Singapore doesn’t exactly have a tipping culture. However, tipping has been widely instituted in local food and beverage industry through a “service charge” – usually slapping an additional 10% on top of the bill. Furthermore, those paying in cash also tend to leave the change behind as tips, while many holidaymakers give hotel service staff cash tips as well.
In recent years, more platforms in Singapore, especially for delivery and drivers, have also been providing an option for tips on their apps. In fact, in a recent viral video by local YouTuber Sneaky Sushi, he gave GrabFood riders that delivered his orders up to $1,000 in cash tips. Many employees and riders and drivers may also be collected cash tips.
This prompted several of us on the team to ask – are tips considered taxable income in Singapore?
Read Also: Why Some Companies Choose To Give Allowance, And Others Pay Reimbursements
Tips Are Considered Taxable Income
While we thought this would be a fairly straightforward question, we didn’t exactly find an straightforward answer to the question on the Inland Revenue Authority of Singapore (IRAS) website.
In a catch-all statement, it IRAS simply states that “all income earned in or derived from Singapore is chargeable to income tax”. By extension, we assume this should include tips. In fact, the only time the IRAS acknowledges tips as a type of income is in a relatively obscure report for self-employed persons stating that:
Generally, all income including tips, bonuses and additional payments derived from the performance of services are taxable as income if the services are performed for the purpose of making profit.
Piecing together these information, it’s clear that both self-employed persons and employees should declare any tips that they receive as income.
Tips Attract CPF Contributions, Hence Should Also Be Taxable
What is clearer is that the CPF Board requires CPF contributions for tips: CPF contributions are payable on Tips collected and distributed to employees by the employer.
Payments that require CPF contributions typically are also taxable. This includes commissions, allowances, bonuses, and others.
Read Also: 10 Types Of Employee Payments (Apart From Salary) That Businesses Need To Pay CPF For
While this is straightforward to self-employed persons, employees who receive tips then have to ensure their employers also know – since employers are required to pay both the employer and employee shares of CPF contributions on the tips amount. This is where it can become a little tricky – especially if employers do not allow employees to keep their tips.
Read Also: Guide To Understanding Your Tax Obligations As A Self-Employed Individual
Not Declaring Tips In Your Income Tax
Not declaring tips can land you in trouble. As non-declaration of cash tips can be hard to uncover, it may go undetected. However, this is a game of chance. You may incur a penalty of up to 400% for the amount, be fined up to $50,000, and/or imprisoned.
If you realise that you have forgotten to declare income in the form of tips, or other income such as commission, bonus, allowance, etc, in previous years, you can still report it. You can input it in your Income Tax Return or email to IRAS, and providing the following information:
1. Nature/type of income
2. Period for which the income is earned
3. Date that income is received
4. Amount
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