How is the specified amount of a relevant withdrawal that is exempt from tax computed?

Computation of amount exempt from tax

SRS members, who have not made any withdrawal [1] prior to the relevant withdrawal (i.e. (i) deemed withdrawal upon death or (ii) full withdrawal on the grounds of terminal illness), will receive the full tax exemption of $400,000 on the relevant withdrawal.

If the SRS member had made such prior withdrawal, the exemption amount of $400,000 will be lowered by:

(i) $40,000 for every year since the first year of the prior withdrawal, to the year immediately before the year of the relevant withdrawal (both years inclusive); and

(ii) the lower of $40,000 and the sum of all prior withdrawals [2], made in the year of the relevant withdrawal. (Please refer to example below).

Application of exempt amount for tax withheld/collected by SRS operators for actual withdrawals made by non-citizens

From 1 July 2016, the amount on which tax is withheld or collected by the SRS operator for a full withdrawal made by a non-citizen SRS member, on the ground that he is suffering from a terminal illness or disease, will accordingly be reduced by the specified amount of withdrawal that is exempt from tax. (Withholding tax or collection of tax by the SRS operator only applies to actual withdrawals made by non-citizens, and hence do not apply to deemed withdrawals upon death.)

Example

As an illustration, consider an SRS member who made his first withdrawal after reaching the prescribed retirement age in year 2013. He withdrew $6,000 in Jan 2015 before he passed away with $420,000 standing in his SRS account on 1 Aug 2015. The specified amount of the deemed withdrawal upon death that is exempt from tax is $314,000, computed as follows:

The amount of deemed withdrawal upon death that is chargeable to tax is computed as follows:

The amount of withdrawal made in Jan 2015 after the prescribed retirement age, is also chargeable to tax:

[1] Withdrawal upon or after the statutory retirement age, or on medical grounds.

[2] Withdrawal upon or after the statutory retirement age, or on medical grounds.