A Foreigner’s Guide to SRS Withdrawals in Singapore
Conditions for 5% Penalty Waiver on Withdrawals
- Reaching Statutory Retirement Age: Withdrawals made after reaching 63 years.
- Medical Grounds: If the account holder withdraws due to health issues.
- Death: Withdrawals by legal representatives after the account holder’s passing.
- Bankruptcy: Withdrawals due to bankruptcy.
Full Withdrawal for Foreigners:
- The foreigner is neither a Singapore citizen nor a Permanent Resident for a continuous 10-year period.
- The account has been maintained for at least 10 years.
- A one-time full withdrawal is made.
Taxation on SRS Withdrawals
- Tax Residents: Progressive tax rates (0% to 22%) apply.
- Non-Residents: A withholding tax of 24% applies.
- Additional taxes may apply depending on income from other sources and residency status.
💡Did You Know?
You are considered a Singapore tax resident if:
- You stayed or worked in Singapore for 183 days or more in the previous calendar year.
- You worked in Singapore continuously for two years, totaling at least 183 days.
Withdrawal Options
- Cash Withdrawals: Subject to tax based on the withdrawal amount and residency status.
- Investment Withdrawals: SRS members can transfer investments out of their accounts (e.g., into a personal CDP account) without liquidation. These withdrawals qualify for a 50% tax concession under conditions like statutory retirement or medical grounds.
Key Points to Consider
- Ensure you meet the criteria for penalty-free withdrawals.
- Being a Singapore tax resident could lower your overall tax liability.
- Plan Withdrawals Strategically to Minimize Tax Exposure:
Strategically planning your withdrawals is crucial, especially for those near the $200,000 annual income limit, as crossing this threshold subjects your income to the highest marginal tax rate of 24%. Here’s how to manage withdrawals effectively:
1. Tax-Resident Advantage:
– Tax residents benefit from progressive tax rates (0% to 22%), while non-residents face a flat 24% withholding tax.
– If possible, ensure tax residency status before making significant withdrawals to reduce your overall tax burden.
2. Leverage the $200,000 Threshold:
– Keep annual withdrawals below $200,000 to avoid hitting the highest tax bracket.
– Consider spreading withdrawals over multiple years, especially if you have other income sources, to stay within lower tax brackets.
3. Use the 50% Tax Concession:
– For tax residents, only 50% of the SRS withdrawal amount is taxable. For example, withdrawing $100,000 means only $50,000 is considered taxable income, making it easier to stay below higher tax brackets.
4. Avoid Clumping Income:
– Combine SRS withdrawals with other income streams like salaries, bonuses, or investment gains strategically. High-income years may push your total earnings into higher tax brackets, increasing your overall tax obligation.
5. Investment Withdrawals:
– Instead of cash, consider transferring investments from your SRS account (e.g., stocks or bonds) into a personal CDP account. These withdrawals also qualify for the 50% tax concession, potentially reducing your taxable income.
