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At a glance - Tax treatment of payment made for expenses incurred overseas and other related expenses

 

Nature

Taxable/ Not taxable

1 Per diem allowance

Amount in excess of IRAS acceptable rates are taxable.

More information available

2 Per diem reimbursement for business expenses incurred

Not taxable

E.g. reimbursements for actual amount incurred on meals, laundry, telephone calls, overseas accommodation, overseas airport transfer, entertainment expenses for business purpose

3 Combination of per diem allowance and reimbursement

The reimbursement portion is not taxable.

As for the per diem allowance, the amount in excess of IRAS acceptable rates are taxable.

4 Parking fees at the airport when employee drives to the airport Taxable
5

Travel insurance premium

Not taxable if it is for the period which an employee is overseas for business

6 Travel between home and airport due to overseas business trips

Reimbursements made in 2005 and subsequent years are not taxable.

Per-trip allowance for an actual trip made is not taxable from 2007 onwards.

7 Payment to buy warm clothing for business trips

Allowance is taxable. This allowance does not form part of the per diem allowance.

Reimbursement based on actual expenses incurred is not taxable.

8 Payment to buy luggage for business trips

Allowance is taxable. This allowance does not form part of the per diem allowance.

Reimbursement based on actual expenses incurred is not taxable.

Per diem allowance paid

Q1 What is per diem allowance?

Per diem allowance refers to the daily allowance given to employees on overseas trips (i.e. out of Singapore) for business purposes. This payment is usually made when employees travel overseas to meet clients, or to attend training and conferences. The allowance is meant to cover certain living expenses incurred overseas such as the cost of meals, transport and other incidental items like laundry.

The following payments do not fall under per diem allowance and are not taxable:

  • Overseas accommodation
  • Overseas airport transfer
  • Travelling expenses between cities for business purpose
  • Entertainment expenses for business purpose

Q2 What is the tax treatment for per diem allowance?

Per diem allowance is taxable unless it can be proved that it is subsistence in nature. As the standard of living differs across countries, the subsistence level varies from country to country.

In the past, companies had to submit the rates for IRAS’ approval. IRAS has however taken into account the feedback from employers. IRAS has decided to publish the acceptable rates by countries.

The tax treatment for per diem allowance paid in 2005 and subsequent years is as follows: 

   Allowance not exceeding acceptable rate  Allowance more than acceptable rate
Report in Form IR8A? No Yes. Report the amount in excess of acceptable rate. 
Tax impact on employee Not taxable The amount in excess of acceptable rate is taxable.

 

Where the per diem allowance is less than the acceptable rate paid for a trip, it cannot be used to offset against the taxable amount arising from other trips.

Example

The acceptable rate for Germany is $120 per day for 2013.

a) Kaisha Ltd paid Mr C $110 per day when he went to Germany for business meetings. Since the per diem allowance of $110 is less than the acceptable rate of $120, there is no taxable benefit. Kaisha Ltd does not have to declare the allowance in the Form IR8A.

b) Taka Ltd paid Mr D per diem allowance of $150 per day when he went to Germany to meet clients. Mr D received $900 for the six days that he was in Germany.
Amount in excess of acceptable rate per day = $150 - $120 = $30
Taxable amount and to be reported in Form IR8A = $30 x 6 = $180

Q3 How are the acceptable rates determined?

IRAS reviews the rates yearly based on information from employers and other relevant information. The rates for the following year are published in December every year.

The acceptable rates determined by IRAS are strictly for Income Tax purpose. The rates do not determine the amount of per diem allowance that an employer wishes to pay its employees.

Q4 My company pays a higher per diem allowance than the acceptable rates set by IRAS. Can I appeal to IRAS to waive the need to tax the excess amount?

The acceptable rates for the following year are published in December so that employers can work out the taxable amount. The rates are applicable for January to December in the following year. Once the rates are published, no changes will be made so that the same rates apply to all employees.

If you think that the higher allowance paid to your employees is justifiable, you can inform  IRAS of these rates so that IRAS can consider them when reviewing the acceptable rates for the following year.

What to do:

  1. Email your rates to “taxqueries@iras.gov.sg”.
  2. Attach the report conducted by a consulting firm on the cost of living or other relevant information to support your basis. Proposed rates based on the employee’s own experience in the country will not be accepted by IRAS.
  3. Declare the amount that is in excess of IRAS acceptable rate in the Form IR8A for the current year.

Q5 Can an employee claim expenses against the excess portion that will be taxed?

No. The acceptable rates would have covered expenses which are subsistence in nature.

Q6 If an employee travels across countries within the same day, what is the rate that should be used to compare against the per diem allowance given?

Per diem allowance should be a proxy for the actual amount of living expenses that the employee incurs or is likely to incur in the day. The comparison should be reasonable and reflect the consumption pattern of that day.

Q7 If an employee departs Singapore on 1 Nov and returns on 5 Nov in the same year, what is the number of days that is considered to be "outside of Singapore" for the purpose of computing per diem allowance?

IRAS will accept the number of days determined by the employer according to its HR policy which is to be applied for all employees concerned, so long as the number of days does not exceed the total length of trip. In this case, we would accept the overseas trip as 5 days if this is so determined by the employer.

Q8 What if a lump sum allowance is paid to cover accommodation, meal, transport expenses and other incidental expenses such as laundry?

The taxable amount is the lump sum payment less the acceptable rate and non-taxable items mentioned in answer of Question 1.

Q9 If the per diem allowance is paid in foreign currency, which exchange rate should be used to convert it to Singapore dollars?

You can use your in-house exchange rate. If you do not have one, you can use exchange rates published by local banks, locally circulated newspapers and reputable news agencies. However the same source must be consistently used.

Q10 What is the acceptable per diem rate for a foreign employee seconded to Singapore?

The per diem allowance mentioned in this page refers to the daily allowance given to employees on overseas trips (i.e. out of Singapore) for business purposes. 

If the employee is a foreigner seconded to Singapore, see information on relocation allowance and reimbursement.

Last Updated on 22 December 2014


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