Find out more on:
• Bonus (contractual, non-contractual)
• Director’s fee
• Other employment income (allowances, benefit-in-kind, salary in lieu of notice...)
Salary is the payment (in money or other form) received or granted for the services you provided to your employer.
You may receive bonus (contractual and/or non-contractual) from your employment.
Type of bonus
What are they
When is the bonus taxable
Taxable in the year that the employee becomes entitled to the bonuses, as specified by the contract or bonus plan.
This is usually the year in which the employee renders his services in earning the bonuses.
See: Example 1
If the employer’s liability to pay the bonus is contingent upon conditions to be met in the future, an employee becomes entitled to such bonuses when the conditions are met.
These bonuses are taxable at the time the conditions are met. See: Example 2
However, if such bonuses are paid in advance before the conditions are met, the bonuses are taxable at the time of payment. Subsequently, if the conditions are not met and the employee returns the bonus in full or in part, the amount returned is considered as an adjustment of income in the year the amount is returned. See: Example 3
For discretionary bonuses that subsequently become legally binding, such bonuses are taxable at the time when the employer contractually binds himself to pay the bonuses and the employees become entitled to the bonuses.
See: Example 4
- Bonuses which can be rescinded by the employer at any time prior to the actual payment of the bonuses without legal consequences.
These bonuses are taxable based on the date on which the bonuses are paid.
See: Example 5
For more information on the tax treatment of bonuses from employment, please refer to the e-Tax Guide Tax Treatment of Director’s Fees and Bonuses from Employment.
Contractual bonus (e.g. 13th month bonus) is payable for services you provided in the year ended 31 Dec 2012 as stated in your employment contract. You received the bonus in Feb 2013.
This contractual bonus will be taxable in the Year of Assessment (YA) 2013 because the bonus was paid for your services in 2012.
It is specified under a bonus plan that contractual bonuses declared for the year ended 31 Dec 2011 will be paid on 31 Mar 2012. It is also specified that the bonuses will not be paid to an employee if he tenders his resignation before that date of payment.
An employee, Mr Tan, gave notice of his resignation on 15 Jan 2012. Hence, he is not entitled to the bonus.
The other employees, who are entitled to the bonuses when the conditions are met on 31 Mar 2012, will be taxed on their bonuses in the Year of Assessment 2013.
An employer contractually binds himself to pay an employee an inducement bonus on 1 Jan 2011, with the condition that the employee returns the sum to the employer on a pro-rata basis if he leaves employment before 31 Dec 2013.
In this example, the bonus is considered to be the employee’s income for 2011 and is taxed in the Year of Assessment 2012.
If the employee left the company in 2012 and returns 50% of the inducement bonus in that year, the amount that he returns will be deducted against his employment income earned in 2012 (i.e. Year of Assessment 2013).
An employer has no legal obligation to pay any bonuses for the year 2012. On 31 Jan 2013, he legally binds himself to pay a bonus for 2012 to his employees within 60 days from 31 Dec 2012. This bonus is not subject to conditions and cannot be rescinded without legal consequences.
In this example, the bonus is considered to be the employees’ income for 2013 because the employer’s liability to pay the bonus arises in 2013 and employees become entitled to it in 2013. Therefore, the bonus will be taxed in the Year of Assessment (YA) 2014.
If due to cash flow problems, the bonus is not paid until 2 Jan 2014, the bonus will still be taxed in YA 2014 as the employees’ become entitled to the bonus on 31 Jan 2013.
An employer informs his employees on 1 Dec 2011 of his decision to pay non-contractual bonuses (for the year ending 31 Dec 2011) on 1 Feb 2012.
The employees become entitled to such non-contractual bonuses on 1 Feb 2012 when the bonuses are paid. These employees will be taxed on these bonuses in the Year of Assessment 2013.
Your director's fees will be treated as income of the year in which you become entitled to the fees.
Generally, you are entitled to director's fees on the date they are voted and approved at the company's annual general meeting.
For example, the company voted and approved director’s fees of $20,000 on 30 Jun 2013 to be paid to you for your services rendered for the accounting year ended 31 Dec 2012. You will be taxed on the fees in the Year of Assessment 2014.
For more information on the tax treatment of director’s fees, please refer to the e-Tax Guide Tax Treatment of Director’s Fees and Bonuses from Employment.
Commission refers to payment you receive for services provided. It is taxable and must be reported in your tax form.
If you receive commission from your employer, please report the commission under 'Employment Income' in your tax form.
If you are self-employed, report your commission under 'trade Income' in your tax form.
Other employment income
Other employment income may include allowances and benefits-in-kind given by your employer. For more information, refer to the FAQ on tax treatment of employee remuneration.
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You may receive transport allowance, meal allowance and etc. from your employer. They are taxable.
Generally, it refers to benefits such as club memberships provided by your employer in place of cash. They are taxable.
- Payments for restrictive covenants
It refers to payments received from your employer for entering into a covenant that restricts your rights. Generally payments for restrictive covenants are not taxable as they are capital receipts.
- Salary in-lieu of notice/notice pay
Payment in lieu of notice to compensate you for early resignation or early termination of contract is taxable.
- Tax paid by employer
When your tax is paid fully or partially by your employer, such a benefit is taxable. A tax-on-tax will be computed. Examples on how to compute tax-on-tax (313KB)
How to report
You have to declare your employment income including allowances, benefits-in-kind and all other gains or profits from employment (before deduction of CPF contribution) under 'employment income' in your tax form.
If your employer participates in the auto-inclusion scheme
You do not have to declare your employment income. Your employer will send us your income details. Find out if your employer is a participant of the auto-inclusion scheme.If you have more than 1 employment
You only have to declare your employment income from the employer who does NOT participate in the auto-inclusion scheme.
Your employer who participates in the auto-inclusion scheme will send us your employment income details electronically. We will automatically include the income details in your assessment.
Q1. I had breached my employment contract and was ordered to pay back the company the income that I earned. Why am I still taxable on the income that I paid back to the company?
Employment income and payback to company for breach of employment contract are two separate types of payment. The employment income that you received was for past services rendered by you and is taxable.
The payback to your company is what you compensate it for breaching your employment contract. This is considered as liquidated damages. Liquidated damages are not tax deductible as an expense and it cannot be set-off against your employment income.
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