IRAS updates guide on GST treatment for fringe benefits to employees

27 September 2011

A new edition of the e-Tax Guide on GST treatment for fringe benefits provided to employees has been issued by IRAS on 23 September 2011.

The GST treatment is summarised as follows:

1)      A taxable person is entitled to claim input tax credit for GST incurred on supplies of goods and services made to him or her, which are used for the purpose of his or her business in the making of taxable supplies.

2)      If the taxable person acquires any goods or services and provides them as fringe benefits to the employees, the goods and services acquired are then considered as used “for the purpose of business”. Therefore, GST incurred on these purchases may be claimed by the taxable person as input tax, except in those specifically disallowed under Regulations 26 and 27 of the GST (General) Regulations 2008 (see item 6 below).

3)      A taxable person is also not allowed to claim GST incurred on goods and services, where the goods and services are acquired solely for the private use by:

  • sole-proprietor as the taxable person
  • partners in the partnership registered as the taxable person
  • directors of company registered as the taxable person, and
  • persons connected to the GST-registered sole proprietor, partnership or company.

4)      For the taxable person to claim the GST incurred on the purchase of goods and services as input tax, this supply of goods and services must be contractually made to that taxable person therefore tax invoices addressed or simplified tax invoices given must be kept.

5)     A taxable person is not entitled to claim input tax under sections 19 and 20 of the GST Act in the following situations:

  • The supply of goods or services made by the taxable person is an exempt supply under the GST Act (for example, residential properties or financial services). The taxable person is not entitled to claim input tax incurred in the making of such supplies; or
  • The goods or services purchased have been charged with GST but the GST incurred is disallowed as input tax under Regulations 26 and  27 of the GST (General) Regulations 2008.

6)     Note that under Regulations 26 and 27 of the GST (General) Regulations 2008, input tax credit is not allowed to be claimed for GST incurred on:

  • club subscription fee
  • medical and accident insurance premium (excluding that where the insurance or the payment of compensation is obligatory under the Work Injury Compensation Act or the insurance is obligatory under any collective agreement within the meaning of the Industrial Relations Act)
  • medical expenses (excluding those that are obligatory under the Work Injury Compensation Act or any collective agreement within the meaning of the Industrial Relations Act)
  • family benefits
  • any transaction involving betting, sweepstakes, lotteries, fruit machines or games of chance
  • Q-plate motor car with COE issued on or after 1 Apr 1998 (including purchase and running expenses like petrol, maintenance, parking fees)
  • SZ-plate motor car rented on or after 1 Jul 1999 (including running expenses), and
  • non-Q-plate motor car (including purchase and running expenses).

The fifth edition updates information on:

  • Input tax disallowed
  • Accounting of output tax: Deemed supply where goods are given free as gifts to or for temporary use by employees
  • Accounting of output tax/Value of supply: Business goods supplied for temporary private use by employees
  • Accounting of output tax: Business goods given free to employees
  • Appendix A: Definition in Regulation 25
  • Appendix D: Table of fringe benefits

For full details, please refer to the e-Tax Guide, “GST: Fringe Benefits (5th Edition)”.

Source: This article was extracted from the Inland Revenue Authority of Singapore (IRAS) website.