So, to help you out, we’ve compiled a guide on the tax treatment of employee benefits. It explains how the Inland Revenue Authority of Singapore (IRAS) treats various forms of benefits that employees get from their Singapore employers.
What is Tax Treatment of Employee Benefits?
“Tax treatment of employee benefits” is one of the many phrases you’ll notice the IRAS uses quite frequently in its tax documentation. It simply refers to the principles that Singapore applies to various forms of employment benefits, including employee remuneration.
Generally, the IRAS is expected to tax all the profits and gains employees earn due to their employment contracts in Singapore. That includes even the corresponding remuneration benefits.
Thankfully, however, there are exemptions. It just so happens that the IRAS allows you to exclude some of the employee benefits from your income tax declarations.
Here are all the details...
Tax Treatment of Employee Remuneration and Benefits
Basic Salary: Your basic salary as an employee is considered part of the standard employment gains. So, of course, both residents and non-residents are expected to pay their taxes accordingly.
Benefits Extended to Family and Friends: In the event an employer gives out the employment benefits to the employee’s friends, relatives, and family members, the IRAS still proceeds to charge taxes on the employment benefits.
Accommodation and Related Benefits: All forms of accommodation remuneration that an employee earns from their Singapore employer are considered part of the employment income. As such, the IRAS charges income tax rates on housing allowance, as well as hotel and serviced apartment costs.
Air Passage: Air passage refers to the cash payment employers grant their employees to offset air travel costs. As it turns out, the amount taxable when you’re taking a home leave, and non-taxable when you’re traveling for business, including travels to and out of Singapore to begin employment.
Awards: Cash and non-cash awards for medical leave, recognizing innovation/improvement, and bursary are not taxable; while rewards for referring friends/relatives, recognizing work performance, and service given are taxable.
Benefits Relating to Corporate Events: All the benefits that employees earn during corporate events are non-taxable. This includes stuff like overseas dinners, lucky draw prizes, and door gifts.
Benefits Relating to Loans: While interest benefits from loans that employees borrow from their employers are not taxable (as long as the scheme is open to all employees), interest benefits on loans that employees borrow from financial institutions, as well as loans given to company directors are taxable.
Car and Car-related Benefits: Benefits relating to private usage of company vehicles, as well reimbursements on business usage are not taxable; while maintenance expenses of vehicles owned by employees, allowances on ERP charges, car park charges for vehicles owned by employees, plus chauffeur expenses are taxable.
Central Provident Fund (CPF) Contributions: While compulsory CPF contributions are non-taxable, all voluntary CPF contributions forwarded to employees’ CPF accounts by their employers are taxable.
Gifts: All types of gifts for bereavements - such as condolence tokens and wreath - are not taxable. On the other hand, gifts for special occasions and festive seasons are only non-taxable if the value does not exceed $200.
Insurance Premium: The IRAS does not charge tax on work injury compensation, travel insurance premiums, as well as group medical insurance policies that employers cater for. But, it proceeds to charge taxes on premiums that are paid out for employees, as well as other forms of insurance in which the employee is the beneficiary.
Lump-Sum Payments: Lump-sum payments relating to restrictive covenants, retrenchment, workers compensation, disability payments, and death gratuities are not taxable; while early termination salary, retirement benefits, induction payouts, and service recognition gratuities are taxable.
Meal Payments and Food Provided: Meal benefits such as food and drinks provided in the workplace, plus meal allowance for working overtime are not taxable; while fixed monthly meal allowance earned by employees is taxable.
Transport Benefits: Reimbursements paid by employers for business-related travel costs are not taxable; while fixed monthly transport allowance is considered taxable.
Overtime Payments: All forms of overtime payments, including overtime claims, and overtime allowance are taxable.
Overseas Holiday Trips: Overseas holiday benefits, including holiday reimbursements, are taxable.
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