Top 10 Income Tax Mistakes to Avoid in Singapore (2025 Edition)

Singapore continues to establish itself as Asia’s premier business hub, attracting over 20,000 foreign investors annually with its competitive corporate tax rate of 17% and progressive individual tax rates ranging from 0% to 24%. However, navigating Singapore’s tax landscape can be complex, and costly mistakes are all too common among foreign investors. With IRAS conducting over 2,800 audits in FY2024/25 and recovering SGD 205 million in unpaid taxes and penalties, understanding these pitfalls is crucial for maintaining compliance and maximizing your investment returns.

1. Missing Critical Tax Filing Deadlines

One of the most frequent and expensive mistakes foreign investors make is missing Singapore’s strict tax filing deadlines. IRAS imposes a 5% penalty on unpaid taxes when payments are not received by the due date.

Key deadlines to remember:

• Individual income tax returns: April 15 for paper filing, April 18 for electronic filing
• Corporate tax returns (Form C-S/C): November 30, 2025, for YA 2025
• Estimated chargeable income (ECI): Within 3 months after the financial year-end
• GST returns: Quarterly filing within one month after the accounting period ends

For repeat offenders, additional penalties of 1% per month can be imposed for every completed month the tax remains unpaid, up to a maximum of 15% of the unpaid tax. Foreign investors should implement automated reminder systems and engage professional InCorp Global tax filing services to ensure timely compliance.

2. Incorrectly Determining Tax Residency Status

Many foreign investors misunderstand Singapore’s tax residency rules, leading to incorrect tax calculations and missed opportunities for relief. Non-residents face a flat 24% tax rate compared to progressive rates for residents starting at 0%.

Singapore considers you a tax resident if you:

• Are a Singapore Citizen or Permanent Resident normally residing in Singapore
• Stayed/worked in Singapore for at least 183 days in the previous calendar year
• Lived in Singapore continuously for 3 consecutive years
• Worked in Singapore for 2 consecutive years with a combined stay of at least 183 days

The financial impact is significant: a non-resident earning SGD 100,000 pays SGD 24,000 in tax, while a resident pays only SGD 3,350 after progressive rates and personal reliefs.

3. Failing to Report All Income Sources

Singapore operates on a territorial tax system, taxing all income earned in or remitted to Singapore. A common mistake among foreign investors is failing to report rental income, investment gains, or business income from multiple sources.

Recent enforcement cases highlight the severity:

• Tee Siew Gim was sentenced to 21 weeks in jail and fined SGD 341,327.75 for underreporting income by SGD 101,630.24.
• Quek Ban Tong Edmund received 5 weeks imprisonment and penalties of SGD 72,770.79 for failing to report tutoring and textbook sales income.

Foreign investors must meticulously track and report:

• Employment income from Singapore sources
• Rental income from Singapore properties
• Business profits from Singapore operations
• Director’s fees and consulting income
• Investment income received in Singapore

4. Overlooking Available Tax Reliefs and Deductions

Singapore offers numerous tax reliefs that foreign investors frequently miss, resulting in unnecessarily high tax bills. For YA 2025, resident individuals receive a 60% tax rebate capped at SGD 200.

Essential reliefs for foreign investors:

• Earned iIncome relief: Available to all working residents
• Parent relief: Up to SGD 9,000 annually for supporting parents
• Spouse relief: SGD 2,000 for non-working spouses
• Life insurance relief: Up to SGD 5,000 for qualifying premiums
• CPF relief: Contributions beyond the mandatory amount

Companies can benefit from:

• Start-up tax exemption: 75% exemption on first SGD 100,000, 50% on next SGD 100,000 for qualifying new companies
• Corporate income tax rebate: 50% rebate capped at SGD 40,000 for YA 2025
• Research & development incentives: Enhanced deductions for qualifying R&D expenses

5. GST Registration and Compliance Errors

With Singapore’s GST rate at 9% since January 2024, proper GST compliance is crucial for businesses. IRAS recovered SGD 205 million from GST audits in FY2024/25, with penalties ranging from SGD 5,000 for display violations to SGD 10 million for complex fraud cases.

Common GST mistakes:

• Late registration: Businesses must register within 30 days of exceeding SGD 1 million taxable turnover
• Incorrect GST treatment: Failing to charge GST on taxable supplies or claiming input tax on exempt supplies
• Poor record keeping: Inadequate documentation for GST claims and transactions
• Missing filing deadlines: Late GST returns incur SGD 200 penalties plus SGD 200 per month, up to SGD 10,000 maximum

From July 2025, businesses will have a 2-month grace period before GST registration becomes effective, providing more time for system setup and staff training.

6. Transfer Pricing Documentation Failures

For multinational investors, transfer pricing compliance is mandatory when annual revenue exceeds SGD 10 million and related-party transactions exceed SGD 2 million (increased from SGD 1 million in 2025).

Non-compliance penalties include:

• SGD 10,000 fine per year for missing documentation
• 5% surcharge on transfer pricing adjustments
• Additional taxes on adjusted income

Singapore’s transfer pricing regime follows OECD guidelines and requires arm’s-length pricing for:

• Intercompany service fees
• Royalty and license payments
• Management fees
• Intercompany loans
• Goods transfers between related entities

7. Withholding Tax Compliance Oversights

Foreign investors often overlook withholding tax obligations when making payments to non-residents. Singapore imposes a 24% withholding tax on various payments to non-residents, including royalties, technical fees, and director remuneration.

Late payment consequences:

• 5% penalty if payment is not made by the due date
• An additional 1% monthly penalty after 30 days, up to 15% maximum

Example: A payment of SGD 10,000 to a non-resident for royalties requires SGD 2,400 withholding tax. Late payment by 28 days results in a SGD 120 penalty, plus additional monthly penalties for continued delays.

8. Inadequate Record Keeping and Documentation

Poor record-keeping is a recurring issue in IRAS audits, leading to disallowed deductions and penalty assessments. Singapore requires businesses to maintain proper books and records for at least 5 years.

Essential documentation requirements:

• All income and expense receipts
• Bank statements and transaction records
• Employment records and payroll documentation
• Asset registers and depreciation schedules
• Related-party transaction documentation
• GST input tax credit supporting documents

Pro tips: Implement cloud-based accounting systems and engage professional InCorp Global tax filing services to ensure comprehensive record maintenance and audit readiness.

9. Misunderstanding the Double Taxation Agreement Benefits

Singapore maintains over 80 Double Taxation Agreements (DTAs), providing significant tax advantages for foreign investors. However, many investors fail to properly claim treaty benefits or understand residency requirements.

Key DTA benefits:

• Reduced withholding tax rates on dividends, royalties, and interest
• Elimination of double taxation on the same income
• Mutual agreement procedures for resolving tax disputes
• Access to foreign tax credits for taxes paid overseas

To claim DTA benefits, investors must:

• Obtain tax residency certificates from home countries
• File proper documentation with IRAS
• Meet treaty-specific conditions and limitations
• Maintain detailed records of foreign taxes paid

10. Ignoring Voluntary Disclosure Opportunities

When tax errors are discovered, IRAS’s Voluntary Disclosure Programme (VDP) offers reduced penalties or complete penalty waivers for proactive disclosure. This program encourages taxpayers to come forward before IRAS discovers the errors through audits.

VDP benefits:

• Penalty reduction or waiver for voluntary disclosure
• Reduced interest charges on outstanding amounts
• Protection from prosecution for honest mistakes
• Improved relationship with tax authorities

Recent success story: Companies using VDP have avoided the standard 5% late payment penalty and additional monthly charges, saving thousands in potential penalties while maintaining good standing with IRAS.

How InCorp Can Help

Navigating Singapore’s tax landscape in 2025 requires strict accuracy and expertise, especially as IRAS recovers over SGD 200 million each year from compliance failures and audit activities. Mistakes in tax filing can quickly become costly for foreign investors.

InCorp Global offers comprehensive tax filing services designed to help investors maintain full compliance, unlock valuable reliefs, and avoid penalties. Their experienced professionals will guide your business through every step—from incorporation and initial setup to ongoing filings and strategic planning in Singapore’s dynamic market.

Get peace of mind and maximize your efficiency—visit incorp.asia to connect with InCorp Global for expert tax filing services tailored specifically for foreign investors.

FAQs

1. Do foreigners pay tax in Singapore?

Yes, foreigners are taxed on income earned in Singapore; non-residents usually pay a flat rate of 24%.

2. How to reduce income tax in Singapore for foreigners?

Foreigners can qualify for resident rates if they stay over 183 days, and may also claim eligible reliefs and deductions.

3. How do I check my income tax in Singapore?

Log in to the IRAS myTax Portal using your SingPass to view, file, and pay your income tax online.