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Responsibilities as an employer

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

 

Amount of OW and AW that are subject to CPF contributions:

Period 

OW ceiling  

AW ceiling

1 Jan 2013 to 31 Dec 2013

$5,000 per month

$85,000 less  Total OW subject to CPF 

($85,000 = 17 months x $5,000)

1 Jan 2012 to 31 Dec 2012

$5,000 per month

$85,000 less  Total OW subject to CPF 

($85,000 = 17 months x $5,000)

1 Jan 2011 to 31 Dec 2011

$4,500 (1 Jan 2011 to 31 Aug 2011) per month

$5,000 ( Sep 2011 to 31 Dec 2011) per month

$79,333 less  Total OW subject to CPF 

($79,333 = 4/12 x 17 months x $5,000 + 8/12 x 17 months x $4,500)

1 Jan 2008 to 31 Dec 2010

$4,500 per month

$76,500 less  Total OW subject to CPF for each year 

 ($76,500 = 17 months x $4,500)

 

Examples on how to determine the taxable amount of the excess employer's CPF contributions on OW and AW:

 

 Actual OW and AW  

Wages subject to CPF contributions 

Taxable amount of excess employer's CPF contributions on OW & AW (assuming employer contributed CPF based on the actual OW & AW at the rate of 16%,)

1

OW = $4,500 per month from Jan to Dec 2013

AW = $40,000

Total OW subject to CPF contributions
= $4,500 x 12
= $54,000

Total AW subject to CPF contributions
= $85,000 - $54,000
= $31,000

Taxable excess contributions on OW = Nil


Taxable excess contributions on AW = ($40,000 - $31,000) x 16% = $1,440

 

2

OW = $5,500 per month from Jan to Dec 2013

AW = $10,000

Total OW subject to CPF contributions
= $5,000 x 12
= $60,000

Total AW subject to CPF contributions
= $85,000 - $60,000
= $25,000 or $10,000 (actual AW)
= $10,000

Taxable excess contributions on OW =
[($5,500 x 12) - ($5,000 x 12)] x 16% = $960

Taxable excess contributions on AW = Nil

 

 

3

OW = $3,500 per month from Feb to Dec 2013

AW = $50,000

Total OW subject to CPF contributions
= $3,500 x 11
= $38,500

Total AW subject to CPF contributions
= $85,000 - $38,500
= $46,500

Taxable excess contributions on OW = Nil

Taxable excess contributions on AW =
($50,000 - $46,500) x 16% = $560

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.

 

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Last Updated on 20 January 2014


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