Travel Allowance Tax Rules In Singapore: What You Need To Know

In Singapore, employers can give employees a per diem allowance to cover expenses incurred while on a business trip, such as meals, transport, and laundry. This allowance is typically given to employees who travel overseas to meet clients or attend training and conferences. In principle, per diems are not considered part of an employee's income and are thus tax-free up to a certain amount. This maximum allowed amount is defined by the 'acceptable rates' published annually by the IRAS. If the per diem allowance exceeds this rate, the excess is considered taxable income and must be reported to the IRAS. The tax treatment of travel allowances in Singapore is an important consideration for both employers and employees when planning and reimbursing business trips.

Per diem allowance exceeding the acceptable rate

In Singapore, employers can give their employees per diems to compensate for expenses incurred while on a business trip, such as meals, transportation, and laundry. Per diems are typically considered non-taxable and are not included in an employee's income, but only up to a certain amount. The Inland Revenue Authority of Singapore (IRAS) publishes 'acceptable rates' that are reviewed annually and vary depending on the country or region. If an employer pays a per diem allowance that exceeds this acceptable rate, the excess amount is considered taxable income and must be reported to the IRAS using Form IR8A.

For example, if the acceptable rate for Australia in a given year is S$118 per day, and an employer pays their employee S$200 per day for a business trip to Australia, the excess of S$82 (S$200 - S$118) is taxable income. It is important to note that if the per diem allowance is less than the acceptable rate, it is not taxable, and it cannot be used to offset taxable amounts from other trips.

The acceptable rates are determined based on the cost of living in different countries or regions. Employers who believe their higher per diem allowances are justifiable can propose their own rates to the IRAS for consideration in the following year's review. To do so, they must submit a report conducted by a consulting firm on the cost of living or provide other relevant information. The proposed rates must be supported by factual data and cannot be based on individual employees' experiences.

When calculating the taxable amount for a per diem allowance, certain expenses are non-taxable and should be deducted from the total allowance. These non-taxable items include overseas accommodation, overseas airport transfers, travelling expenses between cities for business purposes, and entertainment expenses for business purposes.

Reimbursements for business expenses

In Singapore, reimbursements for business expenses are not taxable, provided they are made for the following:

• Mileage on specific trips (not including private mileage, which is taxable)
• Transport between home and office when working overtime
• Travel between home and the airport when travelling for business
• Travel between home and a business venue for business purposes
• Transport expenses for discharging official duties, e.g. travelling from the office to meet a client
• Transport expenses incurred when travelling between the home and an external venue for business, e.g. an external meeting place, training, seminar, workshop, course or retreat
• Mileage incurred on trips between the office and an external business meeting venue, between home and the airport for an overseas business trip, between home and an external business meeting venue, and between home and the office when working overtime
• Transport expenses for working overtime, provided the payment policy is generally available to all staff or applies only to staff at the lower level

Per diem allowances, which are daily allowances given to employees on overseas trips to cover living expenses such as meals, transport and laundry, are taxable if they exceed the acceptable rates set by the IRAS. These rates are published annually and vary depending on the country or region due to differences in the standard of living. If the per diem allowance is less than the acceptable rate, it is not taxable and cannot be used to offset the taxable amount from other trips. Employers can propose their own rates to the IRAS for consideration if they believe the standard rate is insufficient.

Fixed monthly travelling allowance

In Singapore, employers can provide their employees with a fixed monthly travel allowance to compensate for expenses incurred while on business trips. These expenses can include meals, transportation, and other incidental items like laundry. The taxability of these benefits depends on the nature of the transport expense and its purpose.

A fixed monthly travel allowance is generally considered taxable income by the Inland Revenue Authority of Singapore (IRAS). However, there are certain conditions under which a fixed monthly travel allowance may be eligible for tax exemption. If the company provides a travelling allowance to its employees and can prove that the allowance is for official duty purposes, such as travelling out of the station or meeting clients, then the employees may be eligible for a tax exemption of up to RM 6,000 for such an allowance. In such cases, the company can declare this amount under the "tax-exempt allowance" section of the EA form, and employees are not required to declare it as taxable income.

It is important to note that the tax treatment of travel allowances can be complex and subject to change. The information provided here is for informational purposes only, and it is always recommended to refer to the latest guidelines provided by the IRAS or consult with a tax professional for specific advice.

Additionally, when providing a fixed monthly travel allowance, it is essential to distinguish it from a per diem allowance. A per diem allowance refers to a daily allowance given to employees for specific business trips, either overseas or within Singapore. Unlike a fixed monthly allowance, a per diem allowance is typically considered non-taxable up to a certain allowed amount, known as the "acceptable rate" published by the IRAS. If the per diem allowance exceeds this acceptable rate, the excess amount is generally considered taxable income and needs to be reported to the IRAS.

Transport costs for official work purposes

If transport expenses are incurred for official duties, for example, travelling from the office to meet a client, reimbursements are not taxable. Reimbursements made for travelling between home and an external venue for business (e.g. an external meeting place with clients, an external venue for training, seminars, workshops, courses and retreats) are also not taxable. A per-trip allowance for an actual trip made is not taxable.

Mileage reimbursements on specific trips are not taxable. However, reimbursements on private mileage are taxable. Reimbursements on mileage incurred on the following trips are not taxable:

• Between the office and an external business meeting venue (e.g. a client's office)
• Between home and the airport for the purpose of overseas business trips
• Between home and an external business meeting venue
• Between home and the office when working overtime

The rate of reimbursement for mileage depends on the company's policy. While there is no prescribed standard mileage rate, the reimbursements made by the company should be reasonable.

If a company is giving a travelling allowance to staff and can prove that the staff is receiving it for official duty purposes (such as travelling outstation or meeting a client), then the staff is eligible for a tax exemption of up to RM 6,000 for such an allowance.

Reimbursements for private mileage

In Singapore, reimbursements for private mileage are taxable. However, reimbursements on mileage incurred on specific trips are not taxable. These include trips:

• Between the office and external business meeting venues (e.g. a client's office);
• Between home and the airport for the purpose of overseas business trips;
• Between home and external business meeting venues; and
• Between home and the office when working overtime.

The rate of reimbursement for mileage depends on the company's policy. There is no prescribed standard mileage rate, but the reimbursements made by the company should be reasonable.

There are two types of potential reimbursements in Singapore: mileage with a private vehicle or expenses using public transport. In general, the taxability of reimbursements to employees depends on the reason for the expense. For employees on official work business only, any transport expense reimbursement is non-taxable. Shuttle bus services to and from work are also non-taxable, primarily because it is difficult to calculate the value to the employee.

On the other hand, reimbursing taxi fares to and from work is taxable to the employee, unless they are working overtime. Fares to the airport are not taxable, nor are expenses to travel to a business venue (not the place of employment). With the increase in home-based employees, it has been decided that the home is the 'office' and travel to other business venues is not taxable.

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