On this page:
Learn about the taxability of various payments, and detailed illustrations covering topics such as conditional payments paid in advance, refunds of conditional payments, encashment of unutilized leave, and employment assistance payments.
Tax Treatment of Various Payments (Summary Table)
| Nature | Taxable/ Not taxable | |
|---|---|---|
1 | Absentee payroll for attending training courses during or after office hours under Skills Redevelopment Programme (SRP) | Payment from both SRP and employer are taxable |
2 | Conditional payments made in advance | Taxable |
| 3 | Encashment of unutilised leave | Taxable Employer can declare the leave encashment under "d) Others: 1.Allowances: (iii) Others" in the Form IR8A. |
4 | Inflation bonus (cash/ vouchers) | Taxable |
5 | Laundry allowance | Taxable, unless it is made for washing special clothing, e.g. protective clothing |
6 | Maternity Leave Benefit | Taxable |
7 | NSman pay | Taxable When filling in the Form IR8A, do not include NSman pay that is paid directly to an employee by MINDEF, Singapore Civil Defence or Singapore Police Force as they will send the information to IRAS. Information submitted includes: - Physical payment such as Service Pay, Make-Up Pay (MUP), Awards (e.g. IPPT Award), NS Allowance etc - Equivalent payment such as NS HOME Awards (LifeSG credits utilised), NS Excellence Awards etc More information can be found on OneNS Portal. |
8 | Skills Development Levy (SDL) | Not taxable |
9 | Contributions made by employer to employee's Supplementary Retirement Scheme (SRS) account | Taxable |
10 | Relocation allowance | Taxable For details, see Relocating to Singapore. |
11 | Contributions made by employer to any pension/provident fund outside Singapore | Taxable Also see Concessionary Tax Treatment Up to YA 2024 on Overseas Pension / Provident Fund Contributions With effect from YA 2025, the concessionary tax treatment will cease. |
12 | Not Taxable | |
Conditional Payments Paid in Advance
Some employers make payment to employees even though the employees are not entitled to it at the date of payment.
These payments are considered payments paid in advance. The employee is required to refund the payment if he later fails to fulfill the conditions attached to the payment.
Examples of conditional payments paid in advance include:
Retention Bonus/Gratuity
The payment is intended to encourage an employee to stay with the company for a specific period or up to a certain date. The employee is only entitled to the payment after he has fulfilled the conditions.
Some employers pay part or the full bonus/gratuity earlier to make the scheme more attractive to employees.
Bonuses with Conditions of Stay
While the non-contractual bonus is paid based on the performance of the employee or company, some employers attach conditions like the employee served "x" months from the date of payment, or the employee remains in employment up to a certain date.
Generally, when an employer makes a conditional payment in advance, the payment is considered to be income of the employee based on date of payment.
If the conditions are subsequently not met and the employee returns the bonus in full or in part, the refunded amount is considered as an adjustment of his employment income in the year the refund is made.
Refund of Conditional Payments Made
Generally, a payment consists of three components:
- Cash component;
- Employer's contribution to CPF (if any); and
- Employee's contribution to CPF (if any).
- If the advanced payment and refund happen in different years and only the cash component (not the CPF contributions) is refunded, the refunded amount will be allowed as a deduction in the year of refund.
- Excess employer's contribution to CPF is taxable.
- Excess employee's contribution to CPF will not be granted CPF relief.
The above does not apply in the case where an employee is paying liquidated damages.
Scenario 1: Employer Obtains Refund from CPFB
The advanced payment and refund must be in the same year. The employer obtains refund from employee and CPF contributions from CPFB.
Employer Should:
Prepare Form IR8A as if there is no payment made in advance.
Scenario 2: Employers Does Not Obtain Refund from CPFB
The advanced payment and refund may be (a) in the same year or (b) in different years.
The employer obtains refund from employee but is not able to/does not obtain a refund on the CPF contributions from CPFB. The employee may or may not refund the employer's contribution to employer.
Employer Should:
1. Prepare Form IR8A to include the conditional payment made in advance, but exclude details of the refund.
2. Provide details of the refund using the excel template below. (Explanatory notes and examples are provided under the "Notes" worksheet in the file) Refund of advanced payment template (XLS,28KB)
3. Send the template to IRAS by email when you issue the Form IR8A or transmit employment income electronically to IRAS.
4. Inform the employee that the refunded amount will be allowed as a deduction in the year of refund.
Encashment of unutilised leave
If an employee is unable to utilise all the leave days prescribed for the year and his employer allows him to convert the unutilised leave into cash (i.e. encashment of unutilised leave), the cash amount is taxable in the year in which he is entitled to the encashment.
| Scenario | Taxing point |
1. Employee A has 4 days of leave that are not utilised. His employer converted the leave to cash of $1,200 and paid him the amount on 31 Dec 2024. | The $1,200 is taxable in YA 2025 since Employee A is entitled to the encashment of leave in the year 2024. |
2. Employee B ceases employment with his employer on 24 Dec 2024. He has 6 days of unutilised leave from the year 2024 that are converted into cash of $3,000 on the last day of his service. The $3,000 is paid to him on 5 Jan 2025. | The $3,000 is taxable in YA 2025 since Employee B is entitled to the encashment of leave on the last day of his service in 2024. If his employer's company policy is to allow employees to encash unutilised leave in the year following the year of cessation, the $3,000 is taxable in YA 2026 as he will only be entitled to the encashment of leave in the year 2025 (i.e. the year following his cessation).
|
| 3. Employee C has 5 days of leave from year 2023 that are carried forward to 2024. As he was not able to utilise the 5 days of leave by the end of 2024 due to work commitments, his employer allowed him to convert the unutilised leave in Jan 2025 and paid him an amount of $1,500 in Feb 2025. | The $1,500 is taxable in YA 2026 since Employer C is entitled to the encashment of leave in year 2025. |
Employment Assistance Payment
(Re-employment of Older Employees)
Under the Retirement and Re-employment Act (RRA), the minimum retirement age is 63 years. Employers must offer re-employment to eligible employees who turn 63, up to the age 68, to continue their employment in the organisation.
One-Off Employment Assistance Payment (EAP)
Where the employer is not able to find a suitable job for the eligible employee who wishes to work beyond his retirement age, the employer must offer a one-off Employment Assistance Payment (EAP) to the employee.
However, the employer is not obliged to make the EAP under the RRA if:
- the eligible employee declined the employer's offer of re-employment; or
- the employee does not meet the eligibility criteria for re-employment under the new RRA.
The EAP is not taxable as it is provided to employees when the employers are unable to find suitable positions for them.
Find out more about Re-Employment of Older Employees on the Ministry of Manpower website.