Tax treatment of Payment Made for Expenses Incurred Overseas and Other Related Expenses (Summary Table)
| Nature | Taxable/ Not taxable | |
|---|---|---|
1 | Per diem allowance | Amount in excess of IRAS acceptable rates are taxable. See Per Diem Allowance (below). |
2 | Per diem reimbursement for business expenses incurred | Not taxable E.g. reimbursements for actual amount incurred on meals, laundry, telephone calls, overseas accommodation, overseas airport transfer and entertainment expenses for business purpose. |
3 | Combination of per diem allowance and reimbursement | The reimbursement portion is not taxable. |
4 | Parking fees at the airport when employee drives to the airport | Taxable |
5 | Travel insurance premium | Not taxable if it is for the period which an employee is overseas for business. |
6 | Travel between home and airport due to overseas business trips | Reimbursements made in 2005 and subsequent years are not taxable. |
7 | Payment to buy warm clothing for business trips | Allowance is taxable. This allowance does not form part of the per diem allowance. Reimbursement based on actual expenses incurred is not taxable. |
8 | Payment to buy luggage for business trips | Allowance is taxable. This allowance does not form part of the per diem allowance. Reimbursement based on actual expenses incurred is not taxable. |
Per Diem Allowance
Per diem allowance refers to the daily allowance given to employees on overseas trips (i.e. either out of Singapore or into Singapore) for business purposes.
This payment is usually made when employees travel overseas to meet clients, or to attend training and conferences. The allowance is meant to cover certain living expenses incurred overseas such as the cost of meals, transport and other incidental items like laundry.
The following payments do not fall under per diem allowance and are not taxable :
- Overseas accommodation
- Overseas airport transfer
- Travelling expenses between cities for business purpose
- Entertainment expenses for business purpose
Tax Treatment for Per Diem Allowance
Per diem allowance is taxable unless it can be proved that it is subsistence in nature. As the standard of living differs across countries/regions, the subsistence level varies from country/region to country/region.
Acceptable Rates for Travelling Out of Singapore for Business Purpose
In the past, companies had to submit the rates for IRAS' approval. Taking into account the feedback from employers. IRAS has decided to publish the acceptable rates by countries/regions.
The tax treatment for per diem allowance paid in 2005 and subsequent years is as follows:
| Allowance not exceeding acceptable rate | Allowance more than acceptable rate | |
|---|---|---|
Report in Form IR8A? | No | Yes. Report the amount in excess of acceptable rate. |
Tax impact on employee | Not taxable | The amount in excess of acceptable rate is taxable. |
Where the per diem allowance is less than the acceptable rate paid for a trip, it cannot be used to offset against the taxable amount arising from other trips.
Example 1: Allowance Below Acceptable Rate
The acceptable rate for Germany is $125 per day for 2024.
Kaisha Ltd paid Mr C $100 per day when he went to Germany for business meetings. Since the per diem allowance of $100 is less than the acceptable rate of $125, there is no taxable benefit. Kaisha Ltd does not have to declare the allowance in the Form IR8A.
Example 2: Allowance Above Acceptable Rate
The acceptable rate for Germany is $125 per day for 2024.
Taka Ltd paid Mr D per diem allowance of $150 per day when he went to Germany to meet clients. Mr D received $900 for the six days that he was in Germany.
Amount in excess of acceptable rate per day = $150 - $125 = $25
Taxable amount and to be reported in Form IR8A = $25 x 6 = $150
Acceptable Rates for Travelling Into Singapore for Business Purpose (Effective YA 2017)
To rationalise the tax treatment of receipts for business trips received by employees travelling into Singapore, IRAS will publish the acceptable rate for per diem allowance for employees travelling into Singapore on or after 1 January 2016 for business purpose.
The tax treatment of per diem allowance paid for business trips into Singapore on or after 1 January 2016 is as follows:
| Allowance not exceeding acceptable rate | Allowance more than acceptable rate | |
|---|---|---|
| Report in Form IR8A? | No | Yes. Report the amount in excess of acceptable rate. |
| Tax impact on employee | Not taxable | The amount in excess of acceptable rate is taxable. |
However, if you travel into Singapore for business purpose for 60 days or less in a year, you will be exempted from tax on your earnings here. For more information, please refer to Working for Foreign Employers.
Application for Waiver / Review of Acceptable Rates
The acceptable rates determined by IRAS are strictly for Income Tax purpose and they do not determine the amount of per diem allowance that an employer wishes to pay its employees.
The acceptable rates for the following year are published in December so that employers can work out the taxable amount. The rates are applicable for January to December in the following year. Once the rates are published, no changes will be made so that the same rates apply to all employees.
If your company pays a higher per diem allowance than the acceptable rates set by IRAS and you think the higher allowance paid to your employees is justifiable, you can inform IRAS of these rates so that IRAS can consider them when reviewing the acceptable rates for the following year.
How to submit your proposed rates to IRAS:
- Email us your rates.
- Attach the report conducted by a consulting firm on the cost of living or other relevant information to support your basis. Proposed rates based on the employee's own experience in the country/region will not be accepted by IRAS.
- Declare the amount that is in excess of IRAS acceptable rate in the Form IR8A for the current year.
FAQs
Can an employee claim expenses against the excess portion that will be taxed?
If an employee travels across countries/regions within the same day, what is the rate that should be used to compare against the per diem allowance given?
Per diem allowance should be a proxy for the actual amount of living expenses that the employee incurs or is likely to incur in the day. The comparison should be reasonable and reflect the consumption pattern of that day.
If an employee departs Singapore on 1 Nov and returns on 5 Nov in the same year, what is the number of days that is considered to be "outside of Singapore" for the purpose of computing per diem allowance?
IRAS will accept the number of days determined by the employer according to its HR policy which is to be applied for all employees concerned, so long as the number of days does not exceed the total length of trip.
In this case, we would accept the overseas trip as 5 days if this is so determined by the employer.
What if a lump sum allowance is paid to cover accommodation, meal, transport expenses and other incidental expenses such as laundry?
The taxable amount is the lump sum payment less the acceptable rate and non-taxable items. The non-taxable items are:
- Overseas accommodation
- Overseas airport transfer
- Travelling expenses between cities for business purpose
- Entertainment expenses for business purpose
If the per diem allowance is paid in foreign currency, which exchange rate should be used to convert it to Singapore dollars?
You can use your in-house exchange rate. If you do not have one, you can use exchange rates published by local banks, locally circulated newspapers and reputable news agencies. However the same source must be consistently used.