The Minister for Finance announced in his Budget Statement 2008 certain changes to the qualifying criteria of the tax concessions under the Not Ordinarily Resident (“NOR”) tax incentive scheme. These changes will take effect from the Year of Assessment (“YA”) 2009 for all NOR taxpayers, except for those identified under the transitional rules stated below. Details of the changes are summarised below.
Benefits of the NOR Scheme
Under the NOR scheme, an individual who is accorded the NOR status (for a qualifying 5-year period) will enjoy the following tax concessions provided he is a resident by virtue of Section 2(1) of the Singapore Income Tax Act (“the Act”) in that YA and the qualifying criteria of each of the tax concessions are met.
(i) Time apportionment of his Singapore employment income.
(ii) Tax exemption of employer’s contribution to a non-mandatory overseas pension fund or social security scheme.
"Resident in Singapore" is defined in Section 2(1) of the Act as follows.
“in relation to an individual, means a person who, in the year preceding the year of assessment, resides in Singapore except for such temporary absences therefrom as may be reasonable and not inconsistent with a claim by such person to be resident in Singapore, and includes a person who is physically present or who exercises an employment (other than as a director of a company) in Singapore for 183 days or more during the year preceding the year of assessment;…”
(A) Qualifying Criteria for Time Apportionment of Singapore Employment Income
The following criteria (1) and (2) for time apportionment of Singapore employment income remains unchanged. The only change to the qualifying criteria for time apportionment is the minimum income threshold requirement as stated in criteria (3) below.
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Old NOR Scheme |
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New NOR Scheme |
(1) |
Resident NOR Singapore employee must spend at least 90 days outside Singapore for business reasons pursuant to his Singapore employment. |
(2) |
Where the resident NOR Singapore employee’s tax on the apportioned Singapore employment income is less than 10% of his total Singapore employment income, he would still be subject to a minimum floor tax rate of 10% on his total employment income. |
(3) |
His tax on his total Singapore employment income must be greater than 10% of his total Singapore employment income. |
(3) |
His total Singapore employment income must be at least $160,000. |
(B) Qualifying Criteria for Tax Exemption of Employer’s Contribution to a Non- Mandatory Overseas Pension Fund or Social Security Scheme
Similarly, the only change to the qualifying criteria for tax exemption of employer’s contribution to a non-mandatory overseas pension fund or social security scheme tax concession is the minimum income threshold requirement as stated in criteria (3) below.
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Old NOR Scheme |
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New NOR Scheme |
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FOR EMPLOYEE |
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(1) |
Resident NOR Singapore employee is neither a Singapore citizen nor a permanent resident of Singapore (“SPR”). |
(2) |
The tax exemption given to the non-Singapore citizen / non-SPR resident NOR Singapore employee must not exceed a cap. The cap is computed based on the Central Provident Fund (“CPF”) capping rules as if the employer had made the contribution to the CPF for a Singapore citizen as required under the CPF Act (hereinafter referred to as the NOR cap). |
(3) |
Not applicable. |
(3) |
His total Singapore employment income must meet the minimum income threshold of $160,000 (this is also the minimum income threshold applicable to the time apportionment tax concession). |
The change for the tax deduction rules for the employer is as follows.
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FOR EMPLOYER |
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(1) |
Employer is entitled to claim tax deduction on contributions made to a non-mandatory overseas contribution scheme in full, even though tax exemption granted to the non-Singapore citizen / non-SPR resident employee on such contribution is subject to the NOR cap. |
(1) |
Employer should not claim a tax deduction on contributions made to non-mandatory overseas contribution scheme up to the NOR cap if he wishes his non- Singapore citizen / non-SPR resident employee to be eligible for the tax exemption concession up to the NOR cap. In other words, tax deduction is only allowed on the portion of the contributions that is above the NOR cap. |
Transitional Rules
The changes to the NOR scheme will take effect from YA 2009 for all NOR taxpayers, except for the following 2 groups of NOR taxpayers:
(a) existing NOR taxpayers who have enjoyed only non-mandatory overseas contribution scheme concession prior to YA 2009, unless they opt into the new NOR scheme.
(b) existing NOR taxpayers who have enjoyed either time apportionment concession or both time apportionment and non-mandatory overseas contribution scheme concessions prior to YA 2009, provided they opt out of the new NOR scheme.
The election by existing taxpayers to opt into or opt out of the new NOR scheme, once made, is irrevocable.
This one-time election has to be made no later than 15 April 2009 regardless of whether the taxpayer is claiming for any NOR tax concession for the YA 2009, failing which no appeals from those who did not make the election or fail to do so by the deadline would be considered.
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