As income tax rates for individuals look set to be raised from YA 2017, income that fall into the higher income brackets will be taxed more heavily.
For Singapore tax residents, one way to minimise your taxes is to invest in vehicles that give you income that is tax-free in Singapore:
1. Dividends from Singapore company
Dividends paid by a Singapore company are tax exempt in your hands. You will have a wide variety of companies to choose from and this applies to both ordinary shares well as preference shares.
2. Foreign dividends
You do not need to pay tax in Singapore on foreign dividends received here (unless the foreign dividends are received through a Singapore partnership, in which case certain conditions have to be met before they may be exempted).
3. Dividends from REITs
Real Estate Investment Trusts (REITs) are a very popular choice due to its high dividend yield.
The icing on the cake is that you get to enjoy tax exemption on these REIT dividends.
Exemption does not apply, however, if you are receiving it through a Singapore partnership or from your trade, business or profession in REITs.
4. Singapore dividends from SRS
Singapore dividends from Supplementary Retirement Scheme (SRS) accounts are tax-free.
You can also claim personal tax relief on the amount you put into your SRS account in the year of contribution.
From 1 Jan 2016, the annual SRS contribution cap will be increased to $15,300 for Singapore citizens or PRs. This means higher tax savings when you contribute up to the cap.
The downside is that the money in SRS is locked up so do consider the penalty and taxation rules for withdrawals.
5. Singapore dividends from Unit Trusts
Dividends from unit trusts in Singapore are tax exempted.
Similar to dividends from REITs, exemption does not apply, however, if you are receiving it through a Singapore partnership or from your trade, business or profession in unit trusts.
You can also invest in unit trusts via your SRS account where you will be able to choose from the offerings from the different financial institutions.