Tax treatment of awards given to employees for passing examinations, innovation, long-service, providing good service, referrals, work performance, etc.
Cash awards refer to cash or gift/shopping vouchers. Examples of non-cash awards are a pen, a plaque and a watch.
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Tax Treatment of Awards (Summary Table)
| Nature | Taxable / Not taxable | |
|---|---|---|
1 | Award for passing internal/ external examination (cash / non-cash) | This award is not taxable if the value of the benefit does not exceed $200. If the award exceeds the exemption threshold of $200, the whole value is taxable. |
2 | Bursary | |
a) The scheme is open to all employees with the purpose of providing financial assistance to needy employees and awards are only given to eligible employees who satisfy certain criteria, e.g. income of family members. | Not taxable | |
b) Reward for services rendered by a specific employee | Taxable | |
3 | Innovation / Improvement | Not taxable due to administrative concession |
4 | Long Service / Retirement | |
a) Cash awards | Taxable | |
b) Non-cash awards | Not taxable if it does not exceed $200. If the award exceeds the exemption threshold, the whole value is taxable. See Long Service/Retirement below. | |
5 | Recognition for good service provided (cash / non-cash) e.g. GEMS award, Most Courteous Employee Award. These are awards given to recognise good services provided to external or internal customers. | This award is not taxable if the value of the benefit does not exceed $200. If the award exceeds the exemption threshold, the whole value is taxable. See Recognition for Good Service below. |
6 | Recognition for work performance (cash / non-cash) e.g. awards given to promote corporate culture and organising company events and attaining goals / targets | Taxable |
7 | Payment for successfully referring friends or relatives to work for the company. | Taxable even if the award is also available to non-employees |
8 | Zero/low Medical Leave (cash / non-cash) | This award is not taxable if the value of the benefit does not exceed $200. If the award exceeds the exemption threshold, the whole value is taxable. |
Long Service/ Retirement (Non-Cash Awards)
Non-cash awards are taxable as they are granted in respect of employment.
Administrative Concession
Non-cash awards that do not exceed $200 are considered to be not substantial in value and are not taxable due to an administrative concession granted.
If the award exceeds the exemption threshold, the whole value is taxable.The cost incurred by the employer must be declared if the award is taxable.
Engravings on Awards
When the company engraves its logo on the award, e.g. a watch or a pen, the award is still taxable if it exceeds $200 (substantial in value).
Recognition for Good Service
There can be different types of awards given for good service. The exemption is applied on a per award category basis.
Example 1: Two Good Service Awards from Different Categories
An employee received a Most Courteous Employee Award of $150 and a Most Compliments Award of $200 in a year. Since both awards do not exceed $200 each, there is no taxable benefit.
Example 2: Two Good Service Awards from Same Category
An employee received the Most Courteous Employee Award of $150 twice in the year. Since he received a total of $300 under this category, which exceeds the threshold of $200, the benefit of $300 is taxable.
Example 3: One Long Service Award and One Good Service Award
An employee received a Most Compliments Award of $200 and a Long Service non-cash award of $150. Since both awards do not exceed $200 each, there is no taxable benefit.