In my previous article, I mentioned that as a Singapore Permanent Resident (PR), we would eventually need to voluntarily contribute 20% of our monthly salary.
Well, even though your disposable income might have been reduced, there are plenty of financial benefits to incentivize those to convert into a Singapore PR.
Here are some financial benefits that you might not have thought of:
1. Pay lesser income tax
Many Malaysians might not know this – you actually pay lesser income tax as an Singapore PR compared to when you are on an Employment Pass.
Below is an example provided by the Inland Revenue Authority of Singapore (IRAS)
Prior to arriving at the chargeable income, which is the assessable income less personal reliefs, Mr. Heng is entitled to apply the Employee CPF Contribution Relief of SGD 10,000.
In this example, an SGD 10k relief on CPF contribution relief would have kept Mr. Heng at the lower tax tier.
Without that, Mr. Heng’s chargeable income would be subjected at a higher income tax rate since it is more than $40,000.
That said, you can also enjoy additional tax relief if you are making cash top-ups for yourself, your loved ones, or your employees. However, there is a cap to ensure that CFP is not used as a tax shelter.
2. Assess to public housing
I always view Singapore PR as a stock option – an option that gives the holder the right but not the obligation to convert to a Singapore citizen.
Should a SG PR be hell-bent on converting into an SG citizen, preparations and planning for retirement and housing will be crucial.
CPF comes to play. But you should not to forget the role played by the Housing & Development Board (HDB).
The HDB was formed in February 1960 and was tasked to solve the living conditions of Singaporeans back then. Today, it has built more than 1 million flats in 23 towns and 3 estates across the island.
Public housing is made affordable in land-scarce Singapore, condition if you are a Singapore Citizen or Permanent Resident.
Private housing, on average, costs at least 1 times more than public housing.
So this is a financial benefit that could become a reason for Malaysians to convert to PRs or even to Citizens.
3. Pay lesser ABSD when purchasing properties
Additional Buyer Stamp Duty, known as ABSD, is a tax that is levied on top of the Buyer’s Stamp Duty (BSD) when you buy a residential property in Singapore.
The amount of ABSD you have to pay depends on your buyer profile and the number of properties you already own.
For foreigners buying any residential properties in Singapore, there is a whopping 60% of ABSD to be levied on.
That means, if a foreigner opts to purchase a residential property worth SGD 1 million, he or she would have to fork out another SGD 600k purely for ABSD.
A Singapore PR on the other hand, need only to pay 5% for their first residential property.
Yet another advantage to convert into an Singapore PR.
4. Improved chances of getting loan approvals
This is an unwritten financial benefit that is up for debate.
Obtaining Singapore PR might not be strict, but it does come with requirements and caveats. Those who are working on it should know.
It starts with an employment pass, and if Singapore deems that you are contributing well and have solid plans to settle down, the chances of obtaining a permanent resident-ship would be higher.
The caveat is pretty straightforward:
- Have a solid and stable job,
- be endorsed by a company operating in Singapore, and
- not be involved in crime or misdemeanor.
The checklist to become a Singapore permanent resident has basically helped banks and financial institutions when assessing an individual who is planning to take a mortgage or loan.
Not that it is foolproof, but it does provide the banks with more certainty that a PR loan applicant would have much more credibility and stability than a foreigner.
5. Eligibility for citizenship
Singapore’s economic transformation is often referred to as a “miracle”. This land and resource-scarce island was not part of South East Asia blessed with resources.
Yet since the early days, of the Majapahit empire, the British colonization, and up till this very day, Singapore is revered as a trading port. It became the strategic point for traders to meet, and for talents to converge.
For talents who opted to become permanent residents, there are already plenty of tangible and intangible financial benefits. As for becoming a proudly converted Singaporean citizen, there is more to what Singapore has to offer and vice versa as well.
From various subsidies to owning the world’s most powerful passport that allows you to travel visa-free, there are so much more advantages that a citizen holds over a Singapore PR.
But then again, being a Singapore PR is already a start. One can only become a converted SG citizen after a minimum of 2 years of becoming a Singapore PR.
Greener pastures not only for Malaysians but for plenty of people around the world
Singapore’s “miracle” is built upon meritocracy and a more or less efficient system of handling talent and human capital.
This part of South East Asia was not blessed with abundant resources but eventually turned out to be the richest nation in SEA. Its policy and governance continue to be a magnet that attracts foreign direct investments, talents, and high-net-worth individuals.
Thus, to retain talents, it is no surprise that permanent residents and citizens enjoy certain perks that also prepare them for a happy retirement.
The Malaysian brain drain could continue to exacerbate, should the Malaysian government choose not to take a leaf out of Singapore’s talent retention playbook!
