According to Singapore’s Income Tax Act, certain types of remuneration and payments, including those that may fall under company benefits, are taxable.
Employers (and not the employees) have the responsibility to make these distinctions between the types of payments that are taxable and non-taxable.
Employees on the AIS may not know which types of payments they received, especially for company benefits, are taxable since employers are the ones to submit their employment income returns. Employers not on the Auto-inclusion Scheme (AIS) must provide employees a hardcopy of Form IR8A and Appendix 8A and/or 8B or Form IR8S (where applicable) by 1 March of each year, so employees can make the correct submissions.
Here are 10 types of company benefits that employees are actually required to pay income tax on (but may not realise).
Read Also: 12 Things Employers Need To Include In An Itemised Payslip
Read on for more details on the payments and benefits that employees are taxed on.
#1 Allowances
Many allowances provided by companies are considered taxable income for employees. This includes payments such as fixed monthly housing, handphone, meal, transport or grooming allowances, as well as personal car-related benefits. Any allowance provided for doing overtime is also taxable.
In general, reimbursements made by the company for a business-related expense, which may also be for handphone usage, meals, transport or for grooming, are non-taxable. However, if they are paid as an allowance, they may be taxable.
Certain types of allowances, such as meal and transport allowances for employees working overtime, are not taxable for employees.
Read Also: Why Some Companies Choose To Give Allowance, And Others Pay Reimbursements
#2 Club and Gym Memberships
To promote healthy living, companies may provide memberships to a gym, fitness centre or even a club. If these are personal memberships, they will be considered as a taxable company benefit.
Specifically for a club membership, it may be used for both business and personal purposes. For personal memberships, the entrance fee paid by the company will be a taxable benefit to the employee. When the facilities are used, only the portion of personal use is taxable, while the portion for business purposes is not.
Read Also: Guide To Corporate Golf Club Memberships For Businesses
#3 Staff Discounts Above $500
Many employees may see a staff discount at the company they are working at as a perk. However, if these staff discounts exceed $500 in value or only available to a small pool of employees, then the full amount of the discount is taxable. Any discounts extended to family members will also be counted in an employee’s $500 benchmark.
The “staff discount” portion should be calculated using:
[STAFF DISCOUNT] = [MARKET VALUE] – [AMOUNT PAID BY EMPLOYEE]The market value of the product or service is determined by the lowest of the:
- the recommended retail price (RRP);
- lowest market price in a calendar year; or
- the most preferred customer price in a calendar year.
#4 Stock Options
Any gains from Employee Share Options (ESOP) and/or Employee Share Ownership (ESOW) are taxable. Especially for stock options with a vesting period, the gains that employees enjoy from such stock options are taxable even in the event they are no longer working with the company or are posted overseas with the company.
For stocks that have a selling restriction imposed, the gains will only be taxed in the year that the selling restriction is lifted. Otherwise, it will be taxed in the year that the stock options are exercised.
#5 Accommodation Benefits
Any accommodation benefits provided to employees are considered taxable income. This includes accommodation within a residential property or serviced apartment as well as payments for furniture and fittings within the accommodation. Any bills associated with living in the place, such as utilities, telephone, cable and housekeeping costs paid by employers will also be considered taxable income for employees.
In addition, any amounts paid by the employer for an employee to stay at a hotel or serviced apartment within a hotel building is also considered taxable income.
#6 Course Fees
Training courses or scholarships that employers pay for their employees may be considered taxable income. This is especially if the training programme is not available to all employees.
Any stipend or remuneration that employees receive while in their training or scholarship will also be considered taxable income.
#7 Awards Given For Performance, Long Service Or Retirement
Depending on the reason for the award and whether it is provided in cash or non-cash, they can be treated as taxable or partially taxable.
For example, if a cash or non-cash reward is provided due to a specific service rendered by an employee, it will be considered taxable. This includes if the reward is for referring an employee who joins the company.
For long-service and retirement awards, any cash reward will be considered taxable, while only non-cash rewards worth more than $200 will be taxable.
For good service and productivity-related rewards such as zero- or low-medical leave are only taxable if they are worth more than $200.
Even cash rewards on festive occasions will be considered taxable if it is worth more than $200 or are not available to all employees.
Read Also: 10 Types Of Employee Payments (Apart From Salary) That Businesses Need To Pay CPF For
#8 Joining Bonus & Salary-in-Lieu of Notice Pay
Joining bonuses and salary-in-lieu of notice pay when employees leave will be considered taxable income for the employee. Even in instances when the employee has to use a joining bonus to compensate his/her employer for termination without notice, it will still be considered taxable.
However, while salary-in-lieu of notice is taxable, retrenchment benefits are not taxable.
Read Also: How To Calculate Leave Encashment Or Salary-In-Lieu Of Notice Period For Your Employees
#9 Personal Insurance
Premiums for group insurance such as life insurance, critical illness insurance and personal accident is taxable for employees if they are the beneficiaries. If employees are not the beneficiaries, then the premiums on these policies are not taxable.
Similarly, any policy where employees are the policyholders are also considered taxable.
However, the premium for group medical insurance is typically not taxable. Certain groups of employees in Singapore are also entitled to Work Injury Compensation Insurance coverage under WICA. Premiums for these are not taxable.
Read Also: Medical Benefits That Businesses Have To Legally Provide For Their Employees In Singapore
#10 Business Trips (And Any Holiday Portion)
When employees go on business trips, expenses are usually forked out by the company in the form of reimbursements or direct payments. In addition, employees may also receive a per diem allowance or a daily allowance. This allowance is not taxable if it is within IRAS’ acceptable rates based on specific countries.
For example, the daily acceptable allowance for a business trip to the U.S. is $131, to Malaysia is $75, Myanmar is $80 and to China is $88. The full list of individual countries’ per diem rates are listed on the IRAS website.
If the daily allowance exceeds the acceptable rates, then the excess is considered taxable income.
Quite specifically, IRAS singles out the that the holiday portion of business trips are taxable. For instance, any overseas corporate retreat is not taxable. But, if the overseas retreat includes a holiday, then the holiday portion is taxable.
Similarly, any overseas holiday benefit, even if provided for all employees, will be considered as taxable.
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