Tag Archives: Fringe Benefits

Singapore GST – New Administrative Concession for the Singapore GST Treatment on Certain Fringe Benefits


In the IRAS’ e-Tax Guide on GST: Fringe Benefits (4th Editions) published on 29 Jan 2020, the IRAS announced the amendment to the Singapore GST treatment on certain fringe benefits.

1. With effect from 1 Feb 2020, a GST-registered person is allowed to claim input tax incurred on temporary accommodation (e.g. hotel room, serviced apartment) provided to its foreign employees on the first 31 days, if the provision of such accommodation exceeds 341 days per occasion.

2. The Comptroller will allow the input tax claim incurred on ALL transport expenses except for the following:

  • Transport expenses such as the hiring of taxis to transport employees from their homes to work and vice versa during ordinary work hours. Employees have a personal responsibility to ensure that they arrive at work on time and can choose the most suitable mode of transport to and from their workplace and home; and
  •  Motor car expenses that are blocked under regulation 27. For example

3. The Comptroller will allow the input tax claimed on the following:

  •  F&B provided in any staff cafeteria/canteen or at the employer’s premises (e.g. company’s pantry and food catered in for employees);
  •  F&B provided to employees when they work beyond the
    official working hours (“overtime meals”), including meals taken
    outside the employer’s premises; and
  • F&B expenses incurred by employees at the airport when they leave Singapore for business trips and upon their return.

Please click here to access to the above e-Tax Guide published by IRAS on 29 Jan 2020:

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Singapore GST – Input Tax Claim on Fringe Benefits Explained


GENERAL RULE

A GST-registered business can claim input tax on fringe benefits provided to its employees only if they are supplied to the business and incurred for business purposes.

MEANING OF “SUPPLIED TO THE BUSINESS”

  • The goods/ services must be contractually supplied to the GST-registered business.
  • If they are contracted supplied in the employee’s names (e.g. mobile phone plans), as an administrative concession, the GST-registered business can claim the input tax if the employee is reimbursed and they are recognized as a business expense in the employer’s account.

MEANING OF “BUSINESS PURPOSE”

In the e-Tax Guide issued on 6 Jan 2017, IRAS  introduced in paragraph 7 a “close nexus test” comprising six indicators to help businesses determine if a fringe benefit is given for the purpose of business.

Accommodation and related household expenses

  • IRAS generally does not regard them as having a close nexus to business operations.  Some exceptions are where they are necessary to ensure minimal disruptions to business operations (for example the provision of accommodation for an airline’s flight crew layovers) or are required for corporate activities (such as hotel accommodation during a company retreat).

Transportation and related expenses

  • IRAS generally does not not regard them as having a close nexus to business operations unless under the following circumstances:
    • Transportation for corporate activities
    • Transport of employees where limited public transport is available
    • Transport expenses incurred when employees work beyond their official working hours
    • Travel between home and airport for overseas business trip
    • Travel between home and external venues for work-related purposes (for example, client’s office)

Provision of Meals to Employees

  • IRAS generally does not consider expenses incurred for an employee’s meals to have a close nexus to business operations, unless the food and beverages were provided during business meetings, at the staff canteen at company functions and events or when employees work beyond their official working hours.

Clothing, accessories and personal grooming expenses 

  • Clothing, accessories and personal grooming expenses are typically considered incurred for an employee’s personal consumption, except for uniforms, protective clothing, and products sold by the business and worn by employees at work or work-related events to promote the corporate identity.

Medical expenses, health and wellness programs

  • These programs are generally deemed to be primarily incurred for the employee’s personal benefit unless they are necessary under regulatory requirements. Exceptions to the rule may include health and wellness programs organized as part of the corporate activities.

Professional membership fees, education and training expenses

  • They are typically considered having a close nexus to business operations as long as they are relevant to the employee’s job or career progression in the business.

WHEN DOES AN EMPLOYER NEED TO ACCOUNT FOR OUTPUT TAX?

A person is required to account for output tax on goods if such goods are given free to employees. The exceptions are free food and accommodation, gifts that cost less than or equal to $200 and gifts that cost more than $200 but for which no input tax was claimed previously.

Accounting for output tax is also required on deemed supply of services, where he allows his business goods to be used temporarily for free by his employees, except where no input tax has been allowed on the purchase of the goods or when there is a close nexus to his business activities.

If the person provides free services to his employees, he will not be required to account for output tax.

If you have any questions regarding the above, please contact support@whm-consulting.com.

Income Tax & GST – Chinese New Year Gifts to Employees


First of all, we wish all our readers a happy and prosperous Year of Rooster.

During this festive season, some employers have the practice of gifting red packets to their employees.  It is important for them to be aware of the related Singapore income tax and GST rules:

  • For Singapore income tax purposes, any gifts not exceeding $200 is considered not substantial in value and thus, the gifts to the employees do not constitute a taxable benefit.  However, if the gift exceeds this exemption threshold, the full value of the gifts is a taxable benefit to the employee.
  • For Singapore GST purposes, the Comptroller allows the employers to claim input tax incurred on the gifts for Chinese New Year to their employees (not to the employees’ family members).   On the other hand, the the cost of each gift exceeds $200, the employers will also be required to account for output tax.  Of course, the employers need not account for any output tax if they do not make any input tax claims.

 

 

If you have any questions regarding the above, contact us at support@whm-consulting.com.

Singapore GST – Revised e-Tax Guide on Fringe Benefits


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:

  1.  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).
  2.  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.
  3.  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.

If you have any questions regarding the above, please contact support@whm-consulting.com.