Whilst with any budget there were many changes and updates announced, the vast majority of these changes were corporate related with very little changes in relation to employment tax matters announced. However, of the two main changes announced, one of them is particularly important as it affects the Singapore income tax treatment of home leave travel costs provided by an employer on behalf of an expatriate employee on secondment in Singapore.
The employment tax related changes announced in the 2016 Financial Year budget can be summarised as follows –
Personal Income Tax Relief Cap
In order to enhance the progressivity of the Singapore Personal Income Tax regime, the total amount of personal income tax reliefs than an individual can claim will now be capped at SGD$80,000 per Year of Assessment (YA). This relief cap will take effect from 1 January 2017 (YA2018).
Generally this announcement will not affect expatriate (foreign) employees on secondment to Singapore as the majority of personal income tax reliefs apply to working mothers who are Singaporean citizens.
Home Leave Travel Concession for Expatriate Employees
Currently, certain home leave travel costs, provided by an employer to an expatriate employee and family on secondment to Singapore are eligible for a tax concession where only 20% of the actual value of the home leave passages is considered to be a taxable benefit in Singapore. This concession currently applies to one home leave passage per Year of Assessment for the employee and spouse and two home leave passages per Year of Assessment for unmarried children either under the age of 16 or over the age of 16 but in full time schooling.
With effect from 1 January 2017 (YA2018) this tax concession will be withdrawn and the value of all home leave passages will be taxable in full in Singapore.