As an employee, you may receive

• Retrenchment benefits when your employer no longer needs your services; or
• Retirement benefits when you reached your retirement age.

Retrenchment benefits

Retrenchment benefits are payments given by employers to compensate for the loss of employment. Payments to compensate employees for the loss of employment and payments for restrictive covenants are not taxable as they are capital in nature.

When is it taxable

Some employers may pay their employees lump sum payments that consist of payment for loss of employment and other payments that are taxable.

If you received any payments (such as salary in-lieu of notice, gratuity, ex-gratia and etc.) apart from the payment for loss of employment, they will be subjected to tax.

Find out more about retrenchment pay that constitutes payment for loss of employment (80KB).

How to report

You need to declare the full amount of retrenchment benefits under "employment - others" in your tax form.

If your employer is one of the participants of the auto-inclusion scheme, your employer will let us know the amount of your retrenchment benefits. You do not need to report the retrenchment benefits in your tax form.

Please send us

• Amount and breakdown of retrenchment benefits
• A copy of documents related to this lump sum payment
• A copy of your contract of employment

You may send us the details by email, fax or post.

Retirement benefits

All retirement benefits including gratuities and pensions are taxable unless they are specifically exempted under the Income Tax Act.

Retirement benefits are not taxable if they are received from the following tax exempt pension schemes/funds:

• Government pension schemes under any written law relating to pensions in Singapore (including the Pensions Act, Singapore Armed Forces Act and Parliamentary Pensions Act).

• CPF/designated funds.

If you participate in existing approved pension and provident funds, the retirement benefits accrued from such funds up to 31 Dec 1992 will remain tax-exempt. The tax-exemption will apply when they are paid out on the date of retirement based on the statutory retirement age.

When is it taxable

If you receive the retirement benefits from existing approved pension and provident funds

• Before retirement
  You are taxable on the total amount of retirement benefits received. You are not eligible for tax exemption.
  

• After retirement
  You are taxable only on funds accrued from 1 Jan 1993 to date of retirement. The funds will be taxed at the time the benefits are received.

How to report

You need to declare the taxable retirement benefits under ‘employment - others’ in your tax form.