in Singapore or income derived from Singapore sources. Foreign-sourced income is generally not taxable for individuals, unless it is received in Singapore under certain conditions.
This tax framework keeps Singapore competitive globally, attracting professionals, entrepreneurs, and investors.
🏠 What is Local (Singapore-Sourced) Income?
Local income refers to income accrued in or derived from Singapore. It is taxable regardless of whether you are a resident or non-resident. Common examples include:
- Employment income: Salaries, bonuses, allowances, benefits-in-kind from work done in Singapore.
- Business income: Profits from a trade, profession, or vocation carried out in Singapore.
- Rental income: Earnings from letting out property located in Singapore.
- Investment income: Certain taxable interest, royalties, and other gains from Singapore sources.
All these incomes are taxable in the year of assessment following the year they were earned.
🌏 What is Foreign-Sourced Income?
Foreign-sourced income refers to income that arises from outside Singapore. For individuals, this includes:
- Overseas employment income (work done outside Singapore)
- Foreign dividends
- Foreign interest income
- Overseas rental income
- Capital gains from assets sold overseas (generally exempt)
For most individuals, foreign-sourced income is exempt from Singapore income tax, even if remitted into Singapore, unless it is received through a partnership in Singapore.
📊 Tax Treatment: Local vs. Foreign Income
| Type of Income | Taxable in Singapore? | Notes |
|---|---|---|
| Local Employment Income | ✅ Yes | Includes salaries, allowances, bonuses, benefits-in-kind |
| Local Business/Trade Income | ✅ Yes | Taxed on net profit after allowable deductions |
| Local Rental Income | ✅ Yes | Can claim actual expenses or 15% deemed expenses |
| Foreign Employment Income | ❌ No* | Exempt unless earned through a Singapore partnership |
| Foreign Dividends | ❌ No* | Exempt unless received through a Singapore partnership |
| Foreign Rental Income | ❌ No* | Same exemption rules apply as above |
*For companies, foreign income exemptions require meeting certain conditions under the foreign-sourced income exemption scheme, but this generally does not apply to individuals.
💼 How Tax Residency Affects Local & Foreign Income
Tax residents are taxed on local income at progressive rates (0% to 24% for YA 2025) and can claim personal reliefs. Non-residents pay a flat 24% on most local income and generally cannot claim reliefs, with a special 15% rate option for employment income.
Residency status does not affect the exemption for most foreign-sourced income for individuals.
💡 Tax Planning Tips
- Maximise deductible expenses for local income to lower taxable income.
- For business owners, structure operations to take advantage of Singapore’s territorial tax system.
- For expatriates, understand when overseas income becomes taxable if linked to Singapore operations.
- Keep proper documentation of income sources in case of IRAS review.
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📢 Final Thoughts
Singapore’s distinction between local and foreign-sourced income is a major advantage for residents and global professionals. While local income is fully taxable, most foreign-sourced income is exempt, making Singapore an attractive place for international talent and entrepreneurs.
Always confirm your tax obligations with IRAS or a professional advisor, especially if you have cross-border income sources or complex business arrangements.
