When employees incur expenses while completing their work, many businesses may provide reimbursements or pay them an allowance. This is fair to employees, so they don\u2019t incur expenses on behalf of their employers.\u00a0<\/p>\n\n\n\n
If there are employment-related costs that employers do not cover, employees can also\u00a0deduct them as employment expenses when they file their personal income taxes<\/a>.<\/p>\n\n\n\n Read Also:\u00a0Singapore Employment Act: 10 Statutory Requirements To Pay Employees<\/a><\/em><\/strong><\/p>\n\n\n\n Company allowances are usually fixed payments to an employee to cover specific types of employment expenses, regardless of how much expenses they incur for that purpose. For example, companies may provide transport allowances, meal allowances, mobile phone allowances, overseas expenses allowances, and any other types of allowance.<\/p>\n\n\n\n Reimbursements are money that is paid to an employee to compensate them for an employment-related expense they have already incurred. This is usually an exact amount, rather than a fixed amount, and expenses can be wholly or partially reimbursed. This can include taxi fares or meals after overtime, medical expenses, mobile phone usage or overseas expenses.<\/p>\n\n\n\n While both methods serve to cover employment-related expenses, they have different implications for both businesses and employees. We look at some of these considerations:<\/p>\n\n\n\n According to the CPF website, certain allowances may require CPF contributions to be paid on them. Such allowances include handphone, transport, meals, clothing, and overseas expenses; and even good attendance, festive allowance and other allowances also require CPF payments.<\/p>\n\n\n\n This means if employers provide a meal allowance to employees due to overtime work they are putting in, they have to also make CPF contributions – for both employer and employee – on the meal allowance.<\/p>\n\n\n\n In contrast, if employers require an employee to submit a receipt for their meal expenses after doing overtime work, it is considered a reimbursement. This would not oblige them to make any CPF contributions on the payment.<\/p>\n\n\n\n Read Also: Complete Guide To Employer\u2019s CPF Contributions In Singapore<\/a><\/em><\/strong><\/p>\n\n\n\n When employees receive allowances<\/a>, they are typically taxed on it just like normal wages.<\/p>\n\n\n\n For example, if an employee is given a transport allowance each month to cover the driving and parking costs incurred in the course of their work, they have to pay personal income tax on this allowance.<\/p>\n\n\n\n However, if employers provide reimbursements based on car park receipts or mileage, this is not taxable.<\/p>\n\n\n\n Nevertheless, reimbursements for private benefit of owning\/using the vehicle will still require employees to pay taxes on the amount.<\/p>\n\n\n\n This applies to other types of allowance VS reimbursement payments as well. However, for specific expenses, such as\u00a0meal allowance for working overtime<\/a>, employees do not have to pay taxes even though they are given an allowance. Employers can direct their employees to the IRAS website to verify other types of payments you are providing them. <\/p>\n\n\n\n In any case, most employers are on the Auto-Inclusion Scheme (AIS)<\/a> – which requires them to submit the employment income of their employees. This is then automatically included in the employees\u2019 income tax assessment.<\/p>\n\n\n\nWhat Does Company Allowance Mean?<\/strong><\/h3>\n\n\n\n
What Does A Reimbursement Mean?<\/strong><\/h3>\n\n\n\n
What\u2019s The Difference Between Providing An Allowance VS Reimbursements?<\/strong><\/h3>\n\n\n\n
#1 Employers May Have To Pay CPF On Allowances, But Not Reimbursements<\/strong><\/h3>\n\n\n\n
#2 Employees Have To Pay Taxes On Allowances, But Not Reimbursements<\/strong><\/h3>\n\n\n\n