The Point-to-Point Support Package (PPSP) was announced in February 2020 to provide targeted assistance to the Point-to-Point (“P2P”) industry and its drivers to help them cope with the impact of the COVID-19 pandemic. As part of the Resilience Budget announced on 26 March 2020, the Government has extended and enhanced the PPSP.
You may refer to the website of the Land Transport Authority of Singapore (LTA) (Point-to-Point Support Package and Point-to-Point Support Package 2 (PPSP2)) for details relating to PPSP.
Special Relief Fund (“SRF”) Payouts to Taxi Drivers and Private Hire Car (“PHC”) Drivers
To help taxi drivers and PHC drivers defray business costs, the Government is providing relief of $300 per vehicle per month (or $10 per day) for active eligible taxi drivers and PHC drivers for the period of February 2020 to December 2020.
Taxi operators, upon receiving the monies from LTA, will pass on the SRF 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 SRF payouts directly to them via bank transfers.
PHC operators receiving the monies from LTA will pass on the SRF payouts to eligible PHC drivers by crediting the payouts into the drivers’ e-wallet accounts with their PHC operator.
In addition, taxi operators and PHC operators may provide additional financial support to their drivers through giving additional taxi rental reduction, additional credits to drivers’ e-wallets, etc.
For Taxi Operators and PHC Operators
SRF Payouts Funded by the Government
The monies received by taxi operators and PHC operators from LTA for the purpose of making SRF 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 SRF payouts by the taxi operators and PHC operators to their drivers. The deduction will be for the Year of Assessment (“YA”) 2021 and/or 2022, in respect of the SRF payouts that they have passed in the calendar year 2020 to their drivers. With these tax treatments, the taxi operators and PHC operators are tax-neutral with regards to the SRF 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 2021 and/or 2022, in respect of such payments made in the calendar year 2020.
Please see below for an illustration where:
- A taxi operator usually charges $100 in taxi rental to drivers. In the year 2020, the taxi operator receives $10 SRF 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 $10, as well as financial support of $5 to taxi drivers.
- A PHC operator usually earns $100 of income from PHC drivers. In the year 2020, the PHC operator receives $10 SRF 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 $15 to the PHC drivers, also via e-wallet credits.
Taxi Operator | Amount | PHC Operator | Amount
|
|---|---|---|---|
Taxi rental income received from taxi driver | $80 | Operating income | $100 |
Add: Monies received from the Government for SRF payouts | $10 | Add: Monies received from the Government for SRF payouts | $10 |
Net taxi rental income | $90 | Net operating income | $110 |
Less: SRF payout passed on to PHC driver (e-wallet credit) | $(10) | ||
Less: Operators’ additional support for taxi driver (monies paid) | $(5) | Less: Operators’ additional support for PHC driver (e-wallet credit) | $(15) |
Net trade income | $85 | Net trade income | $85 |
For Taxi Drivers and PHC Drivers
SRF Payouts Funded by the Government
The SRF payouts received by taxi drivers and PHC drivers which are funded by the Government will be exempt from income tax in YA 2021 (i.e. for the basis period 2020) 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 2021 if you are a taxi driver or PHC driver.
Reporting of Income for YA 2021 (i.e. Income Earned in Year 2020) 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 2021 (i.e. earned in year 2020) should be the amount charged by the taxi operator/PHC operator before taking into account the SRF payout (if applicable), given that the SRF payout is exempt from income tax.
Example:
A taxi driver/PHC driver earned driving income of $20,000 in the year 2020. His yearly taxi/car rental expense (before any reductions) for the year 2020 is $13,000. Other than taxi/car rental expense, he did not incur any other business expenses in the year 2020.
The taxi driver/PHC driver enjoyed $2,400 SRF payout from the Government. The Government’s SRF 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 SRF 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 $1,000, 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 $1,500 from the PHC operator.
Amount of rental expense that the taxi driver/PHC driver can claim deduction for in YA 2021:
Taxi Driver | Amount | PHC Driver | Amount |
|---|---|---|---|
Gross taxi rental expense | $13,000 | Gross car rental expense | $13,000 |
Less: Operator’s additional support for taxi driver (rental reduction) | $(1,000) | ||
Taxi rental expense that driver can deduct in YA 2021* | $12,000 | PHC rental expense that driver can deduct in YA 2021 | $13,000 |
* The actual taxi rental payable by the taxi driver is $9,600 (i.e. $12,000 less the $2,400 SRF payout from Government received via reduction in taxi rental). As the SRF 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 SRF payout.
Following from the above example, the amount of adjusted profit that the taxi driver / PHC driver reports for YA 2021 is:
Taxi Driver | Amount | PHC Driver | Amount |
|---|---|---|---|
Driving income | $20,000 | Driving income | $20,000 |
Add: Operators' additional support for taxi driver (monies received)*/^ | $500 | Add: Operators' additional support for driver (e-wallet credit)*/^ | $1,500 |
$20,500 | $21,500 | ||
Less: Taxi rental expense | $(12,000) | Less: PHC rental expense | $(13,000) |
Adjusted profit | $8,500 | Adjusted profit | $8,500# |
* 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 SRF payout received via e-wallet credit in his/her YA 2021 adjusted profit as the Government’s SRF 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 2021 is 60% of your driving income (excluding the Government’s SRF payout that you receive).
Example: A taxi driver/PHC driver earned driving income of $20,000 in the year 2020. In addition, the taxi driver/PHC driver also received additional financial support payment of $500 from his operator.
Taxi Driver | Amount | PHC Driver | Amount |
|---|---|---|---|
Driving income | $20,000 | Driving income | $20,000 |
Add: Operators' additional support for driver (monies received)*/^ | $500 | Add: Operators' additional support for driver (e-wallet credit)*/^ | $500 |
$20,500 | $20,500 | ||
Less: Allowable Business Expenses (60% of $20,500) | $(12,300) | Less: Allowable Business Expenses (60% of $20,500) | $(12,300) |
Adjusted profit | $8,200 | Adjusted profit | $8,200# |
*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 SRF payout received via e-wallet credit in his/her YA 2021 adjusted profit as the Government’s SRF payout is exempt from income tax.