GST E-tax Guide on Fringe Benefits
The IRAS has updated the GST e-tax guide on fringe benefits on 29 January 2020. Key changes to this update include:
- Company can now claim input tax for temporary accommodation provided for foreign employee that exceed 31 days per occasion. The amount of input tax claimable is up to the maximum of the 31 days. GST incurred beyond the 31 days remains not claimable. In the previous administrative concession, it was stated that if the temporary accommodation exceeded 31 days, the full amount of GST is not claimable.
- Added the definition of foreign employee for clarity. Based on the definition, it seems to suggest that the foreign employee must be employed under the same legal entity (i.e. employee of head office, branch or representative office). It is also clarified that employees of a foreign related entities (e.g. overseas subsidiary) are not considered the company's employee, hence, the administrative rule and conditions under the fringe benefit e-tax guide would not apply.
- New administrative concession for transport expenses incurred for employees. With effect from 1 February 2020, all transport expenses incurred for employees are claimable except for transport expenses to transport the employees from home to work and vice versa during ordinary work hours. GST incurred on motor car expenses continues to be disallowed regardless of whether the motor car expenses are incurred for business purposes or not.
GST on fringe benefits is a risky area for compliance purposes although the amount involved is usually not material. The company needs to take a balance approach between maximizing the input tax claims on fringe benefits versus the additional administrative work (i.e. documentation and calculating between business and private purposes) involved to support the input tax claims in the event of an IRAS audit.
Speak to your HR department now to understand the different fringe benefits provided and identify gaps, if any. Talk to us to see how we can help you to put in the controls and processes to mitigate the GST risks on fringe benefits.
If you wish to receive this update via email, please follow us on LinkedIn and subscribe to our mailing list.