Taxation

Do You Need Tax Planning?

No matter how much you earn during the year, what really counts is what you get to keep. If you pay more taxes than necessary, you are really throwing money down the drain. That is why tax planning should be an integral aspect of managing your finances.

 

How Not To Lose Money To Unnecessary Taxes

There are many tax strategies that can help you reduce taxes. The strategy or combination of strategies that is suitable for you will very much depend on your personal tax profile. While the range and complexity of tax planning strategies are far and wide, below are examples of some strategies briefly described:

 
Basic Tax Planning Strategies

~ Structure a Tax Effective Remuneration Package
  Your salary, bonuses and other cash allowances are taxable in full. Instead of receiving such benefits as cash allowances, your employer can reimburse you for the expenses, or provide the benefits-in-kind. A Dual Employment Arrangement can also be made if you travel frequently to an overseas subsidiary.
~ Make Voluntary Contributions to CPF
  The CPF is an excellent tax shelter. Both your contributions and the interest earned are tax exempted.
~ Make Use of the Supplementary Retirement Scheme (SRS)
  Besides helping you to achieve your retirement goals, the SRS is an excellent tax planning tool. Every $1 contributed reduces your taxable income by $1. Investment gains on your SRS contributions are tax free until at the point of withdrawal. Besides, you need only to pay tax on 50% of your SRS funds withdrawn upon retirement. You can enjoy further tax savings if you stagger your withdrawals.
~ Maximise Reliefs that You Are Entitled To
  Opt for a separate filing if both your spouse and you are working. IRAS gives personal reliefs and lower marginal tax rates for married women's income.
~ Shift Your Income to Your Spouse
  Shifting your income to your spouse if he/she is in a lower income tax bracket.
~ Defer Income from Peak to Lean Years
  During peak years, your tax payments can be quite high. Consider timing the receipt and exercise of any income and stock options so that you will be pushed down to a lower income tax bracket.

Save Taxes on Your Overseas Interests (Overseas Income, Investments or Business Activities)

The potential returns of overseas investments can be very attractive. There are overseas stocks and other instruments that are likely to bring your better returns than local stocks. But before you make any investments or engage in any overseas business activities, do your sums properly. You have to factor in taxes on your investments to give you an idea what is the real rate of returns. Here are some ways that can help you reduce taxes:

~ Elect to be taxed as a Non Resident
~ Avoid Double Taxation
~ Set Up an Offshore Company
~ Time the Remittance of Income

 

Your Personal Tax Plan

Tax laws and strategies tend to be fairly complex. There is no straightforward tax plan template that is good for you. Your tax plan should be drawn up in consultation with your licensed financial adviser and tax consultant. Your financial adviser will have to study your financial situation in details to cut out a tax plan that fits you. Start a partnership with your licensed adviser and you can better manage your finances to your advantage.

 

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