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Employee Benefits

Goods and services given free to employees as part of their overall remuneration package are known as fringe benefits. The GST treatment for fringe benefits is explained in the following paragraphs.

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Claiming Input Tax

You can claim the GST incurred on fringe benefits if the benefits are incurred for the purpose of your business. As all fringe benefits contain elements of personal consumption on which GST should be levied, fringe benefits are incurred for the purpose of your business only if they have a close nexus to your business activities.

In addition, the benefits must not be:

  1. A non-claimable item  listed under Regulations 26 and 27 of the GST (General) Regulations ; or
  1. Given only to the Sole Proprietor, Partners or Directors of the company. The GST incurred on such expenses is not claimable.
Example: Club Membership Subscription

If you paid club membership subscription fees for your staff as a fringe benefit, the input tax incurred for the subscription fees is not claimable as it is disallowed under Regulation 26.

Example: Motor Car for Employee

You bought a motor car for your employee to reward him for the high value of sales attained. The input tax incurred from the purchase of the motor car is not claimable as it is disallowed under Regulation 27.

 

If your company provides accommodation and other types of benefits to your employees who are affected by the COVID-19 pandemic, you may refer to the COVID-19 GST Guidance for more information.

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Accounting for Output Tax

You may be required to account for output tax on fringe benefits if you have claimed input tax on the acquisition of the fringe benefits.

Provision of free services to employees

The provision of free services is not subject to GST. For example, you need not account for output tax when you allow your employees to use the office telephone to make personal calls.

Business goods given free to employees  

You need to account for output tax on the goods given to your employees except when:

  1. It relates to food or beverage catered for employees;
  2. The cost of the gift is not more than $200 (amount exclusive of GST); or
  3. No credit for input tax has been allowed on the purchase or import of those gifts.
Example: Gifts Purchased from Non-GST Registered Suppliers

You purchased the gifts from a non-GST registered supplier. There is no need to account for output tax since no input tax was incurred.

Please note that when GST on goods has been suspended when you first purchase or import them (e.g. the goods were imported under the Major Exporter Scheme), the GST suspended is treated as input tax allowed to you.

 

Business goods for the temporary use of your employees

You need to account for output tax when you let your employees temporarily use your business goods for free except when:

  1. It relates to the provision of accommodation in a hotel, inn, boarding house or similar establishment;
  2. No credit for input tax has been allowed on the purchase or import of those goods;
  3. The use of your business assets by your employee has a close nexus to your business activities
Example: Business Goods Used by Employee

You purchased a motorcycle to be used for your company deliveries and claimed the input tax incurred on the purchase. Your employees are allowed to use the motorcycle for free on weekends to run their personal errands. You will need to account for output tax on the portion of personal use.

Please refer to the e-Tax Guide “GST: Fringe Benefits” (PDF, 485KB) for more information on:

• The indicators used to determine whether the fringe benefits provided have a close nexus to your business activities

• Common fringe benefits and IRAS' position on the GST treatment of these benefits.

• The GST position on business goods given free to or temporarily used for free by your employees.

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  • My company pays for the utilities incurred by our expatriate employee for his apartment. Can we claim the GST incurred as input tax? Do we need to account for any output tax?

     No, you cannot claim the GST incurred on the utilities paid for your employee as it is not incurred for the purpose of your business.

    Since the input tax claim is not allowed, you do not need to account for output tax on the utilities.

  • My company pays for the utilities incurred by our director for his private use. This fringe benefit is given solely to our director and not available to other employees. Can we claim the GST incurred as input tax? Do we need to account for any output tax?

     No, you cannot claim the GST incurred on the utilities paid for your directors as it is not incurred for the purpose of your business.

    Since the input tax claim is not allowed, you do not need to account for output tax on the utilities.

  • My staff uses his mobile phone for business purposes and the company reimburses him. Can the company claim the GST incurred if the subscription bill is in the name of the employee?

    Yes, the company can claim GST incurred for the portion of the expenses relating to business use if the company records the expense in its accounts and maintains evidence of the reimbursement.

  • If my company gives a $300 gift voucher to our employee, do we need to account for any output tax?

    No, you are not required to account for output tax on cash vouchers that are given away free.

  • Can input tax incurred on fringe benefits be claimed if a simplified tax invoice is issued by the supplier to my employee (instead of my company)?

    Yes, the company can claim the GST incurred if the expense is incurred for business purpose, the company records the expense in its accounts and maintains evidence that it has reimbursed the employee for the expense.