Tax season is here again, and it’s time to look at this year’s options for paying with a credit card.
Individuals with income tax obligations will need to file their taxes by 18 April 2021. They’ll subsequently receive their tax bill (NOA) between the end of April and September 2021. IRAS sends NOAs in batches, so don’t feel left out if everyone else gets theirs before you do.
|💰The Milelion’s Income Tax Guide 2021|
How do I pay my income tax bill with a credit card?
IRAS doesn’t accept credit card payments. In their own words:
Credit card payments are not offered by IRAS directly because of the high transaction costs charged by the credit card service providers. This is to keep the cost of collection low to preserve public funds.
Fair enough. However, this doesn’t mean you can’t use your credit card to pay taxes. There are two types of tax payment facilities, which allow cardholders to earn rewards in exchange for a small fee.
|Indirect Payment Facilities||Direct Payment Facilities|
Both work the same in the sense that you submit your NOA, and your credit card is charged for the amount due plus an admin fee.
|💡 Technically speaking, not all facilities require you to submit an NOA…but we’ll get to that later|
Where they differ is that an indirect payment facility deposits the amount due into your designated bank account, in cash. You’re still responsible for paying IRAS.
With a direct payment facility, the facility provider pays IRAS on your behalf.
Whether it’s better to use an indirect or direct facility all comes down to the cost per mile- the admin fee, divided by the miles you receive on your card.
Regardless of which one you pick, some common rules apply:
- You can’t pay someone else’s tax bill, only your own
- You can’t overpay your tax bill
What are the fees involved?
As mentioned, it’s not free to use your credit card to pay income tax. There’s an admin fee involved, which varies depending on provider.
|🏦 List of Payment Facilities
|Bank||Applicable Cards||Admin Fee|
|Link||HSBC Premier, Visa Platinum, Revolution, Advance, Visa Infinite||0.5-1.5%|
|Link||SCB Visa Infinite||1.6%|
|Link||All cards except HSBC||1.75%
(2020’s fee; 2021 TBC)
|Link||UOB PRVI Miles, Visa Infinite Metal, Reserve||1.7-1.9%*|
|Link||All SCB cards||1.9%^|
|Link||All Citi cards except Citi Rewards/ Cash Back||2%
|Link||All DBS cards||2.5%|
|^This is the rate I see on my account; SC is known to target different people with different rates
*Promo rate till 30 June 2021
|There is an additional option called ipaymy, but for reasons outlined in this post, I have made a decision not to endorse or comment on their services. You’re welcome to check out their rates, in any case- their tax payment promotion last year was on par with CardUp.|
It may be tempting to compare them on the basis of admin fees, but that’s only half the story. You need to also consider the earn rate.
For example, the HSBC Premier Mastercard has an admin fee of 0.5% and an earn rate of 0.4 mpd, so your cost per mile is 1.25 cents. On the other hand, the SCB Visa Infinite has a higher admin fee of 1.6%, but also a much higher earn rate of up to 1.4 mpd, resulting in a lower cost per mile of 1.14 cents.
You also need to keep in mind that banks may apply different earn rates for income tax payments. For example:
- the UOB PRVI Miles Card normally earns 1.4 mpd, but awards 1 mpd for UOB payment facility transactions (you’ll earn 1.4 mpd for CardUp, though)
- all DBS cards earn a flat 1.5 mpd for income tax payment plans, instead of their usual rates.
If this is too complicated for you, the next section should make it very simple.
What are my options for paying tax with a credit card?
Here’s a sample of the rates you can expect to pay with each card, pending additional promotions and targeted offers (check your mail). I’ve not shown any options that cost more than 2 cents per mile, because I believe it simply doesn’t make sense beyond that. Your actual ceiling will of course depend on how you value a mile.
|Summary of Tax Payment Options
(Premier, PPC, BOS)
|SCB Visa Infinite||SCB||1.6%||1.42/
|HSBC Visa Infinite||HSBC||1.5%||1.253/
|HSBC Premier Mastercard||HSBC||0.5%||0.4||1.25|
|UOB PRVI Miles Visa||CardUp4||1.75%||1.4||1.23|
|UOB PRVI Miles Mastercard||CardUp4||1.75%||1.4||1.23|
|UOB Visa Infinite Metal||CardUp4||1.75%||1.4||1.23|
|SCB X Card||CardUp4||1.75%||1.2||1.43|
|DBS Altitude Visa||CardUp4||1.75%||1.2||1.43|
|BOC Elite Miles||CardUp4||1.75%||1.0||1.72|
|AMEX KrisFlyer Ascend||CardUp5||2.2%||1.2||1.79|
|AMEX KrisFlyer Credit Card||CardUp5||2.2%||1.1||1.96|
|1. Earn rate of 2.5 mpd during promo period from 1 May to 31 Aug 2021
2. 1.4 mpd if ≥S$2K spent in a statement period, 1.0 otherwise. This includes tax payments made via the tax payment facility
3. 1.25 if ≥S$50K spent in previous membership year; 1.0 otherwise
4. Use code MLTAX2021, valid till 27 August 2021. If tax payment is at least S$30K, write in to [email protected] for concessionary rate
5. Use code AMEXNEWTAX, valid till 27 August 2021 (for new users only). If existing user, use code AMEXTAX for 2.4% fee
|🧮How is this calculated?|
For CardUp, both the admin fee and the tax payment earn miles, so a S$1,000 payment with a 1.75% fee placed on a 1.2 mpd card earns 1,221 miles (ignoring rounding). This works out to 1.43 cents per mile.
For bank facilities, only the tax payment earns miles, so a S$1,000 payment with a 1.75% fee placed on a 1.2 mpd card earns 1,200 miles. This works out to 1.46 cents per mile.
A few points to note.
Apply for as many facilities as you want
If you hold more than one of the cards above, there’s nothing stopping you from applying for multiple tax payment facilities in order to buy more miles (otherwise known as churning).
For example, someone with a S$10,000 tax bill who holds both the SCB Visa Infinite and HSBC Visa Infinite could send the same NOA to both SCB and HSBC. Upon approval, he/she could buy up to 26,500 miles (14,000 from SCB, 12,500 from HSBC) for S$310 (S$160 from SCB, S$150 from HSBC).
Take particular care if you’re applying for two direct payment facilities, however, because there’s a chance you might end up overpaying your tax bill. “What’s wrong with funding the government’s working capital?” you may ask. Well, IRAS has to arrange for a refund, and tells off the sender in the process. Hence this line in the Citi PayAll T&Cs:
|“Where we have determined in our discretion exercised reasonably that your Payment(s) to IRAS exceed the amount of taxes which you are required to pay to IRAS, we shall be entitled to claw back any rewards credited to your card account in connection with any amount so overpaid to IRAS using the Service. In such an event, we will refund the relevant portion of Fee in respect of such overpaid amount.”|
There’s no chance of this happening with indirect payment facilities, because the onus is on you to pay IRAS. What you do with the cash after it’s deposited into your account is your own business.
You can still use GIRO (in most cases)
IRAS allows taxpayers to split their payment into 12 interest-free installments via GIRO. This is great for maximizing your cashflow, and something I opt for each year.
There are no issues using GIRO if you opt for an indirect payment facility, as the bank simply credits the cash to your account and how you go about paying IRAS after that is up to you.
GIRO used to be an issue for direct payment facilities, but the good news is that’s no longer the case. CardUp, Citi PayAll and SC EasyBill now allow you to pay off any amount up to and including the total balance on your NOA.
In other words, you could:
- Elect to pay your income tax via GIRO
- Make partial payments each month, a few days before the scheduled deduction (6th of each month; where this is a weekend/public holiday, on the next working day). Do note that neither service allows you to set up recurring payments for IRAS
As long as you don’t overpay your total tax bill (which triggers a refund from IRAS and a chiding from the bank), I don’t see any issues here. It’s OK to get the installment slightly wrong and pay more than what’s needed (but not less, obviously), so long as your final payment clears off the remaining balance exactly.
Don’t forget about transfer partner variety
When evaluating two cards with similar cost per mile figures, it’s helpful to think of qualitative factors as well.
One important consideration is transfer partner variety. All things equal, the card that offers more transfer partners will be more useful. If you need a refresher on who partners with who, check out this article.
Another consideration is points expiry. While most frequent flyer programs are extending the validity of their miles during COVID-19, it doesn’t hurt to have a bit of additional wriggle room on the bank side. For a guide on points expiry policies by bank, refer to this post.
No one enjoys paying taxes, but if you’re a glass half-full kind of person, they’re an opportunity to buy miles on the cheap. It all boils down to what your expectations are regarding travel opening up in the second half of this year, and how your miles balance looks right now.
I will be updating this article as new tax payment promotions are announced, so bookmark it for future reference.