Headline salaries hide employer CPF; freelancers must **buy medical, disability, and retirement** with post-tax cash unless they are EP holders with minimal statutory deductions.
Tax comparison (model)
| Band | Employee net | Freelance profit net | | --- | --- | --- | | S$80k | ~S$63k | ~S$59k before extra savings | | S$120k | ~S$91k | ~S$87k | | S$200k | ~S$152k | Needs expense planning + SRS |
Benefits you lose
Employer CPF (17% on ordinary wages for locals), group outpatient plans, corporate billing stability.
Break-even
Add 8–12% to your freelance revenue target if you self-fund insurance + SRS to mimic employee perks.
Hidden costs
EP/LOC logistics if you switch structures, accounting, FX on USD clients, unpaid RFP work.
When freelancing wins
USD-paying clients, S$1.2k+ day rates, deductible travel, multiple invoices.
When it does not
Single local client paying like payroll without CPF clarity—sort IR35-style substance first.
Real numbers: CPF and low headline tax
Median monthly wages ~S$5.5k-6.5k context; employer CPF 17% is real comp that EP holders may not see—locals must fund OA/SA/MA.
| Benchmark | Order of magnitude | Why it matters |
|---|---|---|
| Employer CPF on ordinary wages | 17% (locals) | Hidden vs cash salary. |
| Employee CPF | 20% (subject to ceilings) | Forced savings reduce spendable cash. |
| Medisave (self-employed) | varies | Cash timing for locals. |
| GST registration | S$1M threshold | Quotes change once registered. |
| Corporate medical | S$3k-8k/yr value | Buy retail solo. |
Benefits gap
- Employer CPF as wealth—replicate with voluntary savings. - Outpatient corporate plans cheaper than retail. - Training budgets S$3k-8k/yr in MNCs. - Paid leave accrual—price into day rate. - Bonus / AWS smoothing—contractors invoice or lose.
The break-even point
Even with low income tax, add +15-25% revenue versus salary cash to cover insurance, bench, and ops. Locals need CPF/Medisave loaded.
Structures
- Sole prop — modeled simply. - Pte Ltd — corporate tax + director pay—separate sheet. - EP vs LOC — work pass rules dominate feasibility.
Five-year sketch
3% salary growth vs 4% freelance rate with 85% utilisation: wins with USD clients and high day rates; single-local-client concentration risks reclassification debates.
FAQ
Modeled only via the optional annual field—locals should VERIFY with CPF Board.
Optional tax deferral—plan with tax agent.
Pass rules constrain side work—check MOM terms.
Bank spreads and timing—model explicitly.
Often zero-rated—still file returns.
Buy Integrated Shield + rider if needed—budget **S$3k-6k/yr**.
**S$20k-40k** before leaving stable CPF-heavy roles.
Different tax treatment—see incorporation guide.