COVID-19 has caused airports around the world to come to a standstill. Movement restrictions are still imposed within and across borders to-date, most of the foreign employees are not able to leave Singapore to work for their foreign employers. There are confusions on whether the employment income should be taxed in Singapore (based on physical presence) or in overseas (based on employment contract) or in both countries.
The Inland Revenue Authority of Singapore (IRAS) has provided tax guidance on whether the employment income in the following scenarios is taxable in Singapore.
1) Singaporean/Singapore Permanent Resident (SPR) exercising overseas employment and are working remotely from Singapore for that employment
Employee may be considered as not exercising an employment in Singapore from date of arrival in Singapore in 2020 to date of departure or 30 June 2021 whichever is earlier.
a) If the period of stay in Singapore did not extend beyond 31 December 2020
The qualifying conditions are:
(i) There is no change in the contractual terms governing your employment overseas before and after your return to Singapore; and
(ii) This is a temporary work arrangement due to COVID-19.
If the qualifying conditions are met, the employment income is not taxable. Otherwise, normal tax rule will apply (which is normally taxed at resident rate).
b)If the period of your stay in Singapore extended to 30 June 2021
Besides conditions (i) and (ii) above, the additional qualifying conditions are:
(iii) The work performed by you during your stay in Singapore would have been performed overseas if not for the travel restrictions caused by COVID-19;
(iv) You will leave Singapore as soon as you are able to do so before 30 Jun 2021; and
(v) Your employment income earned during the stay in Singapore from 1 Jan 2021 to 30 Jun 2021 is subject to tax in the country of your overseas employer.
Condition (iv) will not be considered as breached if the reason you continue working remotely from Singapore is due to the escalating COVID-19 situation in the country of your overseas employer (such as resurgence of cases and new strain of virus) and there is an elevated risk of you contracting COVID-19 should you return to work overseas.
There is no need to submit any application to IRAS. However, documents should be retained to support the tax exemption claim.
c)If the period of your stay in Singapore extended to after 1 July 2021
Employment income in relation to your work done in Singapore from 1 Jul 2021 onwards would be subject to Singapore income tax. However, taxpayer may write in to IRAS for a review of the tax treatment of their employment income if he/she is unable to return to the home country due to restrictions and he/she will leave Singapore as soon as practicable.
Below is a summary of the conditions needed for the employment income to be not taxable in Singapore:
| Period of stay in Singapore | Before 1 January 2021 | Before 1 July 2021 | After 1 July 2021 |
| Condition i | √ | √ | Not applicable |
| Condition ii | √ | √ | Not applicable |
| Condition iii | – | √ | Not applicable |
| Condition iv | – | √ | Not applicable |
| Condition v | – | √ | Not applicable |
2)Non-resident foreigner exercising overseas employment who are on short-term business assignment in Singapore and are unable to leave due to COVID-19
For foreigners who are on a short-term business assignment that are unable to leave Singapore in 2020, IRAS may consider you as not exercising an employment in Singapore for the period of your extended stay in 2020, if the following conditions are met:
1.the period of your extended stay is for a period of not more than 60 days; and
2.the work you have done during your extended stay is not connected to your business assignment in Singapore and would have been performed overseas if not for COVID-19.
There is no need to submit any application to IRAS. However, documents should be retained to support the tax exemption claim.
Individual may not be able to make use of Article 15 of the OECD Model to exempt his tax in Singapore if the employee is in Singapore for more than 183 days. The IRAS will disregard the period of extended stay in Singapore if the following conditions are met:
(a)the non-resident employee is prevented from leaving Singapore because:
- he/she is serving COVID-19 Quarantine Order or Stay-Home Notice; or
- the jurisdiction of residence or the jurisdiction where the non-resident employee is based or had made plans to travel to has imposed a ban on the entry of travellers into the jurisdiction which is applicable to that non-resident employee; or
- it is impossible to travel due to unavailability of flights or other modes of transport; and
(b) the non-resident employee would otherwise have left Singapore such that the employment activities would not have been carried out in Singapore; and
(c) the non-resident employee is subject to tax in the jurisdiction of residence on the employment income derived from the employment activities carried out in Singapore if, as a result of the period of extended stay in Singapore being disregarded, the non-resident employee was not taxed in Singapore on those income.
The non-resident employee should keep all relevant documentations and records to substantiate that all the above conditions are met, and to provide the information to IRAS upon request.
3)Employees who are supposed to commence work overseas
In the case of an individual who took up a new employment which allowed him to work remotely from Singapore for the overseas employer during 2020 in the midst of travel restrictions, IRAS would need to assess if the income can qualify for exemption. The individual may provide the following details for IRAS’ consideration:
- Copy of employment contract
- Job responsibilities and scope
- Name of person whom the employee is reporting to
- Nature of work to be performed from Singapore
- Whether this is a temporary work arrangement due to travel restrictions and the relevant supporting documents
IRAS will advise the tax treatment based on the facts of the case.
In conclusion, employees who are exercising employment for a foreign employer in Singapore due to COVID-19 would need to take note whether their employment income may be exempted from tax in Singapore.
