How are incentives, bonuses and expenses taxed in Singapore?

In this article, we cover bonuses & incentives and expenses & reimbursement.

Bonuses and Incentives

In Singapore, bonuses and incentives are generally considered part of an employee's taxable income and taxed at the same rate as salary. They are subject to individual income tax, which is calculated based on the employee's total annual income.Singapore uses a progressive tax system, where tax rates increase with higher income levels. Tax rates range from 0 to 22.5 percent for 2023. For full details, please visit the Inland Revenue Authority of Singapore webpage.

• Employee income taxes are calculated at the end of the tax year.

• CPF (Central Provident Fund) Contributions: Bonuses and incentives are generally subject to CPF contributions, which are social security contributions made by both the employer and the employee to the employee's CPF accounts.
• No Tax Exemption for Bonuses: Unlike some other countries, Singapore does not have a specific tax exemption for bonuses or incentives. All income, including bonuses, is subject to taxation.

Expenses and Reimbursement

Expenses:

In Singapore, employees can claim tax deductions on business-related expenses that are directly incurred during the performance of their job duties. These expenses must be necessary for the conduct of their work and supported by valid documentation.

• Non-Deductible Personal Expenses: Personal expenses unrelated to business purposes cannot be claimed as tax deductions.
• Record-Keeping: Customers must maintain proper records, such as receipts and invoices, to support their claims for tax deductions on business expenses.

Reimbursements:

Reimbursements made by employers for actual business-related expenses incurred by employees are generally not taxable. These reimbursements are considered tax-free and are not included in the employee's taxable income.

• Taxable Reimbursements: Reimbursements for expenses of a personal nature or non-business-related expenses may be treated as taxable income. In such cases, the reimbursement amount is added to the employee's taxable income and subject to individual income tax.
• Record-Keeping: Customers should maintain proper records of reimbursements to support the tax treatment and ensure that tax-free reimbursements are for valid business expenses.

Goods and Services Tax (GST):

For expenses incurred on behalf of the Customer, such as purchasing goods and services, the Customer may reimburse the employee for the GST paid on those expenses. The reimbursement of GST is not considered a taxable supply and is not subject to GST.