Not Ordinarily Resident or NOR Scheme and Concession
Not Ordinarily Resident Scheme or NOR Scheme was introduced in 2002 to attract foreign talents to work in Singapore and Companies to setup businesses and headquarters in Singapore bringing along their high-paying executives who are residing overseas. This initiative further establishes Singapore as business hub which welcome foreign talents.
How Does NOR Scheme Attracts Foreign Talent?
For high-paying foreign talents or employee, the NOR Scheme's time apportionment concession allows them to exclude their remuneration associated with business travel abroad subject to some capping limit. This means that the employee can effectively exclude all or substantial part of his or her remuneration from being taxed in Singapore while he is on business travel. This time apportionment concession of NOR Scheme is also applicable to Singapore Citizen and Permanent Resident who had been working overseas for a number of years and have just returned to Singapore. In short, the time apportionment concession subject part of the employment income instead of the full income to Singapore Individual Tax. With Singapore's low individual tax rates and this concession, can imagine how low your average personal tax can go?
Besides time apportionment concession, the NOR Scheme also exempt employer's contribution to overseas voluntary pension plan up to the Central Provident Fund capping limit. In usual circumstances, employer's contribution to foreigner's overseas voluntary pension is taxable. With this pension exemption concession of NOR Scheme, foreigners can further reduce their Singapore tax payable. Please note that this pension exemption concession is not available to Singapore Citizen and Permanent Resident.
Qualifying Conditions for Not Ordinarily Resident Scheme and Concessions
You must be a non-resident for Singapore tax purposes for three Year of Assessments (YA) before the first year when the NOR Scheme commences. That means, you did not work in Singapore or stay in Singapore for 183 days or more and was not assessed as a tax resident for the 3 YAs prior to the commencement of NOR Scheme.
Additional conditions for NOR Time Apportionment Concession are:
- You must be a resident for the year you are applying Time Apportionment Concession. That means, you must either be physically present in Singapore or exercising employment in Singapore for 183 days or more in the relevant calendar year;
- Your employment income must be SGD160,000 and above; and
- Your business travel days must be 90 days or more. The day of departure is counted as one travel day. The day of arrival is not counted as travel day.
Additional conditions for NOR Exemption on Voluntary Contribution to Overseas Pension Plan by Employer
- You must be a resident for the year you are applying the Pension Exemption Concession. That means, you must either be physically present in Singapore or exercising employment in Singapore for 183 days or more in the relevant calendar year;
- Your employment income must be SGD160,000 and above;
- You must not be a Singapore Citizen or Permanent Resident; and
- Your employer is not claiming a corporate tax deduction on the voluntary contribution to overseas pension plan.
Out of the 5 years NOR Scheme, if you do not meet any of the above conditions, you only forego the concession for that year. If you meet all the conditions next year (within the 5 years NOR Scheme), you can still apply for the concession. For example, in YA2018, you only travel for 89 days, so you didn't meet one of the conditions for time apportionment concession and therefore you are not eligible for the concession for YA2018. However, if you meet all the conditions in YA2019, you can apply for the concession for YA2019.
How Do You Calculate Time Apportionment Concession of Not Ordinarily Resident Scheme?
Employment Days minus Travel Days divided by Employment Days for that YA multiply by Total Employment Income of that YA (including benefits-in-kind but excluding director's fee and tax borne by employer). This will be the apportioned income. If the tax payable based on this apportionment income is at least 10% of the total Employment Income of that YA, you can use this apportioned income. Otherwise, you should regross the apportionment income to at least 10% of the total Employment Income of that YA.
How Do You Calculate the Pension Exemption of NOR Scheme?
For NOR pension exemption, you must ascertain what is the equivalent of the employer's CPF contibution as if this employee is a Singapore Citizen (applying the CPF capping rule). The exemption amount on the employer's voluntary contribution to overseas pension plan will be capped at this amount.
Should I exclude the Pension Exemption first before Apportioning the Employment Income?
If the employee qualifies for both NOR Pension Exemption Concession and Time Apportionment Concession, you should apply the Pension Exemption first before you apportion the employment income.
Still Not Sure How to Apply for NOR Scheme and Concession?
Our tax specialists will be able to help with all your NOR Scheme and Concessions application. Just contact us and we will be there for you.