Singapore Fact-File Part 6:
Individual Business Employment Issues

6.2 Singapore Employment vs Self-Employment Tax Issues

The differences between employment and self-employment

Although both employees and sole proprietors in charge of unincorporated businesses are taxed under the personal income tax system, there are certain differences in terms of tax treatment; for example the self-employed business owner can often claim losses against trade income, which is not an option available to an employee.

The Inland Revenue Service of Singapore generally defines a person as an employee if they: have no personal liability within the business, have no investment in it, and are unable to personally profit or lose money, are paid a regular wage, and can be paid overtime, bonuses, or commissions, must take instruction, and work specific hours, have their working tools and equipment supplied by the person or organisation that is paying them, and must generally get permission from that person to work elsewhere.

Conversely, a self-employed person or sole proprietor is generally deemed to be such if they are financially liable for the business, do substantial amounts of work in their own workspace, pay employees (and are able to subcontract if necessary), have a financial investment in the business, incur costs and losses, but are able to profit as well, can set their own hours, are generally paid on a ‘per job’ basis (with lawyers representing one exception), make their own contributions to the Central Provident Fund, and contribute on behalf of employees.

Sole proprietors should report their business income under ‘Sole Proprietorship’ in the ‘Trade, Business, Profession or Vocation’ section of their tax return.