IRAS issued the second edition of e-Tax Guide on Fringe Benefits on 6 Jan 2017. The major amendments made by IRAS in this e-Tax Guide are summarized below:
- For GST purposes, if a GST-registered employer gives away business goods as gifts to his employees, he may need to account for GST output when he is allowed the input tax claim. Of course, the employer can choose not to claim any input tax credit for GST incurred on such goods (with cost more than $200) and thus he is not required to account for GST output tax. They would also not be required to do so if no GST was incurred on the purchase of such goods (e.g. they were purchased from a non-GST registered business).
- If a GST-registered employer lets his employees temporarily use his business goods for personal use (even if there is no consideration), he is deemed to make a supply of services to his employees and will be required to account for output tax if he has been allowed to claim input tax credit on such goods (this also applies to GST suspended on the supply or importation of such goods). Of course, if the employer chooses not to claim the input tax credit for the GST incurred on such goods, he need not account for GST output tax.
- Whether goods are provided to employees for business or personal use is determined by the Close Nexus Test. The Comptroller will consider that there is a close nexus between the provision of the fringe benefit and an employer’s business as long as any of the following indicators are met:
– Necessary for the proper operation of your business
– Directly maintains or increases the efficiency of business operations
– Primarily promotes staff interaction
– Encourages the upgrading of employee’s skills and knowledge relevant to your business
– Given in recognition of employee’s contributions towards the business
– Promotes corporate identity
4. Under the indicator “primarily promotes staff interaction”, the Comptroller has clarified that transport expenses incurred for corporate activities are considered as having a close nexus to an employer’s business activities as they primarily promote staff interaction (e.g. when an employer charters a bus for a team-bonding activity). Transport expenses incurred due to limited public transport available to employees also have a close nexus to an employer’s business activities. Gifts given during corporate events such as those given away to employees during dinner and dance, family day and company retreats are also considered as having a close nexus to business as they primarily promote staff interaction.
5. For the provision of mobile phones, if an employer has difficulties in determining the business and private portions of such expenses, he may claim input tax as follows:
- For full reimbursements, based on 4/7 of the GST incurred on the mobile phone expenses.
- For partial reimbursements, based on 7/107 of the amount reimbursed or 4/7 of the GST incurred on the mobile phone expenses, whichever is the lower.
6. GST incurred on goods and services is also not claimable where they are acquired are given only to specific persons (i.e. the fringe benefits are not given to other employees). The Comptroller will generally regard such fringe benefits as incurred for the personal consumption of the specific employee and hence, they will not satisfy the condition of “for the purpose of business”. Specific persons are:
(i) the sole-proprietor of a GST-registered sole-proprietorship;
(ii) the partners of a GST-registered partnership;
(iii) the directors of a GST-registered company; and
(iv) persons connected to the GST-registered sole proprietor, partnership or company, as the case may be.
However, the Comptroller recognises that some businesses only allow specific persons to attend courses. Hence, the Comptroller will allow the input tax incurred on such courses provided that the courses are relevant to the business. An example would be tax courses attended by the partners of a tax consultancy firm. For other fringe benefits, the input tax incurred is claimable only if similar fringe benefits are also provided to staff. For example, input tax incurred on refreshments at the board of directors’ meeting is claimable if refreshments are also provided at staff meetings.
7. As an administrative concession, the Comptroller will allow an employer to claim input tax incurred on temporary accommodation (e.g. hotel room, serviced apartment) provided to his foreign employees who relocate to or come to Singapore for business activities, such as meetings and projects. Generally, the provision of accommodation not exceeding a period of 30 days is regarded as “temporary accommodation”. If a foreign employee relocates to Singapore or comes to Singapore on short business trips with his or her family members, any costs incurred to house the family members, even on a temporary basis, are blocked as family benefits under regulation 26 of the GST (General) Regulations.
However, if the foreign employee is entitled under the company’s policy to a specific type of accommodation (e.g. a hotel suite) for his individual stay, input tax will be allowed in full even if the accommodation is used to house both the employee and his or her family members so long as no additional cost is incurred to accommodate the latter. For example, if costs are incurred to provide additional beds in the hotel suite for the family members, input tax on such additional costs will be disallowed.
8. The Comptroller has clarified that an employer is allowed to claim input tax incurred on gifts on the bereavement of the employee or the immediate family members of your employee. Immediate family members consist of the spouse, children, parents, and parents-in-law, grandparents, great-grandparents, and siblings.
9. For transport via taxi, the employer should only be claiming the GST on fees such as booking fees and administrative fees for credit card payments as taxi fares are unlikely to be subject to GST.
10. The fees incurred in the preparation of employee’s IR8A/IRA8S can be claimed as input tax credit as it is the employer’s responsibility and not a fringe benefit.
11. For credit card subscription (corporate card), input tax can be recovered on the portion of subscription fee for corporate purchases.
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