At a glance - Tax treatment of various payments
| Nature |
Taxable/ Not taxable |
| 1 |
Absentee payroll for attending training courses during or after office hours under Skills Redevelopment Programme (SRP) |
Payment from both SRP and employer are taxable
|
| 2 |
Conditional payments made in advance
Example: retention bonus/ gratuity |
Taxable
See information for cases where employee refunds the payment |
| 3 |
Inflation bonus (cash/ vouchers) |
Taxable |
| 4 |
Laundry allowance |
Taxable, unless it is made for washing special clothing, e.g. protective clothing |
| 5 |
Maternity Leave Benefit |
Taxable |
| 6 |
NSman pay
|
Taxable
When filling in the Form IR8A, exclude NSman pay made directly to an employee by MINDEF, Singapore Civil Defence or Singapore Police Force as they will send the information to IRAS.
|
| 7 |
Skills Development Levy (SDL) |
Not taxable
More information on SDL can be found in CPFB website |
Refund of conditional payments made in advance
What are conditional payments made in advance?
Some employers make payment to employees even though the employees are not yet entitled to it at the date of payment. These employers are paying the employees in advance. The employee is required to refund the payment if he subsequently did not fulfill the conditions attached to the payment.
Payments with conditions attached and are commonly made in advance include:
i) Retention bonus/ gratuity
The intention of this payment is to induce an employee to stay on with the company for a specific period or up to a certain date. An employee is entitled to the payment only after he has fulfilled the conditions. Some employers pay part of or the full bonus/ gratuity earlier so as to make the scheme more attractive to employees.
ii) Bonuses with conditions of stay
While the non-contractual bonus is paid based on the performance of the employee or company, some employers attach conditions like the employee served “x” months from the date of payment, or the person remains an employee on a certain date.
Generally when an employer pays the conditional payment in advance, the payment is considered to be income of the employee based on date of payment.
Tax treatment when there is a refund of the conditional payment made earlier
The following paragraphs do not apply in the case where an employee is paying liquidated damages.
Generally a payment consists of three components: the cash component, employer’s contribution to CPF (if any) and employee’s contribution to CPF (if any).
In the event where the employee refunds the cash received earlier to the employer and the employer is able to obtain a refund on the CPF contributions made, the payment would not considered to be income of the employee.
If the employee refunds only the cash component and not the CPF contributions, the CPF contribution becomes an excess contribution. The excess employer’s contribution to CPF is taxable. The excess employee’s contribution to CPF should not be granted CPF relief.
Action required by employer
| Scenario |
Action required by employer |
| 1 |
Advanced payment and refund happen in the same year. Employer obtains refund from employee and CPF contributions from CPFB. |
1. Prepare Form IR8A as if there is no payment made in advance.
|
| 2a) |
Advanced payment and refund happen in the same year. Employer obtains refund from employee but is not able to/ does not obtain a refund on the CPF contributions from CPFB. The employee may or may not refund the employer’s contribution to employer. |
1. Prepare Form IR8A to include the conditional payment made in advance, but exclude details of the refund.
2. Provide details of the refund using the excel template below. (Explanatory notes and examples are provided under the “Notes” worksheet in the file)
Refund of advanced payment template (28KB)
3. Forward the template to IRAS by email or fax when you issue the Form IR8A or transmit employment income electronically to IRAS.
Email: taxqueries@iras.gov.sg
Fax: 6351 3636
|
| 2b) |
Advanced payment and refund happen in different years. |