FREQUENTLY ASKED QUESTIONS ON THE NOT ORDINARILY RESIDENT (NOR) SCHEME

QUALIFYING CONDITIONS FOR NOR

What are the criteria I must satisfy to qualify for the NOR Scheme?

To qualify for the NOR scheme, you must satisfy the following criteria:

• You must be a resident of Singapore for income tax purposes (hereinafter referred to as resident) for that year of assessment (YA) you want to qualify for the NOR Scheme; and
  
  
• You must not be a resident of Singapore for income tax purposes (hereinafter referred to as non-resident) for the 3 consecutive years of assessment immediately before that year of assessment.

However, the government has made it easier to qualify for the NOR Scheme through the following transition rules. You would qualify for the NOR scheme if you meet any one of the following transition rules:

What is the rationale for the NOR Scheme?

This scheme is targeted at attracting global talent who have spent a significant amount of time abroad in the past few years and encourage them to relocate to Singapore.

How do I apply for the NOR status?

You must apply to the Comptroller of Income Tax in the specified application form by 15 Apr of the year of assessment in which you wish to qualify for the NOR Scheme (e.g. to qualify for the NOR scheme from YA2004 to YA2008, you have to apply by 15 Apr 2004).

However, if you are making an application to qualify for the NOR scheme for any year of assessment between YA99 and YA2002, the application form must be submitted to the Comptroller of Income Tax latest by 15 Apr 2003.

The application form is available at www.iras.gov.sg

Can I apply for the NOR Scheme more than once?

Yes, you can apply for the NOR scheme more than once so long as the earlier NOR status has already expired and you satisfy the qualifying conditions for the NOR scheme.

Once I qualify for the NOR Scheme, does it mean that I must be a resident for all the 5 years?

No, you can either be a resident or non-resident during the 5-year period in which you are accorded the NOR status. However, you can only enjoy the tax concessions under the NOR scheme if you are a resident for that year of assessment. For example, if you claim for time apportionment of your Singapore employment income for YA2003, you must be a resident for YA2003.

Can I qualify for the 3-year administrative concession given by IRAS during the NOR period?

Yes. An individual who had applied for the NOR status could still subsequently avail himself of the 3 year administrative concession during the period of his NOR status.

TIME APPORTIONMENT

What does time apportionment of Singapore employment income mean?

If you are exercising employment in Singapore, your total employment income in Singapore including the days you are outside of Singapore for business reasons would be liable to tax in Singapore. With time apportionment, you will be taxed only on the portion of your Singapore employment income, which corresponds to the number of days you are in Singapore. Therefore, your Singapore employment income, which corresponds to the number of days you are outside of Singapore for business reasons, will not be subject to Singapore income tax. However, in the event that the tax on the Singapore employment income corresponding to the number of days in Singapore is less than 10% of the Singapore employment income before time apportionment, you will be subject to a tax of 10% of your total Singapore employment income (hereinafter referred to as "10% floor rate").

What is the rationale for this incentive?

This incentive is targeted at making Singapore an attractive location for individuals to live and work. Specifically, this scheme attracts global talents who have international or regional business experience. With time apportionment, their employment income, which corresponds to the number of days they are outside of Singapore for business reasons, will not be subject to income tax.

What are the qualifying conditions for time apportionment?

You must satisfy the following 3 criteria.

Criteria 1: You must first qualify for the NOR Scheme;
Criteria 2: You must be exercising a Singapore employment and must spend at least 90 days outside of Singapore for business reasons; and
Criteria 3: Your income tax computed on your total Singapore employment income must be greater than 10%.

My income tax rate computed on my apportioned Singapore employment income is less than 10%. How will I be taxed?

If your income tax rate (i.e. tax/Singapore employment income before time apportionment) based on your apportioned employment income is less than 10%, you will be subjected to the 10% floor rate. IRAS will compute your equivalent employment income (which corresponds to 10% of Singapore employment income before time apportionment). This amount will then be aggregated with your other income sources (for example rental and interest) to arrive at your net tax payable.

If I have to travel out of Singapore for almost the entire year, does it mean that my Singapore employment income that is subjected to income tax will be very low?

No, you would have to pay tax on the amount of Singapore employment income corresponding to at least 10% of your total Singapore employment income.

Why must I pay tax on the amount of Singapore employment income corresponding to 10% of my total Singapore employment income?

This scheme is part of the Government's measures to make Singapore more attractive to global talent, and hence for companies and new businesses to locate in Singapore. It is reasonable to expect individuals to pay income tax, which corresponds to at least half the top marginal tax rate. The individual will still enjoy significant income tax savings depending on his travel schedule and employment income. yes

Can all my Singapore employment income be time-apportioned?

Your Singapore employment income includes all gains or profits from employment (e.g. wages, salary, bonuses, perquisite, gains from employee share award schemes and stock option gains etc). However, not all employment income would be time-apportioned. Leave passage, commuted leave, director's fees and all benefits in kind whose values are independent of the number of days spent outside of Singapore for business reasons such as accommodation, car benefit etc would not be time-apportioned but be subject to tax in Singapore in full.

How do I apply for the time apportionment incentive?

You will have to complete the specified application form and send it to the Comptroller of Income tax no later than 15 Apr of each year. The application form can be found at www.iras.gov.sg. The application form requires your Singapore employer to certify that the days spent outside of Singapore are for business reasons pertaining to your Singapore employment.

Can weekends be considered as days spent outside of Singapore for business reasons?

It depends on the reason for spending the weekend outside of Singapore. Your Singapore employer must certify that that weekend spent outside of Singapore was meant for business purposes. For example, assume that you have to travel to a subsidiary in China for a series of meetings. You leave Singapore on Thursday afternoon and have a full schedule of meetings everyday except Sunday. You return to Singapore the next week on a Tuesday afternoon. You would have spent 5 days outside of Singapore (i.e. Thursday, Friday, Saturday, Sunday and Monday). Tuesday is considered as a day spent in Singapore. This is provided you elect for the alternative method of computing days spent outside of Singapore.

Will there be any apportionment of the "days spent outside of Singapore" rule for an executive who relocates to Singapore in the middle of the year? For example, will it be sufficient for such an individual to spend say 45 days out of Singapore to satisfy the rule?

There will be no apportionment. They can enjoy the full benefits of time apportionment from the next year.

How do I compute my final income tax with time apportionment?

Firstly, you need to satisfy the 3 qualifying conditions before you are eligible for time apportionment of Singapore employment income.
Secondly, you must compute the income tax rate on apportioned employment income:

• If the rate is more than 10%, your apportioned employment income is added to your other sources of income and your final income tax is computed accordingly.
  
  
• If the rate is less than 10%, your employment income is then recomputed such that it corresponds to 10% of your total employment income. The recomputed employment income is then added to your other sources of income and your final income tax is computed accordingly.

Examples:

Scenario 1
In YA2005, Mr A earns $400,00 per annum as the regional production manager of XYZ Pte Ltd. He travels out of Singapore on business reasons for 100 days in a year. Mr A has satisfied the 3 qualifying conditions for the time apportionment incentive.

Total Singapore employment income = $400,000
Number of days outside of Singapore = 100
Income tax on total employment income = $64,600

As income tax rate on apportioned employment income is more than 10%, the employment income that is finally subjected to income tax is $290,411.

Scenario 2
In YA2006, Mr A's employment income remains the same. Due to expansion of XYZ's business in the region, Mr A has to travel more. He travels 200 days in the year. Mr A has satisfied the 3 qualifying conditions for the time apportionment incentive.

As income tax rate on apportioned employment income is less than 10%, Mr A's final employment income that is subjected to income tax must be restated such that it corresponds to 10% of his employment income before time apportionment.

EMPLOYER'S CONTRIBUTION TO NON-MANDATORY OVERSEAS PENSION FUND OR SOCIAL SECURITY SCHEME

Why is the tax concession only for overseas private pension funds? How about overseas government pension funds that are mandatory?

Currently, as a concession, employers' contributions to approved mandatory overseas pension funds or social security scheme are tax-exempt in the hands of the employees. Employers contributing to such schemes can apply for the concession with the Comptroller of Income Tax. In such situations, the employer will give up the income tax deduction.

What is the rationale for this incentive?

Many expatriates continue to contribute to an overseas private pension fund while on assignments. We have to be competitive to attract talented individuals to Singapore. Many countries such as Ireland, UK and Hong Kong already give tax concessions to individuals on the contribution to overseas pension funds.

If Singapore has an attractive tax framework, these individuals will be attracted to Singapore and this has positive spin-offs to Singapore especially in terms of job creation and economic growth.

Does it mean that for a NOR, it does not matter whether the contributions is to a social security or pension plan. It will still be exempt subject to the CPF capping. The employer will also enjoy corporate tax deductions?

Scenario 1: Employer contribution to overseas mandatory pension fund is not taxable on the individual and the company does not take a tax deduction on the expenses.

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