Using SRS to save on taxes for Expats in Singapore

By Lynette Tan

If you’ve only got a minute:

• The SRS is a voluntary savings scheme that encourages individuals to save for their retirement.
• Foreigners can use it to save for their retirement, enjoy tax savings with their SRS contributions and invest their SRS funds for potentially higher returns.
• Contributing the maximum SRS amount can help foreigners save at least S$3,000 in taxes for those earning at least S$100,000 annually. 

Singapore has long been seen as a vibrant metropolis known for its robust economy, excellent infrastructure, and diverse culture. It is a magnet for expatriates seeking professional growth and a high quality of life. 

While most expats focus on their career and enjoying their time in Singapore, it's crucial not to overlook the significance of long-term financial planning, especially for those who intend to make Singapore their home for the next couple of years.

Unlike your home country, where pension schemes or familiar investment vehicles might be readily available, planning for your golden years as an expat requires a proactive and informed approach. Relying solely on schemes from your home country might not be sufficient, or easily accessible, from afar. This is where the Supplementary Retirement Scheme (SRS) can come in handy for foreigners working in Singapore.

Understanding the Supplementary Retirement Scheme (SRS) 

The SRS is a voluntary savings scheme introduced by the Singapore government to encourage individuals to save for their retirement. It functions as a complementary scheme to the mandatory Central Provident Fund (CPF), offering a flexible and tax-efficient way to accumulate additional funds for retirement. For expats who may not contribute to CPF, or only minimally, SRS provides an alternative for retirement savings.

Unlike CPF, which is managed by the government, SRS accounts are opened and operated through 3 banks in Singapore. They are DBS Bank, OCBC Bank and UOB Bank. This allows participants a degree of choice in where they hold their SRS account and potentially access different investment products offered by these institutions.

• Key benefits of SRS: Tax savings & investment opportunities

The primary allure of the SRS lies in its dual benefits: significant tax savings through tax relief on contributions and the opportunity to invest your SRS funds. Contributions made to your SRS account are eligible for tax relief, effectively reducing your taxable income for the year.

Furthermore, the funds within your SRS account can be invested in a wide range of approved financial products allowing your retirement savings to grow over time, potentially at a faster rate than simply holding cash. Within your SRS account, you gain access to investment products including unit trusts/mutual funds, stocks and ETFs, bonds, and fixed deposits. This diverse selection allows you to tailor your investment strategy to your risk tolerance and financial goals, fostering compounding returns that can significantly grow your retirement nest egg over time.

• Eligibility

Singapore Citizens, Permanent Residents (PRs) and foreigners working in Singapore can apply to open an SRS account. This means that if you are employed in Singapore, regardless of your nationality, you are likely eligible to open an SRS account. 

To open an SRS account, individuals must be at least 18 years of age. There is also no income ceiling that restricts eligibility for contributing to SRS.

Navigating SRS as an Expatriate: Specific Considerations

 While highly beneficial, expats need to be aware of specific rules governing SRS. 

There is an annual maximum contribution limit for SRS. It's important to note that this limit differs for Singaporean Citizens/PRs and foreigners. For foreigners, the current annual SRS contribution cap is $35,700, which is higher than the $15,300 for Singaporeans/PRs. This higher limit allows foreigners to save a substantial amount annually and maximise their tax relief.

Understanding withdrawal rules is paramount for expats.

1. Withdrawal upon statutory retirement age: You can withdraw your SRS funds without penalty from the statutory retirement age that was in effect when you made your first SRS contribution. A significant concession is that 50% of the withdrawal amount is tax-exempt. To further manage tax implications, you can spread your withdrawals over a 10-year period.
2. Withdrawal due to permanent departure from Singapore: This is a key provision for expats. You’ll need to fulfil 3 conditions: You are neither a Singapore citizen nor a PR for a continuous 10-year period, the SRS account has been maintained for at least 10 years, and that a one-time full withdrawal is made.
3. Other withdrawal scenarios: Withdrawals due to medical grounds, terminal illness, or death are typically allowed without penalty. However, other early withdrawals incur a 5% penalty and the full amount is subject to income tax.

Tax implications for Residents & Non-Residents 

All income earned in Singapore is taxable. How much taxes you need to pay depends on

1. how much you earn in Singapore; and
2. whether you are a tax resident or non-resident for income tax purposes. 

You are a tax resident for a particular Year of Assessment if you are a:

• Singapore Citizen or Singapore PR who normally resides in Singapore
• Foreigner who has stayed/worked in Singapore:
1. for at least 183 days in the previous calendar year; or
2. continuously for 3 consecutive years; or
• Foreigner who has worked in Singapore for a continuous period straddling 2 calendar years and your total period of stay is at least 183 days. This applies to foreign employees who entered Singapore but excludes  directors of a company,  public entertainers or  professionals. 

Tax treatment – Resident vs Non-residents

Using SRS for tax savings

 An expat working in Singapore is thus subject to paying taxes based on the progressive tax rate — the higher your income, the more taxes you pay due to the higher tax bracket. Here’s an example of how much you get to save if you contribute to your SRS account.

 Tax savings for $35,700 SRS contribution for foreigners                   

*based on Year of Assessment 2025

Things to watch out for

While SRS offers many advantages, it's essential to be aware of potential downsides.

As mentioned, early withdrawals (outside of specific exemptions) incur a 5% penalty and the full amount is subject to income tax.

Like any investment, SRS funds are subject to market fluctuations. Diversification is crucial to mitigate these risks.

Be mindful of account maintenance fees charged by SRS operators and investment product fees (e.g., fund management fees) associated with your chosen investments.

While SRS rules have historically been stable, government policies can change, potentially impacting future regulations.

Conclusion

For expatriates in Singapore, the SRS presents a powerful opportunity for both significant tax savings and long-term investment growth. By understanding its benefits, specific considerations for foreigners, and practical management, expats can proactively plan for their retirement. While the scheme offers substantial advantages, seeking professional financial advice is highly recommended to tailor an SRS strategy that aligns with your individual financial goals and empowers you to secure your financial future in Singapore.