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Personal income tax rates rise second year in a row 

Singapore, 22 October 2013
The global average personal income tax rate has increased again this year by 0.3 percent, said KPMG. This is the second year in a row that an increase has been noted- last year also saw individual tax rates rise by 0.3 percent.

2013 also marks the second highest quantity of rate increases – in nine countries – since KPMG began collecting rate data in 2003.

The most highly publicised tax rate change for 2013 occurred in the United States (US), where the expiration of Bush administration era tax cuts saw the highest federal rate increase from 35 percent to 39.6 percent. Slovenia experienced the greatest increase, with the tax rate moving up nine percentage points from 41 percent to 50 percent.

Mr BJ Ooi, Partner and Head of International Executive Services with KPMG in Singapore said: "To address government budgetary deficit concerns, many countries have either created new income tax rate bands for very high income tax earners or are introducing new temporary taxes.

"Targeting high income earners is a way for governments to gain revenue. It also allows them to be seen by taxpayers as doing something that is fair and necessary for the benefit of their country."

The Czech Republic is one example to note with its implementation of a temporary tax, referred to as a 'solidarity surcharge' and applied at a rate of seven percent to income exceeding CZK1,242,432.

Average rates in Asia

Average rates remained more or less constant in Asia at 28.24 percent, a marginal decrease from 28.29 percent last year.

While rates broadly remained the same among Asian heavyweights Japan at 50 percent, China at 45 percent and India at 30 percent, both India and Japan saw some changes made.

India introduced a new temporary tax on high earners. For the 2013/14 fiscal year only, India has imposed a 10 percent surcharge on tax paid by individuals earning over INR10 million. Japan increased its highest rate by 0.84 percent due to the introduction of a 'Special Reconstruction Surtax', which the Japanese government introduced to help fund the cost of rebuilding after the Great East Japan Earthquake of 2011.

Within Southeast Asia and East Asia, Singapore's tax rate, at 20 percent, remains among the lowest, along with Hong Kong which stands at 15 percent.

Notable tax decreases

Latvia decreased its flat tax rate by one percent as part of a staggered move to reduce its rate from 25 percent to 20 percent by 2015, and Greece decreased its top rate by 3 percent - from 45 percent to 42 percent. While the top rate did decrease in Greece, the change was part of a wider move to restructure all tax rate bands. These changes saw tax rates increase at the lower and middle levels, to the extent that tax rates actually increased for all individuals earning under EUR 220,000. This is despite the decrease in the top rate.

The third and most significant decrease occurred in the United Kingdom (UK), where the top rate was reduced from 50 percent to 45 percent from 6 April 2013. During its three years of operation, the UK's 50 percent rate was widely criticized for driving high-earning individuals abroad and acting as a deterrent to entrepreneurship.

Similar criticism has been levied at the highly-publicised 75 percent tax bracket on individuals earning over EUR 1million proposed by French President, François Hollande, over a year ago. In December 2012, France's constitutional council ruled that the 75 percent rate was unconstitutional, and it is still unclear whether a tax on the "super rich" will be introduced in France in a different form.

For more information, please visit www.kpmg.com/taxrates for KPMG's Online Tax Rates Tool. The tool is regularly updated and allows users to compare (the highest) corporate, indirect and individual income tax rates for one country, for any given year(s) and to compare one tax type across multiple countries, for any given year(s).

Rate increases

Country 2012 rate 2013
Armenia 25% 26%
Denmark 55.38% 55.56%
Egypt 20% 25%
Finland 49% 51.13%
Israel 48% 50%
Luxembourg 41.34% 43.6%
Portugal 46.5% 48%
Slovenia 41% 50%
US 35% 39.6%


Countries with rate decreases

Country 2012 rate 2013
Greece 45% 42%
Iceland 46.24% 46.22%
Latvia 25% 24%
UK 50% 45%