New PR in Singapore? Why you pay more income tax in your first two years
Got your blue IC and noticed your tax bill looks surprisingly high? You are not imagining things.
A new Singapore Permanent Resident (PR) often pays more income tax than a citizen earning the exact same salary. Here is why it happens, how the numbers look, and why your take-home pay is still higher overall.
The CPF relief puzzle
In Singapore, taxable income is reduced by tax reliefs. One major relief is the employee contribution to the Central Provident Fund (CPF), Singapore’s mandatory social security savings scheme.
For employees aged 55 and below:
- Singapore citizens and PRs from their 3rd year pay 20% employee CPF. Employers add another 17%.
- 1st year PRs pay 5% employee CPF (employer pays 4%) under default graduated rates.
- 2nd year PRs pay 15% employee CPF (employer pays 9%).
- Foreigners on an Employment Pass (EP) pay no CPF at all.
These figures come from CPF Board rate tables from 1 Jan 2026.
Because employee CPF contributions count directly as CPF relief, lower CPF rates mean a smaller tax relief. A citizen gets a full 20% deduction up to the annual wage ceiling. CPF is only charged on wages up to $102,000 a year, which caps CPF relief at $20,400 for a citizen.
Everyone resident here also gets $1,000 earned income relief (below age 55). Foreigners on an EP get no CPF relief, while new PRs get much less relief than older PRs and citizens. The result? A higher chargeable income and a higher tax bill.
Comparing tax bills across salaries
Here is how annual income tax compares across different residency statuses, based on employment income only, age under 55, and no other reliefs from the Kiasu Kit income tax calculator:
| Salary a year | Citizen / PR 3rd year+ | PR 1st year | PR 2nd year | Foreigner (EP) |
|---|---|---|---|---|
| $60,000 | $1,040 | $1,670 | $1,250 | $1,880 |
| $80,000 | $2,160 | $3,000 | $2,440 | $3,280 |
| $120,000 | $5,489 | $7,248.50 | $6,075.50 | $7,835 |
At an $80,000 annual salary, a 1st year PR pays $3,000 in income tax. That is $840 more than a citizen ($2,160), but still less than an EP holder ($3,280).
By the 2nd year, as your employee CPF rate rises to 15%, your CPF relief grows and your tax bill drops closer to the citizen benchmark.
Extra tax vs extra take-home pay
While paying more tax feels like a sting when filing your return for the Year of Assessment (YA), your monthly cash flow is actually better off.
The extra tax is small compared with the extra take-home pay. A new PR keeps more of each paycheque because less goes into CPF:
- On a salary of $6,000 a month, take-home pay is $5,700 in your 1st PR year.
- From the 3rd year onwards, take-home pay is $4,800 on the same monthly wage.
You can check your exact monthly cash breakdown using the take-home pay calculator.
Read more: Can CPF be paid as cash?