Yeah!!! It’s time to pay tax!!!
Says no one. Singapore is a low tax country for both individuals and corporate so I opposed it’s not too bad for us.
What is the process of filing income tax? Do I need to file income tax? That was my biggest questions!!!
Basically, there are only 2 categories of people in terms of filing tax;
- Need to file tax
- Don’t need to file tax
To find out, click on this link, to access the various different tools as well as the needs to file for tax.
Putting aside the annoyance of having to pay tax and the “ever-helpful” and “ever-user-friendly” IRAS website, the process of filing income tax can be broken down into 3 steps,
- Check if you need to file + file your tax if needed.
- Check your status after filing + if you need to make any changes.
- Pay or tax
Singapore is a low-tax country which is good for citizens and is especially favourable for investors. Singapore has no tax for capital gains and dividends, therefore, it is great to be a stock investor in Singapore.
Back to income tax, in Singapore, our income tax are quite low, with reliefs, many people ends up paying very little tax. Then again, any tax is annoying. Putting aside feelings, here is how tax are calculated in Singapore.
What is Tax and Should We Pay For It?
Tax is simply revenue for the government and we should definitely pay for it. Without tax, the government cannot function and no country in the world can afford that. (The armed forces, police, medical and all other essential services needs money to function, and therefore, a country needs tax.)
As citizens of the country, it is our responsibility to contribute to the country as well. Everyone plays a part, at the very least, everyone pays GST, therefore, everyone, no matter rich or poor, will make their own contribution towards the nation.
We should pay for tax if we are required to pay for it, however, tax is something we should avoid.
Other than being a revenue for the government, tax is a tool that the government uses to encourage or discourage citizens to do a certain thing. For example, in land-scarce Singapore, the government discourage car ownership, therefore, we have COE.
Saving water is a good habit, however, the government cannot stop you from running your shower head for 1 hour while you sing Mama Mia. therefore, there is water tax. Similarly, Sugar Tax, Carbon Tax, Cigarette Tax and Alcohol Tax are ways the government is trying to tell you too cut down upon.
On the other hand, there are tax reliefs, if you do what the government wants you to do, you are either not taxed or you get to avoid tax.
For example, Singapore government promotes investment, therefore, there is no tax for capital gains and dividends. The government wants you to protect yourself through insurance so you can claim tax relief.
The government encourages you to prepare for your retirement, therefore, you can claim tax reliefs for CPF contributions.
Income Tax Tools
Basically income tax is complex and annoying. Despite so, it is also the responsibility of everyone to the country therefore, we need to pay income tax. Nonetheless, tax are ways the government tries to channel us to do certain things and not to do certain things, therefore, there are things called reliefs, which reduces your tax payable.
Click here to look at the compiled list of useful tools that you will need in filing tax.
On a final note, this is why everyone should have additional sources of income, especially in Singapore. If the only income that you have is salaried, not only are you over-reliant on it, you are liable for tax. Whereas, investments do not have tax, if your investment returns are 10 times of your salary, the government do not tax you.
The type of investment matters as well, as you can see here, capital gains and dividends from stocks are not liable for income tax. A clear go-ahead by the government for you to do it.
However, the big money market of the stock market is ruthless, it is a man-eating dinosaur. It is important to be educated than to be sorry.