Recovering Expenses
Migrant domestic worker employment agencies
Learn about the GST treatment of fees charged by migrant domestic worker (MDW) employment agencies and recovery of expenses by these agencies.
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Fees charged by migrant domestic worker employment agencies
A migrant domestic worker (MDW) employment agency provides services of sourcing and shortlisting workers, arranging interviews of workers with prospective employers, and facilitating the placement of workers for employment.
As an MDW employment agency, you may be engaged by the MDW seeking employment, the employer seeking to hire an MDW, or the overseas agency looking to place MDWs through you. MDW employment agencies may charge different fees to different parties for their services:
- Employers (agency fee)
- MDWs (service fee)
- Overseas agencies (commission fee)
Agency fee charged to employer
You may charge an agency fee to an employer who engages you to source and facilitate their hiring of an MDW. As your services are supplied to the employer in Singapore, the agency fee is subject to GST at the prevailing GST rate.
Service fee charged to MDW and commission fee earned from overseas agency
You may charge a service fee to the MDW for matching the MDW with a Singapore employer. This fee is commonly recovered as part of a placement fee1.
Alternatively, instead of charging a service fee to the MDW, you may earn a commission fee from the overseas agency that facilitated the placement of the MDW, for your matching services.
The GST treatment of these fees depends on whether the MDW is overseas or in Singapore when the matching services are performed.
| Scenario | Service fee charged to MDW | Commission fee received from overseas agency |
|---|---|---|
| MDW matched while in Singapore Examples include: · Transfer MDWs; and · MDWs matched under Ministry of Manpower's Advance Placement Scheme. | Standard-rate | Standard-rate Although the service is supplied to the overseas agency, the MDW is also regarded as a direct beneficiary of the matching services. Hence, the fee does not qualify for zero-rating since the MDW is in Singapore at the time the services are performed. |
| MDW matched while overseas An example would be a new MDW recruited from overseas. | Zero-rate under section 21(3)(j) of the GST Act as the services are supplied to the MDW and directly benefit the MDW who belongs overseas and is outside Singapore when the matching services are performed.2 | Zero-rate under section 21(3)(j) of the GST Act as the services are supplied to the overseas agency and directly benefit the overseas agency and the MDW, who belong overseas and are outside Singapore when the matching services are performed.2 |
1 Placement fee generally comprises the following components and is first paid by the employer on the MDW’s behalf, and subsequently recovered by the employer from the MDW through deductions from the MDW’s salary:
a. Service fee charged to the MDW for matching the MDW with a Singapore employer. GST treatment highlighted above.
b. Costs incurred by the MDW overseas (e.g. overseas training, advance loan) that are payable to the overseas agency that has facilitated the MDW’s placement. This is not subject to GST. See the section on Recovering disbursements below.
2You should maintain relevant documentation to support that the matching services were performed while the MDW was overseas, such as the In-Principle Approval (IPA) letter issued by the Ministry of Manpower showing the name of the Singapore employer.
Recovering expenses from customers
In addition to charging fees for matching services, MDW employment agencies may also recover expenses incurred on behalf of employers or MDWs. The GST treatment depends on whether the recovery is a reimbursement or disbursement.
Recovering reimbursements
In the course of providing your services, you may incur costs in your own capacity (i.e. as principal) and recover these costs from your customers. For GST purposes, the recovery of costs incurred by you as a principal is termed as reimbursement. You must charge GST if the recovery constitutes a standard-rated supply. You can claim input tax on the expenses subject to the conditions for input tax claims.
Examples include expenses billed to and incurred by you for local transportation to ferry the MDW to the employer’s premises and food and lodging provided to the MDW, which are recovered by you from the employer as part of your primary supply of facilitation services.
Recovering disbursements
Where you are merely making payment on behalf of another person who has incurred the costs, such cost recovery is termed as disbursement. You do not need to charge GST as the recovery of disbursements does not constitute a supply.
Examples of common disbursements include costs incurred by the MDW overseas (e.g. overseas training, advance loan) that are recovered from the MDW by the MDW employment agency on behalf of the overseas agency, recovery of MDW work permit application and renewal fees, and recovery of medical and accident insurance premiums for insurance coverage for the MDW. If you charge a mark-up or separate fee for your administrative service, this is a separate supply that is subject to GST.
For more information on the GST treatment for the recovery of expenses, please refer to Recovering Expenses and the e-Tax Guide "GST: Guide on Reimbursement and Disbursement of Expenses" (PDF, 585KB).
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