COVID-19 Driver Relief Fund

COVID-19 Driver Relief Fund

The COVID-19 Driver Relief Fund (CDRF) scheme was created to provide sector-specific support to help taxi and private hire car (“PHC”) drivers affected by COVID-19 tide over this period of economic uncertainty and depressed taxi/PHC ridership. The CDRF scheme replaces the Special Relief Fund (SRF) and Self-employed Person Income Relief Scheme (SIRS) for taxi and PHC drivers.

You may refer to the website of the Land Transport Authority of Singapore (LTA) for details relating to the CDRF scheme.

CDRF Payouts to Taxi Drivers and PHC Drivers

To provide income support during this period, the Government is providing relief in the year 2021 for active eligible taxi drivers and PHC drivers in the form of CDRF payouts:

Taxi operators, upon receiving the monies from LTA, will pass on the CDRF payouts to taxi drivers who hire taxis from them through a reduction in taxi rental fees payable by the drivers. For taxi drivers who own their own taxis, LTA will make the CDRF payouts directly to them via bank transfers.

In addition, taxi operators and PHC operators may provide additional financial support to their drivers through giving additional taxi rental reduction, additional credits to the drivers’ e-wallets, etc.

PHC operators receiving the monies from LTA will pass on the CDRF payouts to eligible PHC drivers by crediting the payouts into the drivers’ e-wallet accounts with their PHC operator.

For Taxi Operators and PHC Operators

CDRF Payouts Funded by the Government

The monies received by taxi operators and PHC operators from LTA for the purpose of making CDRF payouts are taxable in the hands of the operators. At the same time, the Ministry of Finance intends to introduce a specific provision in the Income Tax Act (“ITA”) to allow tax deductions on the onward payment of the CDRF payouts by the taxi operators and PHC operators to their drivers. The deduction will be for the Year of Assessment (“YA”) 2022 and/or 2023, in respect of the CDRF payouts that they have passed in the calendar year 2021 to their drivers. With these tax treatments, the taxi operators and PHC operators are tax-neutral with regards to the CDRF payouts.

Additional Support Given by Taxi Operators and PHC Operators to Drivers

Where additional support measures are provided by the taxi operators and PHC operators to their drivers, similar tax deduction treatment applies. The Ministry of Finance intends to introduce a specific provision in the ITA to allow tax deductions on the monetary support payments made in response to COVID-19 pandemic by the taxi operators and PHC operators to their drivers. The deduction will be for the YA 2022 and/or 2023, in respect of such payments made in the calendar year 2021.

Please see below for an illustration where:

• A taxi operator usually charges $36,000 in taxi rental to drivers. In the year 2021, the taxi operator receives $4,000 CDRF payout from the Government which it disburses to taxi drivers in the form of reduced taxi rental. The taxi operator further provides an additional rental reduction of $3,000, as well as financial support of $500 to taxi drivers.
• A PHC operator usually earns $36,000 of income from PHC drivers. In the year 2021, the PHC operator receives $4,000 CDRF payout from the Government which it disburses to PHC drivers in the form of e-wallet credits. The PHC operator further provides financial support of $3,500 to the PHC drivers, also via e-wallet credits.

For Taxi Drivers and PHC Drivers

CDRF Payouts Funded by the Government

The CDRF payouts received by taxi drivers and PHC drivers which are funded by the Government will be exempt from income tax in YA 2022 (i.e. for the basis period 2021) as the payouts are meant to provide financial support for taxi drivers and PHC drivers during the COVID-19 pandemic.

Additional Support Given by Taxi Operators and PHC Operators to Drivers

The usual tax treatment will apply. This means that taxi drivers will claim the actual rental expenses which is charged by the operator. For additional monetary payments or e-wallet credits received from the operators, these will be treated as additional income to the drivers and will be taxable.

Please see below for an illustration of how you should report your income for YA 2022 if you are a taxi driver or PHC driver.

Reporting of Income for YA 2022 (i.e. Income Earned in Year 2021) for Taxi Drivers and PHC Drivers

If you choose to claim tax deduction based on actual expenses

The amount of taxi or PHC rental expenses that you can claim against your driving income in YA 2022 (i.e. earned in year 2021) should be the amount charged by the taxi operator/PHC operator before taking into account the CDRF payout (if applicable), given that the CDRF payout is exempt from income tax.

Example:

A taxi driver/PHC driver earned driving income of $40,000 in the year 2021. His yearly taxi/car rental expense (before any reductions) for the year 2021 is $26,000. Other than taxi/car rental expense, he did not incur any other business expenses in the year 2021.

The taxi driver/PHC driver enjoyed $4,000 CDRF payout from the Government. The Government’s CDRF payout is disbursed by the taxi operator to the taxi driver in the form of reduced taxi rental, while the PHC operator disburses the Government’s CDRF payout to the PHC driver by crediting amounts to the PHC driver’s e-wallet. In addition, the taxi driver also enjoyed an additional rental reduction of $3,000, as well as additional financial support payment of $500 from the taxi operator. The PHC driver on the other hand receives additional financial support payment of $3,500 from the PHC operator.

Amount of rental expense that the taxi driver/PHC driver can claim deduction for in YA 2022:

* The actual taxi rental payable by the taxi driver is $19,000 (i.e. $23,000 less the $4,000 CDRF payout from Government received in the form of reduced taxi rental). As the CDRF payout from the Government received by the taxi driver is exempt from income tax, the taxi driver can claim a deduction on the amount of taxi rental without taking into account the CDRF payout.

Following from the above example, the amount of adjusted profit that the taxi driver / PHC driver reports for YA 2022 is:

^* In this example, assume that the support payments are given to supplement the driving income. ^{^}The usual tax treatment applies to the additional support received from the operators, and such amounts are taxable. ^#The PHC driver is not required to include the Government’s CDRF payout received via e-wallet credit in his/her YA 2022 adjusted profit as the Government’s CDRF payout is exempt from income tax.

If you choose to claim expenses based on 60% of driving income (deemed expense ratio)

The amount of business expenses you can deduct against your driving income for YA 2022 is 60% of your driving income (excluding the Government’s CDRF payout that you receive).

Example: A taxi driver/PHC driver earned driving income of $40,000 in the year 2021. In addition, the taxi driver/PHC driver also received additional financial support payment of $3,500 from his operator.

^*In this example, assume that the support payments are given to supplement the driving income. ^{^}The usual tax treatment applies to the additional support received from the operators, and such amounts are taxable. ^#The PHC driver is not required to include the Government’s CDRF payout received via e-wallet credit in his/her YA 2022 adjusted profit as the Government’s CDRF payout is exempt from income tax.