Car and car-related benefits given to an employee are taxable based on the value of benefit derived from the employee’s private usage of the car or car-related items.
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Tax Treatment of Various Car and Car-related Benefits (Summary Table)
| S/n | Nature | Taxable or Not Taxable |
|---|---|---|
| 1 | Car provided by employer | Taxable See Taxable Value of Car Benefits From YA 2020 and Taxable Value of Car Benefits Before YA 2020 (below). |
| 2 | Driver / chauffeur services | Taxable [Annual cost of driver x (private mileage / total mileage)] |
| 3 | Car park charges reimbursed or provided by employer (e.g. season parking, daily car park charges or complimentary ticket) at one or more locations when an employee drives from home to work and parks his/her own car in the office car park or a nearby car park | Taxable |
| 4 | Reimbursement on car park charges for client meetings (i.e. for work purposes) | Not Taxable |
| 5 | Car park charges reimbursed by employer when an employee parks his/her own car at the airport when he goes on business trips | Taxable |
| 6 | Allowance on ERP Charges | Taxable |
| 7 | Reimbursement on ERP Charges | Not taxable if the charges are incurred for work purposes |
| 8 | Reimbursement on mileage for business usage | Not taxable The rate of reimbursement for mileage depends on the company's policy. While there is no prescribed mileage rate, the reimbursement made by the company should be reasonable. |
| 9 | Taxes, repairs and maintenance expenses of employee's own vehicle | Taxable |
| 10 | Incidental benefit (including any reimbursement of petrol and car park charges) derived from commercial vehicle provided by employer (e.g. motorcycle, van, truck, minibus, lorry) when the employee drives the vehicle home from work and vice versa | Not taxable |
Car Provided by Employer: Taxable Value of Car Benefits From YA 2020
A. New Car (i.e. Employer is the first owner of the car)
The value of benefit derived from a new car is computed as follows:
| Value of Benefit |
|---|
3/7 x [(car cost - PARF rebate)/10 + actual running and maintenance costs incurred by the employer] |
Where:
- 3/7 refers to the use of car outside office hours for private matters which is estimated at three out of seven days in a week.
- Car cost refers to the acquisition cost of the car (inclusive of COE) paid or payable at the date of purchase.
- PARF rebate refers to the Preferential Additional Registration Fee rebate to be granted when the car is de-registered at the age of above 9 but not exceeding 10 years.
- Actual running and maintenance costs incurred by the employer (including reimbursements made to the employee by the employer) refer to costs such as road tax, petrol, car park charge, ERP charge, car insurance, repairs and maintenance, if any.
- See Example 1 and Example 2
B. Second-hand Car
The value of benefit derived from a second-hand car is computed as follows:
| Less than 10 years old at the time of purchase | More than 10 years old at the time of purchase |
|---|---|
| 3/7 x [(car cost - PARF rebate)/B + actual running and maintenance costs incurred by the employer] | 3/7 x [(car cost/B) + actual running and maintenance costs incurred by the employer] |
Where:
- Car cost refers to the actual cost of the car (inclusive of COE) paid or payable by the employer at the date of purchase.
- B refers to the remaining period from the date of purchase of the car to the date of expiry of the COE or the renewed COE (if the second-hand car is more than 10 years old at the time of purchase)
- Actual running and maintenance costs incurred by the employer (including reimbursements made to the employee by the employer) refer to costs such as road tax, petrol, car park charge, ERP charge, car insurance, repairs and maintenance, if any.
- See Example 3
C. Car with Renewed COE
The value of benefit where the employer renews the COE for an existing car and continues to provide the employee with that car is computed as follows:
| Value of benefit |
|---|
| 3/7 x [(C+D)/E + actual running and maintenance costs incurred by the employer] |
Where:
- C refers to the amount payable on renewal of COE for the continued use of the car after the end of the 10th year.
- D refers to the amount of PARF rebate which would have been granted on the first COE when the car is de-registered between 9 and 10 years old, if not for the renewal.
- E refers to the remaining period from the date of renewal of COE to the date of expiry of the renewed COE (currently either 5 or 10 years)
- Actual running and maintenance costs incurred by the employer (including reimbursements made to the employee by the employer) refers to costs such as road tax, petrol, car park charge, ERP charge, car insurance, repairs and maintenance, if any.
- See Example 4
D. Leased Car
The value of the car benefit where the employer leases a car for the employee's use is computed as follows:
| Value of benefit |
|---|
| 3/7 x (rental cost incurred by the employer + actual running and maintenance costs incurred by the employer) |
Where:
- Actual running and maintenance costs incurred by the employer (including reimbursements made to the employee by the employer) refers to costs not borne by the car hiring company, such as petrol, car park charge, ERP charge, if any.
- See Example 5
You may use the Car Benefit Calculator from YA 2020 (Excel,107KB) to check the taxable value of car benefits.
Examples on Computation of Taxable Car Benefits From YA 2020
Example 1: Employer provides a new car to an employee
A company purchased a new car for $120,000 (inclusive of registration fee, ARF, excise duty and COE) on 1 January 2015. It provided its employee with this car since 1 January 2015. Prior to YA 2020, the car benefits were computed based on the previous formula.
With effect from YA 2020
The company incurs the following running expenses for the year ended 31 December 2019:
| Petrol | Road tax (1 January 2019 to 31 December 2019) | Car insurance (1 January 2019 to 31 December 2019) | Car park and ERP charges | Car maintenance and repairs | Total |
|---|---|---|---|---|---|
| $5,000 | $1,200 | $1,500 | $1,550 | $1,200 | $10,450 |
The PARF rebate of the car when it is de-registered between 9 and 10 years old is $24,000.
Value of taxable car benefit for the year ended 31 December 2019 = 3/7 x [($120,000 - $24,000)/10 + $10,450] = 3/7 x $20,050 = $8,592
Example 2: Employer provides a new car to an employee for part of the year
(a) Cost of car
| Price of car (inclusive of registration fee, ARF, excise duty and COE) | Leather car seat | Total |
|---|---|---|
| $156,140 | $1,500 | $157,640 |
(b) Running expenses incurred by the company during the period 1 August 2019 to 31 December 2019
| Petrol | Road tax (for the period 1 August 2019 to 31 July 2020)* | Car insurance (1 August 2019 to 31 July 2020) | Car park and ERP charges | Car maintenance and repairs | Total |
|---|---|---|---|---|---|
| $3,000 | $1,200 | $1,500 | $1,000 | $1,300 | $8,000 |
The PARF rebate of the car when it is de-registered between 9 and 10 years old is $26,000.
Value of taxable car benefits for the period 1 August 2019 to 31 December 2019 = 3/7 x {[(157,640 - 26,000) / 10] x 153 / 365 + 8,000} = 3/7 x $13,518 = $5,793
*Note: Some expenses may be paid in advance for the year, e.g. car insurance and road tax. To ease the compliance burden of the employer, IRAS is prepared to accept the taxable car benefit computed based on the actual running costs incurred by the employer in the calendar year.
Example 3: Employer provides a second-hand car to an employee for part of the year
On 1 August 2019, an employer purchases a second-hand car (registered on 1 October 2015) and provides it to its employee. The employer incurs the following costs in 2019:
(a) Cost of car
| Price of car (with COE expiring on 30 Sep 2025) | Transfer fee | Total |
|---|---|---|
| $105,000 | $25 | $105,025 |
(b) Running expenses incurred by the employer for the period 1 August 2019 to 31 December 2019 (153 days)
| Petrol | Road tax (1 August 2019 to 31 July 2020) | Car insurance (1 August 2019 to 31 July 2020) | Car park and ERP charges | Car maintenance and repairs | Total |
|---|---|---|---|---|---|
| $2,000 | $2,000 | $2,500 | $1,000 | $800 | $8,300 |
The PARF rebate of the car when it is de-registered between 9 and 10 years old is $28,000.
Value of taxable car benefit for the period 1 August 2019 to 31 December 2019 = 3/7 x {[($105,025 - $28,000) / 7*] x 153 / 365 + $8,300} = 3/7 x $12,912 = $5,533
*Note: The remaining period from date of purchase to the expiry of the COE is 6 years 2 months. For the purpose of computing the taxable car benefit, the remaining period is rounded up to the nearest number of years i.e. 7 years.
Example 4: Employer renews the COE of an existing car
An employer has an existing car which it purchased on 1 Apr 2009 for $80,000 (inclusive of registration fee, ARF, excise duty and COE). The COE of the car expires on 31 March 2019. The employer pays $25,000 to renew the car's COE for another 5 years from 1 April 2019 to 31 March 2024. The employer would have received a PARF rebate of $10,500 if it had not renewed the car's COE. The employer provides this car to an employee from 1 January 2019 to 31 December 2019.
Running expenses incurred by the employer from 1 January 2019 to 31 March 2019 (90 days)
| Petrol | Car park and ERP charges | Car maintenance and repairs | Total |
|---|---|---|---|
| $900 | $500 | $200 | $1,600 |
Running expenses incurred by the employer from 1 April 2019 to 31 December 2019 (275 days)
| Petrol | Road tax (1 April 2019 to 31 March 2020) | Car insurance (1 April 2019 to 31 March 2020) | Car park and ERP charges | Car maintenance and repairs | Total |
|---|---|---|---|---|---|
| $2,900 | $1,210 | $2,500 | $1,500 | $1,000 | $9,110 |
Value of taxable car benefit for the period 1 April 2019 to 31 December 2019 = 3/7 x {[($25,000 + $10,500) / 5] x 275 / 365 + $9,110} = 3/7 x $14,459 = $6,196
Total value of taxable car benefit from 1 January 2019 to 31 December 2019 = $1,420 + $6,196 = $7,616
Example 5: Employer provides a leased car to an employee
A company provides a leased car to an employee from 1 January 2019 to 31 December 2019. The company incurs the following expenses in the year 2019:
| Car rental |
|---|
| $30,000 |
Running expenses incurred by the employer from 1 January 2019 to 31 December 2019
| Petrol | Car park and ERP charges | Total |
|---|---|---|
| $5,000 | $1,500 | $6,500 |
Value of taxable car benefit for the year ended 31 December 2019 = 3/7 x ($30,000 + $6,500) = 3/7 x $36,500 = $15,642
Car Provided by Employer: Taxable Value of Car Benefits Before YA 2020
A. New Car
The value of benefit derived from a new car is computed as follows:
| Value of Car Benefit = either (a) or (b) | |
|---|---|
a) Employee pays for the petrol | 3/7 x [(car cost - residual value)/10] + ($0.45 per km x private mileage) |
b) Employer pays for the petrol | 3/7 x [(car cost - residual value)/10] + ($0.55 per km x private mileage) |
Where:
- 3/7 refers to the use of car outside office hours for private matters which is estimated at three out of seven days in a week.
- Car cost refers to the acquisition cost of the car (inclusive of COE) paid or payable at the date of purchase.
- Residual value depends on when the car is registered.
- Car registered on or after 1 Nov 1990, residual value is 80% of the open-market value of the car. The open-market value at the time of purchase can be found on the vehicle registration card.
- Car registered before 1 Nov 1990, residual value is nil.
- Private mileage refers to the mileage made for personal (i.e. not business) purposes. The employee should keep records of the mileage and inform the employer.
B. Second-hand Car
The value of benefit derived from a second-hand car is computed as follows:
| Less than 10 years old at the time of purchase | More than 10 years old at the time of purchase |
|---|---|
| 3/7 x [(A - residue value)/B] + ($0.45 per km x private mileage), if employee pays for the cost of petrol | 3/7 x (A/F) + ($0.45 per km x private mileage), if employee pays for the cost of petrol |
Where:
- If employer pays for the cost of petrol, use the rate of $0.55 per km instead of $0.45 per km.
- A = actual cost (inclusive of COE) of the car paid or payable by the employer at the date of purchase
- B = the remaining period from the date of purchase of the car to the date of expiry of the first COE (i.e. at the end of the 10th year)
- F = the remaining period from the date of purchase of the car to the date of expiry of the renewed COE
C. Car with Renewed COE
The value of benefit derived from an existing car with renewed COE is computed as follows:
3/7 x (G+D)/E + ($0.45 per km x private mileage), if employee pays for the cost of petrol
Where:
- If employer pays for the cost of petrol, use the rate of $0.55 per km instead of $0.45 per km.
- D = the amount payable on renewal of COE for the continued use of the car after the end of the 10th year.
- E = the remaining period from the date of renewal of COE to the date of expiry of the renewed COE (currently either five or 10 years)
- G = the amount of residual value which would have been allowable as set-off against the cost of the private car for purposes of computing the car benefit for the period prior to the expiry of the first COE
D. Leased Car
The value of the car benefit where the employer bears the full cost of rental of the leased car and all other running and maintenance expenses are borne by the car hiring company is computed as follows:
| Employer pays for the petrol | Employee pays for the petrol |
|---|---|
| (3/7 x rental cost incurred by the employer) + ($0.10 km x private mileage) | 3/7 x rental cost incurred by the employer |
You may use the Car Benefit Calculator (XLS, 84KB) to check the taxable value of car benefits.
FAQs
Why is there a change in the formula for computing the taxable value of car benefit from the Year of Assessment 2020 onwards?
Given the changes in the costs of owning and maintaining a car, the current formula has become increasingly less relevant and does not reflect the true value of the benefits enjoyed by employees who are provided with cars by the employers.
The change in the formula would better reflect the true value of the benefits enjoyed by the employees as it is based on actual running and maintenance cost of the car. The new formula also simplifies tax compliance for determining the taxable value as employees are no longer required to track their private mileage.
The formula is also updated to take into account the current LTA regulations on residual value of a car.
Our company pays car allowances to our employees. Are we affected by the change in the formula for computing taxable car benefit?
No. The computation of taxable car benefit is not applicable to car allowances. Employer has to declare the car allowances paid to the employees in full.
Our company pays the annual road tax and car insurance for the period from 1 June every year to 31 May of the following year. For computing the value of taxable car benefit for an employee to whom we have provided the car from 1 January 2019 to 31 December 2019, do we have to pro-rate the annual road tax and car insurance?
No. For the ease of compliance in computing the taxable car benefit, IRAS is prepared to accept the actual costs incurred by the employer in the year ended 31 December 2019, on the basis that these are recurring costs (refer to example 2).
Our company has multiple offices. Our employee usually drives from home to work and park his own car in the car park at one of the office locations. As the employee's job requires him to perform services at 2 locations periodically, we provide him with free season parking at both locations. Is the employee liable to tax on the value of free season parking at both locations?
Yes. Car park benefits provided by the employer for the employee to park his own car in the car park are taxable. Since free season parking is provided to the employee at two locations, the amount of taxable benefits is the total market value of season parking at both car parks.