Singapore’s tax system is widely regarded for its simplicity and competitiveness, but employers sending mobile employees there must navigate several unique rules. Understanding how employment income is taxed, how residency is determined, and when employer actions are required can help prevent compliance issues and unexpected costs.

Understanding Singapore’s Tax Residency and Income Rules

Singapore operates on a territorial basis of taxation, meaning employment income is taxable if it arises from work performed in Singapore. The tax year follows the calendar year, and income is taxed on a one-year lag, so income earned in 2025 will be taxed in the Year of Assessment (YA) 2026.

Tax residency status significantly impacts how much tax an employee will pay. Generally, an employee is considered a tax resident if they are physically present and/or working in Singapore for at least 183 days in a calendar year. If they don’t meet this threshold within a single year, an administrative concession allows for resident treatment if the employee works in Singapore for at least 183 days over two consecutive YAs.

Why does this matter for your mobile employees?

Resident individuals enjoy personal reliefs and are taxed at progressive rates ranging from 0% to 24%. In contrast, non-residents are taxed at the higher of a flat 15% rate (without reliefs) or the resident tax calculation. Proper planning to achieve resident status, where possible, can yield significant tax savings.

Additionally, foreign-sourced income and capital gains are generally not taxed in Singapore. This simplifies tax considerations for globally mobile employees, particularly those with investments or other income outside Singapore.

Planning to send your employee to Singapore?

If your organization is planning to send an employee to Singapore, it’s important to anticipate local tax compliance requirements, especially tax clearance obligations upon cessation of employment. Unlike in some jurisdictions, Singapore does not require employers to withhold personal income tax on a monthly basis. However, specific steps are required when an employee ends their assignment or leaves the country.

Key Actions for Employers:

  1. File Form IR21 (Notification of Cessation of Employment) with The Inland Revenue Authority of Singapore (IRAS) at least one month before the date of cessation of employment.
  2. Withhold all money due to the employee once the Company is aware that the employee will cease employment. All monies due to the employee (such as final salary, bonuses, or commissions) will be withheld until the employee’s tax obligations have been settled with the IRAS. The employer will be required to make the tax payment from the monies withheld before releasing the balance of monies withheld (if any) to the employee.  This ensures the employee clears any outstanding tax dues before receiving their final entitlements.

These obligations are non-negotiable and strictly enforced. Failing to comply could result in penalties for the company and delays for the employee. Proactive coordination with your tax advisor and payroll teams will help ensure the exit process runs smoothly and in line with IRAS expectations.

Budgeting for Singapore tax bill

Singapore does not require employers to withhold taxes from employees. Since tax is assessed in arrears, employees typically won’t pay tax in the year of arrival. However, in the year the employment ends, they may be taxed for 2 years.

The final amounts withheld by the employer may sometimes be insufficient, requiring the employee to pay the balance. As a general rule, employees should set aside at least one month’s salary for taxes for each year.

Equity compensation

Companies are increasingly offering share-based compensation to align employee interests with long-term business goals. These incentives can drive productivity, innovation and a stronger commitment to the company’s success.

One of the unique features of Singapore’s tax policy is the treatment on the gains of stock options and shares awarded to employees as part of their remuneration packages. Employees are subject to tax only on shares granted during Singapore employment. Tax is triggered when options are exercised or shares vest. If restrictions apply, taxation may be deferred until those are lifted. The taxable gain is the difference between the market value and the exercise price, if any. Future gains are generally treated as capital gains which are tax exempt provided the employee does not habitually trade in shares.

Non-Singapore citizens must pay tax on deemed gains from unexercised options or unvested shares when leaving Singapore. This can create significant tax liability, so early planning is advised.

Should the actual value of the shares on vesting be lower than the deemed value, or if the shares are subsequently forfeited, employees may request reassessment within four years from the relevant year.

Working remotely from Singapore

Foreign employees must hold a valid employment or work pass issued by Singapore’s Ministry of Manpower before starting work in Singapore. If an employee requests to work remotely from Singapore, the company should consider the following issues:

  1. Immigration requirements: Employees holding a dependent’s pass may need to obtain a Letter of Consent. Alternatively, an Employer of Record (EOR) arrangement may be used.
  2. Tax reporting obligations: The employer must report the employee’s remuneration via IR8A annually. Tax clearance may also be required. If the company has no registered presence in Singapore, it must still ensure compliance.
  3. EOR limitations: While the EOR handles employer filings, they may not capture all non-cash benefits, such as home leave or equity, which could lead to under-reporting.

Final Thoughts

Singapore remains one of Asia’s most attractive destinations for global talent, thanks to its straightforward tax system and favorable treatment of foreign income. However, compliance requirements, especially around tax residency, equity compensation, and departure obligations, require careful planning and coordination between HR, payroll, and tax teams.

By addressing these considerations early, employers can minimize administrative challenges and help their mobile employees experience a smooth transition both into and out of Singapore.

If you would like guidance specific to your organization or employees, please reach out to discuss your situation with one of our mobility tax professionals.

Published 25 NOVEMBER 2025

Author: Pioneer Associates