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
Per diem allowance is taxable unless it can be proved that it is subsistence in nature. As the standard of living differs across countries, the subsistence level varies from country to country.
Acceptable Rates for Travelling Out of Singapore for Business Purpose
In the past, companies had to submit the rates for IRAS' approval. IRAS has however taken into account the feedback from employers. IRAS has decided to publish the acceptable rates by countries.
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.
The acceptable rate for Germany is $120 per day for 2013.
Kaisha Ltd paid Mr C $110 per day when he went to Germany for business meetings. Since the per diem allowance of $110 is less than the acceptable rate of $120, there is no taxable benefit. Kaisha Ltd does not have to declare the allowance in the Form IR8A.
The acceptable rate for Germany is $120 per day for 2013.
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 - $120 = $30
Taxable amount and to be reported in Form IR8A = $30 x 6 = $180
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.
Annual Review of Acceptable Rates
IRAS reviews the rates yearly based on information from employers and other relevant information. The rates for the following year are published in December every year.
The acceptable rates determined by IRAS are strictly for Income Tax purpose. The rates do not determine the amount of per diem allowance that an employer wishes to pay its employees.
Application for Waiver / Review of Acceptable Rates
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 your rates to " taxqueries@iras.gov.sg ".
- 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 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.