We refer to the letter "个人所得税应容许扣除房租" in Lianhe Zaobao by 严庆芳 on 3 Nov 2009.

An individual who works in Singapore is taxed on his income earned in Singapore. For an employee, his gains from employment may include salary, bonus, cash allowances such as housing and transport allowances and benefits-in-kind (i.e. benefits provided by employers in place of cash).

Cash allowance, regardless of how the employer chooses to term it, is in essence an employment gain which the employees would have full discretion to how and when they want to use it. Therefore, the full cash allowance is taxable which is similar to the salary and bonus received by the employees. Currently, employees are allowed to deduct employment expenses from their employment income only if the employment expenses meet all the following conditions:

• Expenses are incurred by employees when carrying out their official duties,
• Expenses are not reimbursed by the employer,
• Expenses are not of capital or private in nature, and
• Travelling expenses are not those incurred on motorcars.

An employee's rental expense for accommodation is private in nature. Hence, all employees cannot claim housing rentals as employment expenses.

In the case where an employer chooses to provide accommodation (regardless of whether the employer owns or leases the premises) for their employees, it is deemed a benefit-in-kind received by the employees, which is taxable. Under the law, the value to be taxed in the hands of the employees is calculated at 10% of the employment income or the Annual Value of the property whichever is lower, less any rent paid by the employee.

Whether an employer provides a cash allowance or accommodation to the employee is a private arrangement between the employer and the employee. Employees would take into account other considerations including any tax implications when coming to an agreement on the terms and conditions of their employment.

We thank the writer for the feedback and the opportunity for us to clarify.