5 to 10 Years Plan - Income Tax I

Before I start, let's do some ice breaking. This is the origin of income tax (at least in US if not the World), and this is the Wiki version. (note that these articles does not belong to this site). The main purpose of income tax is to contribute your income/revenue to the nation and this is one of the government main revenue. (Otherwise where do you think government get money).

The government unit that in-charge of income tax in Singapore is Inland Revenue Authority of Singapore. Most of the people call them I-Ras. The information below is taken from IRAS website, if you want further information, please contact them or visit the website.

First of all, the tax rate from recent years. It is recorded here (if it is broken, please go to IRAS to check). We will take a look on 2006 since it is latest and I will boldly assume fresh school leaver like me cannot exceed $80,000 per year. Below is the summarised table of income tax rate from IRAS (We are not responsible for the wrong info, noted down on 11 Sept 2005).

Income Amount	2006	2003-2005
20,000-30,000	3.75%	4.00%
30,001-40,000	5.75%	6.00%
40,001-80,000	8.75%	9.00%

And for time being for myself I guess (and estimate) I gonna be in second row which is 30,001-40,000 but I will try to lower it down to 3.75%. So I will do calculation based on 3.75%. So for example your annual income is $25,000 , you need to pay $937.5 to the government which is a lot for us freshgraduate. Come on and think why I need to come out with so much money and I am really poor enough to support my living here.

Fear not. We will try to reduce everything together (DISCLAIMER: There is no illegal tax exemption method here. If you are looking for it, please do not hesitate to find else where). It won't be as bad as you think when your salary is $2,000 you need to lump all $2,000 to your income. So it is not $2,000 x 12 = $24,000.

The word INCOME refer to your "profit". There are a lot of exemption in the calculation of income tax as far as I read and know. You can claim three types of employment expenses namely:

1. Entertainment expenses
2. Travelling expenses
3. Subscriptions paid to professional bodies or society

By the way, I think logically people understand what is Entertainment expense means. It is not meant the two jugs of beer that you and your friend drank two weeks ago to celebrate your birthday. It is expense that you spend for production of your income (and not reimbursed by your employer). For instance, you are a property agent (property consultant) and you need to treat your customer dinner to discuss some contract paperwork. Do remember to keep the receipt because if it is not shown to your boss then you can show to IRAS.

There goes same as Travelling expenses too and it is definitely not reimbursed by your employer. Then you will think, my company did not provide transport fees for my transport so I can at least claim some from the tax. No, you can't because "Travelling expenses incurred to and from home and office are also not allowable". Therefore it is a good news to those sales engineer who do not have claims from their company. So remember to keep that taxi receipt (by the way, I do not know how the MRT/bus fare is calculated for this case. Can someone enlighten me?).

The subscription fees is not really a problem for most of the people. Unless you are a NUSS member (NUS society member). They always advertise you can get tax exempted from their annual fees. The problem of these claiming is troublesome paperwork. This includes:

1. mode of public transport (if claim is on travelling expenses)
2. date and place visited
3. name and address of the person contacted
4. purpose of visit and
5. amount incurred

IRAS also mentioned that we cannot estimate (or guesstimate).

I will end the first part here. The next part will includes more exemption and what is the best method to be a winner in this tax issue.