Not all income you receive is taxed the same way in Singapore. Some payments, such as annuities, alimony, and windfalls, have unique tax rules under the Inland Revenue Authority of Singapore (IRAS) guidelines. This guide explains how each is treated for tax purposes so you can report correctly and optimise your tax position.
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📌 1. Annuities – Regular Payouts for Life or a Fixed Term
Annuities are regular payments received from an insurance policy, retirement plan, or investment scheme. In Singapore, the tax treatment depends on the source and nature of the annuity.
- Purchased Annuities (from personal funds): Generally, the capital portion is tax-free, while the interest or investment gain portion may be taxable.
- CPF LIFE or SRS Annuities: Payments are partially taxable, depending on the scheme’s rules. CPF LIFE payouts are typically not taxable for Singapore residents, while SRS withdrawals are taxable at prevailing rates.
- Foreign Annuities: If received in Singapore, they may be taxable unless exempt under the Foreign-Sourced Income Exemption (FSIE) rules.
📌 2. Alimony & Maintenance Payments
Alimony refers to maintenance payments made after divorce or legal separation. In Singapore:
- For the Recipient: Alimony or maintenance payments received are not taxable, regardless of whether they are paid periodically or as a lump sum.
- For the Payer: Alimony payments are not tax-deductible. They are considered personal expenses and not deductible from taxable income.
- Child maintenance payments are also non-taxable to the recipient and non-deductible for the payer.
This treatment aligns with IRAS’s position that such payments are transfers of private wealth, not income from employment or business.
📌 3. Windfalls – Unexpected Lump Sums
Windfalls are unexpected gains, such as lottery winnings, inheritance, or one-off gifts. In Singapore, most windfalls are not taxable as they are considered capital in nature.
| Type of Windfall | Tax Treatment |
|---|---|
| Lottery or Toto winnings | Not taxable |
| Inheritance from family | Not taxable (no estate duty in Singapore) |
| One-off cash gifts | Not taxable unless given in exchange for services |
| Contest prizes in cash | Taxable if related to your profession or business |
📊 Example – Mixed Income Scenario
Suppose in YA 2025, you receive:
- CPF LIFE payout – S$24,000 (tax-free)
- Alimony – S$12,000 (tax-free)
- Lottery win – S$50,000 (tax-free)
- Prize for a work-related competition – S$5,000 (taxable)
In this case, only the S$5,000 prize is taxable and should be declared in your annual tax return.
⚠️ Common Mistakes to Avoid
- Assuming all annuity payments are tax-free – check the source.
- Failing to declare work-related prizes as income.
- Believing alimony is deductible for the payer – it is not.
💡 Tax Planning Tips
- For annuities, structure payouts to fall within lower tax brackets.
- Keep clear records of annuity contracts and source of funds.
- When possible, receive gifts and inheritances in capital form to avoid tax implications.
📍 Final Thoughts
Understanding how annuities, alimony, and windfalls are taxed in Singapore can save you from costly mistakes. While most of these are not taxable, certain components and related payments may still attract tax. Always verify with IRAS guidelines or consult a qualified tax advisor.
