[Personal Income Tax Systems] Different Taxable Items? What Are the Benefits? A Comprehensive Comparison of Hong Kong vs. Singapore

When considering relocation to Asia or business expansion, understanding the tax systems of Hong Kong and Singapore is essential.

In this article, we will introduce the taxable income categories of these two financial hubs and analyze their differences. For those seeking strategic tax advantages, it is crucial to grasp these distinctions.

Hong Kong

Among Hong Kong’s individual income taxes, Salaries Tax is particularly detailed and carries the highest importance. As its name suggests, Salaries Tax might seem to apply only to salaries, but in reality, allowances, pensions, and even tips from customers are also taxable. Below, we take a closer look at the details of Salaries Tax in Hong Kong.

Taxable Income Categories under Salaries Tax (Reference: GovHK “Chargeable and Non-chargeable Income”)

・Salaries, Wages, and Director’s Fees
It is important to note that the declared amount refers to the total income before deducting contributions to the Mandatory Provident Fund (MPF) or other recognized retirement schemes.

・Commissions, Bonuses, Leave Pay, Gratuities upon Contract Completion, and Payment in Lieu of Notice
The majority of payments made by employers to employees are subject to individual income tax, regardless of:
1. Whether the payments are made before, during, or after employment.
2. Whether the amount matches or exceeds the employment conditions.
Very few exceptions exist where payments are not considered “income,” such as compensation for work-related injuries.

・Allowances, Special Allowances, and Fringe Benefits (Includes cash allowances, education allowances, and holiday travel allowances)

・Tips Received as an Employee (Includes tips paid by restaurant customers to individual waiters and those given to tour guides)

・Salaries Tax Paid by the Employer on Behalf of the Employee

・Rental Value of Employer-Provided Accommodation
Typically calculated as 10% of an employee’s income from their employer after deducting expenses (excluding education allowances).

・Stock Awards and Stock Options
All stock-based compensation and stock options received due to one’s position or employment must be reported, including exercised, transferred, or waived stock options.

・Back Pay, Gratuities upon Contract Completion, Deferred Compensation, and Unpaid Salaries

・Severance Pay (Includes the final month’s salary and payment in lieu of notice) and Retirement Payments (Includes MPF contributions made or deemed to be made and benefits received from retirement schemes)

・Pensions

Non-Taxable Income Categories under Salaries Tax

・Severance Payments and Long Service Payments
However, any amount exceeding the limit set by the Employment Ordinance is subject to taxation.

・Jury Service Allowances

Singapore

Taxable Items in Personal Income Tax (Reference: IRAS “What is taxable, what is not”)

In Singapore, taxable items for personal income tax are broadly categorized into four main types:

Employment Income

・Salary, Bonuses, Director’s Fees, Commissions
　※役員報酬：Only fees for attending board meetings held in Singapore are non-taxable for directors.

・Other Employment-Related Benefits
Treatment varies by item. Some examples are as follows:
　Taxable: Maternity leave benefits, employer-provided cars, subsidies for children’s dormitory accommodation, voluntary top-ups to CPF by the employer, long service awards and retirement gratuities in cash.
　Non-taxable: Meals and gifts at company events, travel insurance for overseas business trips, work injury compensation, reimbursements for actual business expenses incurred, taxi fares between home and office for overtime work.

・Overseas Income
This mainly falls into the following five categories:
　①Income received through partnerships based in Singapore.
　②Overseas income related to employment in Singapore (e.g., a regional sales manager for a Singaporean company).
　③Overseas transactions related to a trade or business conducted in Singapore.
　④Employment in Singapore under a foreign employer.
　⑤Overseas employment for the Singapore government.

・Retirement Benefits Received from Approved Pension or Provident Funds (Regardless of Pre-Retirement or Retirement Payouts)
　※Benefits received from government pension schemes, CPF, or other designated funds are non-taxable.

・Profits from Exercising Employee Share Option (ESOP) and Other Employee Share Ownership (ESOW) Schemes

・Government Pensions Received from Approved Pension Schemes

・Notice Pay, Ex-Gratia Payments, and Honorariums

Income from Business, Profession, or Vocation

・Self-Employment and Partnerships
All self-employed individuals, including partners in ACRA-registered partnerships, must report income from their business as “business income” rather than “salary.” Business income forms part of the total personal income and is taxed at personal income tax rates. Individuals and partnerships with income from self-employment, employment, royalties, commissions, or estate/trust income must file an income tax return if they meet any of the following conditions:
　①Annual total income exceeds S$22,000.
　②Net profit from self-employment is S$6,000 or more in a year.
　③They are non-residents earning income from Singapore.

・Government Grant Income
Wage Credit Scheme (WCS) payments, which assist employers in wage increases, are considered taxable income for employers. Jobs Support Scheme (JSS) payments are non-taxable for employers, but if the employer distributes JSS payouts in cash to another party, the recipient is subject to tax. The tax treatment of COVID-19-related grants varies by scheme.

・Cryptocurrency
Payments and revenue received in cryptocurrency, such as Bitcoin, are taxable if received in Singapore. Valuation is generally based on the fair market value of the goods or services exchanged, but if only cryptocurrency is used and no market value is available, the exchange rate at the time of transaction can be used. Businesses engaged in trading cryptocurrencies or mining and exchanging them for money are taxed on profits from cryptocurrency transactions. Companies holding cryptocurrencies for long-term investment can enjoy capital gains, which are non-taxable. Whether cryptocurrency disposal profits are classified as trading income or capital gains depends on factors such as intent, trading frequency, and holding period.

Income from Property and Investments

・Rental Income
Rental income includes the full amount received for leasing out property, including rent, maintenance fees, and furniture/appliance rental. For security deposits, forfeited amounts are generally considered taxable rental income. If a deposit is forfeited due to tenant-caused property damage, repair costs can be deducted.
Rental income from subletting part of an owned property (e.g., renting out a room while living in the home) is taxable. Insurance compensation received for leased property is taxable. If property is jointly owned, rental income is taxed based on each co-owner’s legal share. Expenses incurred to generate rental income can be deducted from taxable income.

・Dividends

Taxable	Non-taxable
Dividends received from cooperatives (e.g., NTUC Fairprice Co-operative Ltd, NTUC Healthcare Co-operative Ltd, The Singapore Police Co-operative Society Ltd).	Dividends from Singapore-incorporated companies under the one-tier corporate tax system (except cooperatives).
Dividends from foreign sources received by individuals in Singapore through a Singapore partnership. ※Certain dividends may be exempt from taxation if specific conditions are met.	Foreign-sourced dividends received by Singapore residents (except through a Singapore partnership).
Dividends from Real Estate Investment Trusts (REITs) (if received by an individual through a Singapore partnership or if related to transactions, business, or professional activities involving REITs).	Dividends from Real Estate Investment Trusts (REITs) unless received through a partnership or related to a business, trade, or profession.

・Interest Income

Taxable	Non-taxable
Deposits with non-approved banks in Singapore.	Deposits with licensed banks and financial institutions in Singapore.
Deposits with unlicensed finance companies in Singapore.	Deposits with licensed finance companies in Singapore.
Pawnbrokers in Singapore.	Securities such as bonds (except when owned by a partnership or held as trading stock).
Loans provided to corporations, individuals, etc.	Foreign-source interest, such as interest paid by foreign companies or businesses (excluding cases where the interest is earned through a partnership). ※Interest paid by the Singapore branch of a foreign company or business is considered Singapore-sourced.
Refunds of voluntary CPF top-up contributions for employees.
Bonds owned by a partnership or held as trading stock.

・Profits from the Sale of Property, Stocks, and Financial Assets
Generally, profits from the sale of properties, stocks, or financial assets in Singapore are non-taxable. However, profits from “property trading” are taxable if deemed to be motivated by profit-seeking intent. Factors considered include transaction frequency, purpose of sale, and holding period. Capital gains from real estate sales, stock transactions (including cryptocurrencies), and insurance payouts are non-taxable.

Other Income

・Annuities
Generally, annuities purchased from insurance companies, payments from gifts, inheritances, asset sales, or renunciation of rights are non-taxable.
However, annuities may be partially or fully taxable in the following cases:
①Received through business, trade, or profession in Singapore or via a Singapore partnership.
②Withdrawals from the Supplementary Retirement Scheme (SRS).
③Purchased by an employer instead of employment benefits or pensions.

・Alimony and Maintenance Payments
Non-taxable if received under a Singapore court order or contractual agreement:
①Spousal maintenance under court order or separation agreement.
②Child support under a court order or agreement.
③Parental maintenance under the Maintenance of Parents Act.

・Estate/Trust Income
Income received from an estate or trust managed in Singapore is taxable.

・National Service Housing, Medical and Education Award (NS HOME) Grants
The NS HOME Award is granted by the Ministry of Defence and the Ministry of Home Affairs to recognize the contributions of Singaporean citizens serving in National Service. Payments credited to the Post-Secondary Education Account and CPF MediSave/Ordinary Account are non-taxable. However, credits of S$500/S$1,000 received via the LifeSG app are taxable.

・Royalties
Royalties received from copyrights, patents, and trademarks are taxable if paid by a Singapore resident or business. Certain literary, artistic, and intellectual property-related royalties benefit from preferential tax rates. However, royalties from newspapers, periodicals, and intellectual properties registered after 2017 do not qualify for these exemptions.

・Lottery and Gambling Winnings
Winnings from 4D, Toto, Singapore Sweep, horse racing, casinos, and other gambling activities are non-taxable.

・Withdrawals from the Supplementary Retirement Scheme (SRS)
Funds can be withdrawn from an SRS account at any time, either in cash or as investments (if applicable). Withdrawals are subject to taxation, with tax rates and taxable amounts depending on the timing and type of withdrawal. Foreigners and Singapore Permanent Residents withdrawing from an SRS account are subject to withholding tax.

Comparison

When comparing the two, the following differences can be observed. Please refer to these points when considering relocation or business expansion:

・Salary
Hong Kong: The taxable scope is relatively broad, covering not only bonuses, commissions, and allowances but also benefits such as housing rental value and employer-paid taxes.
Singapore: Certain elements are distinguished. For example, director’s fees are exempt from board meeting attendance fees, and benefits such as company events, overseas travel insurance, and meal expenses are non-taxable.

・Bonuses
Hong Kong: Various bonuses, including completion and deferred bonuses, are subject to taxation.
Singapore: Some bonuses related to the COVID-19 support program are tax-exempt, but certain other bonuses are taxed.

・Retirement Benefits
Hong Kong: Severance pay, including the final month’s salary, payment in lieu of notice, and MPF contributions, is included in taxable income. However, severance compensation and long service payments are tax-exempt.
Singapore: Contributions to approved pension schemes are taxed, but government pension scheme payouts are exempt.

・Investment Gains
Hong Kong: Gains from stocks and options are generally taxable.
Singapore: Gains from the sale of certain financial products and non-speculative transactions are tax-exempt.

・Foreign Income
Hong Kong: Foreign-source income derived from Hong Kong employment is subject to taxation.
Singapore: Certain types of foreign income, such as earnings from Singapore-based partnerships or Singapore-related employment, are also taxed.

・Real Estate
Hong Kong: Rental income is subject to rental income tax.
Singapore: Rental income is taxed, but deductions for related expenses are allowed.

・Stock-Related Earnings
Hong Kong: All stock dividends and stock options are taxed.
Singapore: Gains from employee stock options are taxable, but other employee stock ownership plans may have exemptions.

・Cryptocurrency
香港：関連する規定が整っていません。
シンガポール：場合によって非課税対象になる場合もあり、関連の規定や判定基準があります。

Hong Kong: Regulations are not yet well established.
Singapore: Depending on the circumstances, cryptocurrency transactions may be tax-exempt, with specific regulations and assessment criteria in place.

まとめ

Deciding between Hong Kong and Singapore depends on various factors such as personal financial status, employment type, and financial habits. Both have their respective advantages in terms of tax transparency and tax-saving opportunities.

For Hong Kong, the tax system is often praised for its simplicity and uniform tax rates. It may be attractive for individuals with standard employment arrangements or those earning most of their income from a fixed salary. Hong Kong does not impose capital gains tax or value-added tax, which can be advantageous for individuals with relatively simple portfolios. Additionally, Hong Kong’s territorial tax system means that only income derived from Hong Kong is taxed, making it beneficial for individuals who earn most of their income outside of Hong Kong. This system may appeal to professionals with international clients or those engaged in global business.

Known for its comprehensive tax system and various incentives, Singapore’s progressive tax structure ensures that even high-income earners do not face a sharp increase in tax rates. Individuals with more complex financial situations—such as those receiving bonuses, stock options, and allowances—may find Singapore’s tax system more suitable. Singapore provides targeted exemptions for certain types of income, encouraging investment and innovation. Entrepreneurs, professionals with diverse income sources, or those engaged in research and development activities may benefit from Singapore’s incentives and tax exemptions. Additionally, tax exemptions on capital gains from certain financial products and specific dividends can be appealing to investors.

In summary, individuals with simpler income structures focusing on international business may find Hong Kong’s tax system advantageous. On the other hand, those with diverse income streams looking to leverage specific tax exemptions may find Singapore’s system more favorable. When evaluating the impact of each tax system, consulting with a tax professional is essential to ensure an approach tailored to individual circumstances.

In the next article, we will provide a detailed comparison of tax deductions in both systems, including deductible items and amounts. Stay tuned!