Overseas Per Diem Allowance For Work. Do Employees Need To Pay Income Tax On It As Part Of Their Employment Income?

People in Singapore travel often for leisure and work. When we are travelling overseas for work, our employers may provide us with an overseas travel allowance, also known as a per diem allowance. This allowance is meant to cover certain living expenses incurred overseas, such as the cost of meals, transport and other incidental items like laundry.

However, it’s important to note that this per diem allowance that is provided for work-related reasons can be subject to taxation. The Inland Revenue Authority of Singapore (IRAS) has set acceptable rates for per diem allowances. If the allowance given is within these rates, it is not taxable. If we are, however, receiving an allowance that is above IRAS acceptable rates, the amount in excess of the acceptable rates would be considered as taxable income for the employee.

For example, if an employee travels to China for a five-day work trip, IRAS’s acceptable rate for the country is $90 a day. If the employee receives $90 a day or $450 over a 5-day period, this allowance is not taxed. However, if the employee receives $200 per day, or $1,000 over a five-day period, the amount exceeding the acceptable rate, which in this case is $550 ($1,000 – $450), is taxable.

Below is the per diem allowance for 2024, specified in Singapore Dollars (SGD), for some commonly visited countries for work purposes.

CountryPer Diem/Daily Allowance
Australia$126
Brunei$70
Cambodia$136
China$90
France$143
India$100
Indonesia$130
Japan$162
South Korea$122
Malaysia$73
Myanmar$101
Switzerland$146
Taiwan$64
Thailand$87
United Arab Emirates$140
United Kingdom$156
United States$150
Vietnam$65

The full list of all countries is available on the IRAS website.

A few observations.

The per diem rates do not always align with the general cost of living in the respective countries. For instance, countries typically perceived as less expensive, such as Cambodia ($136 per day) and Indonesia ($130 per day), have higher per diem rates compared to countries like Australia ($126 per day) and South Korea ($122 per day), where the cost of living is usually considered higher.

In less frequented countries, where business facilities might be less readily available, and the usual amenities that a business traveller may expect are less accessible, the per diem allowances are often higher. Examples include Anguilla at $181 per day, the Republic of the Congo at $155 per day, and Ethiopia at $153 per day.

The per diem rates established by IRAS are specifically for the purposes of income tax. These rates do not dictate the actual per diem allowance employers choose to provide their employees. However, as IRAS has deemed these rates appropriate, they serve as a valuable guideline for employers when deciding the per diem allowances for employees travelling to these countries.

When the per diem allowance is given in a foreign currency, employers have the option to use their internal exchange rate to convert the amount into Singapore Dollars (SGD). Alternatively, they may refer to exchange rates published by local banks, local newspapers, or reputable news agencies for the conversion.

Reimbursement For Overseas Travel Expenses Are Not Taxable

It’s important to note that reimbursements provided to employees for business expenses incurred during overseas travel – such as meals and laundry – are not considered taxable income. This means that if employees submit these expenses with corresponding receipts to their company, the reimbursements they receive are not subject to tax.

Furthermore, certain types of payments do not fall under the category of per diem allowance and are not taxable. These include:

  • Overseas accommodation costs
  • Overseas airport transfers
  • Travel expenses between cities for business purposes
  • Business-related entertainment expenses

If a lump sum allowance is given to pay for accommodations, meals, transport expenses and other incidental expenses, the taxable amount would be the lump sum payment less the acceptable rate and non-taxable per diem allowance.

For example, consider an employee who receives a $5,000 travel allowance for a seven-day work trip to Japan and incurs $2,000 in expenses on accommodation, overseas airport transfers, entertainment, and intercity travel. The taxable benefit that will be included as part of his employment income is calculated as follows: $5,000 (total allowance) minus $2,000 (non-taxable benefits) minus $1,134 (IRAS acceptable rate of $162 per day for 7 days), resulting in a taxable amount of $1,866.

Read Also: 10 Types Of Company Benefits That Employees Have To Pay Income Tax On

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