15th March 2019
A major player in the APAC region, Singapore has a reputation as one of the strongest economies in the world. In fact, in 2018, the country was ranked as the second most open economy, as well as the second most pro-business regime in 2019. It’s also a hugely attractive destination for contractors, with high demand for professionals across a number of sectors. Recent reports, for example, have highlighted skills shortages in the country’s lucrative Fintech industry, with demand for skills in AI, machine learning, data science, UI/UX, and digital transformation. It’s perhaps no surprise, then, to note that the number of contractors in the region is rising, with a 20% increase in contract roles throughout 2018 that is expected to continue throughout this year. However, despite this massive demand, contractors should be aware that the country has actively been introducing tougher tax systems intended to reduce their heavy reliance on foreign workers, with plans to remove the Singapore Not Ordinarily Resident Scheme (NOR) . While this should not dissuade any potential contractors from making the move to Singapore, it’s important to understand the latest developments. Here’s what you need to know.
Singapore Not Ordinarily Resident scheme is set to be scrapped
In Singapore’s 2019 budget announcement, plans were revealed to tweak the countries tax system in order to reduce the reliance on foreign workers. This means that incentives for those on Singapore’s Not Ordinarily Resident scheme will end by next year. The Not Ordinarily Resident scheme, introduced in 2002, was designed to encourage foreign talent to relocate to Singapore by providing them with tax concessions. Those who qualify for the NOR are not taxed on a portion of their Singaporean income that corresponds to the number of days they spend outside the country in a calendar year. They also receive favourable tax treatment in terms of contributions to overseas pension funds. To qualify for the NOR scheme, individuals need to be a non-resident for three consecutive years.
Furthermore, Singapore intends to adjust the foreign worker dependency ratio from 40% to 38% by January 1, 2020 and to 35% by January 1, 2021. While the Government says it will “continue to build an attractive environment for foreign workers through a competitive tax regime in the future’’, it will now be relying heavily on other areas, such as ‘’a stable political, economic and social environment, strong regional connectivity, high standards of healthcare, housing and education.”
Sabrina Sia, Tax Partner and Leader of Global Employer Services at Deloitte Singapore, commented on the budget, saying: “The scrapping of Singapore’s Not Ordinarily Resident (NOR) is an unexpected move, as the scheme had been so effective in attracting high quality talent to the region. Initially, we thought the Government would consider allowing Singaporeans similar concessions to foreign workers, in order to provide incentives for locals to step up to top roles. However, the Government has levelled the playing field in a different way by removing all tax concessions. This is in line with the Government’s intention to ensure and enhance the progressivity of the tax system, as well as to ensure that the foreign workforce acts as a complement to the local workforce.”
Contractors need to be aware
While removing Singapore’s Not Ordinarily Resident scheme may make compliance more complicated for contingent workers, contractors should not shy away from exploring opportunities in Singapore, as the destination clearly has a lot to offer. The fact is, countries around the world are working together to enforce tougher tax regimes, and wherever contractors may choose to work, compliance should be top of their priority list. In fact, even in many countries previously known as tax havens, there have been record tax collections. The complexity of international tax systems is daunting, and the headache that can come with it is best avoided. This is why, in order to take advantage of booming global economies, compliance should be left to the experts. For this reason, we recommend getting in touch with an international contractor management service that can take the weight off your shoulders. To ease your mind on compliance, and avoid any chance of unwittingly breaching the law, get in touch today.