It’s that dreaded time of year again if you work in Singapore. IRAS are already posting out the ‘Notice of Assessment’ for your 2017 income tax liability. Thankfully I didn’t receive mine yet!
No one looks forward to paying their tax bill each year, but there’s some light at the end of the tunnel. Increasingly it’s become possible to pay your income tax bill with your credit card, in turn earning a sizeable chunk of KrisFlyer miles (or other frequent flyer points if your credit card allows that) for the transaction.
Many of you will already have received and paid your tax bill by now – apologies if you would have found this article useful I did intend to post it last month but it took a backseat.
This is not a service IRAS offers directly. The transaction must usually be arranged through your credit card company, and they will charge you a fee for the service, which means the miles are not going to be ‘free’.
For example – if like me you hold the Standard Chartered Visa Infinite card (SCVI) the income tax payment processing fee is 1.6%, and the card gives you 1.4 KrisFlyer miles per S$1 spent locally, assuming you have at least S$2,000 of other spend on the card in the same statement month which is a condition of the higher earning rate.
For a S$10,000 tax bill (example to keep the maths easy), the fee will set me back S$160, for 14,000 miles awarded. That means I’m paying 1.14 cents per KrisFlyer mile, which is a great deal as we value them at 2 cents each if used sensibly.
Even if you almost exclusively use your KrisFlyer miles for economy class redemptions, which we don’t recommend, you shouldn’t lose money ‘buying’ at this rate.
The credit card options
Not everyone has the SCVI card, so what other Singapore credit cards offer miles when paying your income tax?
Here’s a table of those which allow it and the effective cost per mile for using the tax payment facility in each case:
|Cost per mile|
* The SCVI tax payment facility offers 1.4 miles per S$1 (Hi rate) only if you have spent over S$2,000 on other transactions in the same statement period. Income tax payment doesn’t count towards the minimum – not specifically stated in the T&Cs but confirmed by Standard Chartered on the phone earlier this month. The agent I spoke with could be wrong, but it’s much safer to clear the spend requirement on other transactions in the same statement period if you’re counting on the 1.4 miles rate. Otherwise 1 mile per S$1 applies (Lo rate).
With the exception of the DBS Altitude card all of these options involve ‘buying’ KrisFlyer miles at less than 2 cents per mile, our personal upper limit to ensure a decent return. Note that for DBS Altitude cardholders, CardUp (see below) offers a better option.
If your credit card doesn’t have a tax payment facility (many good ones don’t) there’s still another option to earn miles by paying your income tax bill using your credit card through CardUp.
The issue here is that the fee is higher at 2.6%, so it doesn’t always make sense depending on the miles earning rate of your card and of course the cost at which you’re comfortable ‘buying’ KrisFlyer miles.
Here’s how the cost per mile comes out for major miles earning cards issued in Singapore if you pay through CardUp. Remember that unlike the direct credit card payment facilities listed above, you will also earn miles on the fee CardUp charge you, which is taken account of in the cost per mile column in the table below.
|Cost per mile|
|UOB PRVI Miles||2.6%||1.4||1.81¢|
We added the DBS Altitude card to the CardUp list because it represents much better value to pay your income tax this way than using the DBS tax payment facility.
We first wrote about CardUp last year. If you haven’t used the service before (it can also be used to pay a number of other bills like rent, property tax and school fees), you can enjoy up to S$20 off the transaction fee on your first payment by using our promo code ANDREWC11.
Direct with your Credit Card Provider
For Credit Card payments there’s a variety of methods depending on the card issuer (for Standard Chartered it’s online – for some others there’s a manual form).
In all cases to the best of our knowledge you must upload or submit your Notice of Assessment and provide your bank account details. If the application is accepted the card issuer will transfer the amount owed to your personal bank account and you will then be responsible for settling your income tax directly with IRAS.
Your card will be charged for the amount transferred to your bank account plus the processing fee, so be prepared to pay this about a month later.
For CardUp, select ‘Income Tax’ when scheduling a new payment. You’ll be able to make a one-off payment in accordance with your Notice of Assessment (having entered your IRAS reference) and this will be directly transferred to IRAS on your behalf.
Your card will be charged for the total transaction, plus the 2.6% CardUp fee.
Paying Income Tax by Giro
What many people (myself included) prefer to do rather than pay off their annual income tax bill in one lump sum is to let IRAS calculate a monthly GIRO payment plan, which is interest free. You then pay your tax off for the previous year in much smaller monthly sums.
This is still possible if you pay your income tax by credit card, but only with the cards allowing you to do so directly. That’s because CardUp settles directly with IRAS as explained above, while the card issuers just give you the money and trust you to pay IRAS yourself.
Once the credit card company has paid your income tax total into your bank account, you are still responsible for then settling the income tax with IRAS. The credit card company will not check if you have done this, nor are they obliged to.
There is therefore no problem arranging with IRAS to pay your income tax by GIRO and simply use the money the credit card company transferred to you to settle your credit card statement the next month (when the income tax charge will be due).
Your tax payments will then be spread through the year as usual but you’ll still have a chunk of miles from the original transaction.
If you’ve still to receive your Notice of Assessment or haven’t paid it yet – don’t rush to do so without considering the miles earning options. This can be a big boost to your annual miles total.