Everyone in the globe dreaded this “outflow” called TAX.
This is my first time, I pay tax to the government…. and due to my hectic schedule (going for seminars, doing roadshows and meeting clients), I “forget” to make the payment.
They send me a letter, saying that I will be fined extra $28.10. However, because this is the first time, I am paying tax, they will waive it for me if I make the payment by 9 July 2009.
I did it on that very day, using AXS machine. (Victory Sign) 🙂 🙂 🙂
Btw, I’ve been brainstorming ideas, ways and methodologies where YOU CAN REDUCE YOUR TAX PAYABLE OR PAY 0% TAX IN SINGAPORE LEGALLY!!! (evil but innocent smile..hehe)
Note: The strategies that I am going to share with you is purely legal and ethical. (Information accurate as at 23rd July 2009)
Strategy #1) If you are employee,sole proprietor or in partnership, you just need to ensure that your chargeable income (income that is liable for tax) is less than $20,000, and you DONT HAVE to pay any taxes.
Chargeable Income = Total Income – Tax Allowable Expenses – Tax Reliefs
In Singapore, an average Singaporean brings home, disposable income (money that go inside your pocket) of about $5,000/mth or $60,000/year.
So, the first method is quite difficult to apply. Yet , YOU CAN ALWAYS REDUCE YOUR CHARGEABLE INCOME, by documenting and declaring your tax allowable expenses.
Tax allowable expenses are expenses incurred in order to GENERATE income.
Example, if you are a financial consultant like me. Document your roadshow costs, cost for printing namecards, cost for knowledge upgrading like going for seminars and other expenses related to helping you GENERATE your income.
When your chargeable income is lower, you pay lower tax, or no tax if your chargeable income is less than $20,000.
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Strategy #2) Claim as much “reliefs” as you can.
The first relief that every working Singaporean has is Earned Income Relief.
Earned Income Relief reduces the amount of Chargable Income, thus reducing the amount to be taxed.
Below 55 years of age $1,000, 55 to 59 years of age $3,000, 60 years of age onwards $4,000
You can visit http://www.iras.gov.sg to check what other reliefs applicable to you.
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Strategy #3) Contributions to CPF helps you to save tax
When you contribute your CPF, you can also reduce your tax.
Right now, you are required to contribute 20% of your salary to CPF and your employer pay 14.5%.
You can only get the money when you reached age of 55.
Example if, you earn $2000/mth.
$400 of your pay is going to CPF. You take home only $1600. You only need to pay tax for your take home pay of $1600. Money that goes to CPF is not taxable.
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Strategy #4) Supplementary Retirement Scheme (SRS)
This is my favourite… 🙂 🙂 🙂
Supplementary Retirement Scheme is a savings plan that you can sign up when you reach 21 years old.
You can contribute up to 15% of your income. You can use this money to offset your total income, thus reducing your chargeable income.
(Btw, if you already have an SRS account, I can help you get BETTER returns, then leaving it there. Call me for appt! ).
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Strategy #5) Capital Allowances
The assets you buy for your business operations can be used to reduce your tax.
The assets you buy, depreciates in value every single year. Depreciation is an expense and thus tax deductible. The $$$ that you can use to write off differs than accounting term.
Accounting depreciation, takes into account the life of the assets you buy till it become scrap or ready to be disposed.
Depreciation or capital allowance for tax purpose is STANDARDISED!
Example: Computers, hardwares and printers, take 1 year to write off
Plant and Machinery, take 3 years to write off.
Commercial vehicles, take 6 years to write off
Example, for me, I buy laptop, printers etc2 for my business operations..If my laptop and printer cost, example $3000, I can just classify $3000 as my capital allowance and deduct it from my total income, thus reducing my chargeable income.
There are really many ways (like donations to approved charities, paying insurance premium etc2), that you can use LEGALLY, to reduce your tax. It requires planning and continual education.
Hope the above information helps!!! 🙂
p.s. By the way, if you wish to discover a simple & halal way to create a positive monthly cashflow and calculate your net worth for FREE, then please click here…
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Hi,
I need some tips to reduce income tax.
Would the child education plus enrichment cost to be considered as well? for example, I spent $12k a year for my child education. Can this part to be considered?