- The GST offset package, which the Government has introduced, will ensure that most households including all lower-income households will not be worse off for at least 5 years. The Government has worked out the S&CC rebates such that those with lower income will get more than those with higher income. As there is a clear correlation between income and housing-type, as a general framework, it is reasonable to differentiate the allocation of rebates by housing-type. Within this general framework, HDB executive flat dwellers get Economic Restructuring Shares (ERS) but not the HDB-related rebates. Using the annual value cut-off of $10,000 means that Singaporeans who do not live in HDB flats but in cheaper private property will also get the higher amount of ERS. The amount of ERS a person will get in January 2003 depends on the Annual Value of the person's home based on IRAS's records on 1 December 2002. 90% of all households will get $1200 worth of ERS. Based on current records, all HDB flats except only for a few exceptionally large flats should get $1200 worth of ERS. The Government recognises that comprehensive as the offset package is, it may not cover everyone. Any household with an income below the median household income of $3,600 which finds that their package of rebates and ERS shares does not fully offset their extra tax for at least 5 years, may approach their CCC for assistance.
Are retrenchment payments taxable?
Retrenchment payments are not taxable. The sum is paid for the loss of office. It is treated as a capital receipt, and therefore not taxable. This is true even when the retrenchment payments are provided for in the contract of service or collective agreements, or when the payments are computed based on the number of years of service.
However, employers often include other payments for services to be rendered, or already rendered, when paying out retrenchment benefits. Such payments are taxable.
Examples are salary in lieu of notice and gratuity for services. They are payments which the employee would have got even if he were not retrenched. In summary, retrenchment benefits as such are not taxable.
However, if other payments are also made which the employee would have got even if he were not retrenched, these portions will be taxable. The description by employers on the payouts is also irrelevant to IRAS.
They will look at the facts to determine the nature of the payment.
Can divorcees and widowers claim procreation tax rebates?
The Government will allow divorcees (with effect from YA2003) to continue claiming their procreation tax rebates granted before their divorce.
Currently, individuals may continue to claim any unexpired procreation tax rebates even after the death of their spouses.
Can the Government consider increasing the personal relief? This will help people across the board, esp. those who are out of job.Tax reliefs serve as a sign of recognition for individuals' efforts. They are not intended to compensate taxpayers for expenses incurred. The Government appreciates that many Singaporeans are affected by the economic downturn. We have therefore decided to grant a 5% tax rebate to all taxpayers as part of the off-budget package. This is on top of the 10% tax rebate already announced in the 2001 Budget Statement. For 2002, taxpayers will receive a 10% tax rebate.
Do we have to cash in stock options deemed to be exercised at the point that foreign employees finish working?Yes, the foreign employees need not physically cash in their stock options. The stock options are merely deemed to be exercised for tax purposes.
I am a single working adult who needs to employ a maid to look after my parent who is seriously ill. Why can I not claim the foreign maid levy relief?
There are various types of personal reliefs provided in our income tax assessment system. Some of these are general reliefs provided to individuals like the Earned Income Relief. There are also other reliefs that serve specific objectives and thus are provided only to specific group of qualifying individuals.
The foreign maid levy (FML) relief is one targeted relief meant to encourage married women to re-join the workforce after they have set up their families. This is the reason why FML relief is provided only to married working women. Therefore, we are not able to allow you to claim this relief.
However, if you have contributed to your parent's maintenance, you can qualify for the parent relief. The parent relief is given as a recognition for individuals taking care of their parents who are 55 years old or more, or are physically or mentally handicapped.
It is however not meant to compensate the individual in full for the expenses incurred in caring for his/her parents.
Is it difficult for the public to compute the amount of bank interest that is taxable and the amount of interest exempt from income tax?Individuals may approach their bank to obtain the relevant interest income values for the purpose of computing the interest that is exempt from income tax. The amount of interest that is declared for income tax purposes is as follows: For savings and current accounts, the lower of the actual interest income derived from the savings or current account, or the interest income that would have been derived from a $100,000 deposit in a savings or current account. For fixed deposit accounts, the lower of the actual interest income derived from a standard fixed deposit account or the interest income that would have been derived from a $100,000 fixed deposit account.
What do foreign employees and their companies need to do when they find out their contract is going to end?When a foreign employee ceases employment, the company will have to seek tax clearance by informing IRAS at least one month before the cessation of employment. There is no obligation on the foreign employees to inform IRAS.
What is the change in the taxation system for dividends arising from Budget 2002?Presently, the existing imputation system could hinder companies from distributing corporate income to shareholders, as they require sufficient tax credits before dividends can be paid. In particular, there are restrictions on the distribution of dividends from capital gains and other non-taxable corporate income. Under the imputation system, a company may not be able to pay out as much dividends to shareholders as it would wish to, due to such restrictions. The new one-tier system will free companies from a number of restrictions relating to the distribution of corporate profit as dividends, including removing current restrictions on the distribution of dividends from capital gains and other non-taxable corporate income. The one-tier system, along with new measures in group relief and the lower corporate tax rate, will increase company profits available for distribution. These could result in higher dividend payouts for all shareholders. This would benefit all shareholders, including individuals who either do not pay income tax or are in the lower-income tax brackets. Nevertheless, the government is mindful of the fact that many companies will not be able to make full use of their accumulated dividend franking credits by 1 Jan 2003. Hence, it has allowed a 5-year transition period from 1 Jan 2003 to 31 Dec 2007 for companies to pay franked dividends out of any unutilised dividend franking credits as of 31 Dec 2002. All shareholders will still be able to receive dividends with credits attached during this period.
What is the tax rate charged for stock options?The gains from stock options are part of employment income. The tax rate charged depends on the amount of income an individual earns and whether the individual is regarded as a tax resident or non-resident in Singapore. If an individual is a tax-resident, then his income will be taxed at graduated rates from 4% to 22%. If an individual is a non-resident, then his income will be taxed at 15% or resident rates, whichever gives rise to higher tax.