At a glance - Tax treatment of contributions to CPF
Nature
|
Taxable/ Not taxable
|
| 1 |
Employer's portion relating to employment in Singapore |
|
a) Compulsory payments under the CPF Act |
Not taxable
Information on amount of compulsory contributions available
|
b) Voluntary payments, i.e. amount in excess of compulsory contributions to be made by employer |
Taxable
Information on refunds claimed available
|
| 2 |
Contributions made from 1 Jan 2004 relating to employment outside Singapore |
Not taxable since the contribution is a foreign-sourced income |
| 3 |
Contributions relating to director's fees |
Taxable as these are voluntary contributions |
Compulsory payments under the CPF Act
Q What is the amount of compulsory CPF contributions?
The CPF Act determines the amount of compulsory CPF contributions on Ordinary and Additional Wages. The information is available on Central Provident Fund Board's website .
Definition of Ordinary and Additional wage
| Ordinary wage (OW) |
Wages due or granted wholly and exclusively in respect of an employee’s employment in that month and payable before the due date for payment of CPF contributions for that month.
E.g. food allowance and overtime payment |
| Additional wage (AW) |
Wages which are not granted wholly and exclusively for the month.
E.g. annual bonus, leave pay and incentive payments
|
Limit on the amount of CPF contributions made in respect of OW and AW from 1 Jan 2006:
| OW ceiling |
Maximum amount of CPF payable is based on a monthly salary ceiling of $4,500 for OW |
| AW ceiling |
Maximum amount of AW on which CPF is payable
= $76,500 – total OW subject to CPF contributions in the year, or the actual AW, whichever is lower
|
Limit on the amount of CPF contributions made in respect of OW and AW from 1 Sep 2011:
| OW ceiling |
Maximum amount of CPF payable is based on a monthly salary ceiling of $5,000 for OW |
| AW ceiling for 2011 |
Maximum amount of AW on which CPF is payable
= $79,333* – total OW subject to CPF contributions in the year, or the actual AW, whichever is lower
*[(8/12 x 17 months x $4,500) + (4/12 x 17 months x $5,000)]
|
| AW ceiling for 2012 and subsequent years |
Maximum amount of AW on which CPF is payable
= $85,000* – total OW subject to CPF contributions in the year, or the actual AW, whichever is lower
*17 months x $5,000
|
Examples on how to apply the OW and AW limit
| |
OW and AW |
Wages subject to CPF contributions |
| 1 |
OW = $4,500 per month for January to December
AW = $40,000
|
Total OW subject to CPF contributions
= $4,500 x 12
= $54,000
Total AW subject to CPF contributions
= $76,500 - $54,000
= $22,500
|
| 2 |
OW = $5,500 per month for January to December
AW = $10,000
|
Total OW subject to CPF contributions
= $4,500 x 12
= $54,000
Total AW subject to CPF contributions
= $76,500 - $54,000
= $22,500 or $10,000 (actual AW)
= $10,000
|
| 3 |
OW = $3,500 per month for February to December
AW = $50,000
|
Total OW subject to CPF contributions
= $3,500 x 11
= $38,500
Total AW subject to CPF contributions
= $76,500 - $38,500
= $38,000
|
Voluntary payments
Q If excess CPF contributions are made by the employer and the employer has claimed or is claiming the refund in the year, what should the employer do?
Since excess contributions are made, the employer has to complete the Form IR8S.
If the excess employer’s contributions have been brought to tax and the employer has claimed/ is claiming a refund, the employee should forward the completed Form IR8S to IRAS. IRAS will then review the employee’s assessment accordingly.
CPF contributions made by Singapore Permanent Residents (SPRs) and their employers
Q What is the tax treatment of CPF contributions by SPRs and their employers?
The tax treatment is the same for SPRs and Singapore Citizens. However, under the CPF Act, an SPR employee is required to make CPF contributions at a lower rate in the first 2 years after attaining PR status. After which, the full rates would come into effect.
Q What is the tax treatment if SPR contributes full rates in the first two years after attaining PR status?
If CPF Board approves the application to pay full rates, then the full-rate contributions made by the SPR and his employer would be treated as mandatory CPF contributions.
Related employers
Q How do you define "related employers"?
One employer is considered to be related to another where:
- one of them can control the other, or
- both of them are under the control of a common person
An example of related employers is where the companies are branches or subsidiaries of a parent company.