TEI files first submission in Singapore on tax treatment of benefits-in-kind provided to employees: February 3, 2006.

• Position: Tax Executives Institute

On February 3, 2006, TEI's Asia Chapter filed comments with Harvey Koenig, Head (Tax Policy) of the Singapore Ministry of Finance on the tax treatment of certain benefits-in-kind provided to employees. The comments were prepared under the aegis of TEI's Asia Taxes Subcommittee, whose chair is David K. Sutherland of Morgan Stanley & Co. Incorporated.

On behalf of the Asia Chapter of Tax Executives Institute (TEI), I am pleased to offer the following comments on the benefit-in-kind taxation guidelines recently issued by the Inland Revenue Authority of Singapore (IRAS). These rules, which become effective almost immediately, include provisions concerning work-related transportation reimbursement and per diem allowances. TEI believes that the change in treatment of these benefits may adversely affect companies doing business in Singapore and should be modified.

Background

TEI (www.tei.org) is an international organization of more than 5,800 members who are responsible--in executive, administrative, or managerial capacities--for the tax affairs of their employers. TEI's members represent more than 2,800 of the leading corporations with 53 chapters in Asia, North America, and Europe. In September 2005, the Asia Chapter of TEI was officially registered as a Society in Singapore as Tax Executives--Asia Chapter.

TEI members are accountants, lawyers, and other corporate and business employees. The organization is dedicated to the development of sound tax policy, compliance with and uniform enforcement of tax laws, and minimization of administration and compliance costs to the benefit of both government and taxpayers. TEI's Asia Chapter is pleased to offer the following comments on the tax treatment in Singapore of certain benefits-in-kind provided to employees.

Proposed Treatment by IRAS

The IRAS's new guidelines would treat certain benefits-in-kind, as follows:

* Transport reimbursement as a result of commuting from the employee's home to a meeting venue, such as a client's office, would be taxable to the employee.

* Transport reimbursement from the employee's home to the airport for business trips would be taxable to employee.

* If a machine breaks down and the employee must return to the office, the transport reimbursement would be taxable to the employee.

* Reimbursement by the employer of living expenses incurred by an employee during overseas business trips (e.g., cost of meals, transport expenses, and other incidental expenses such as laundry) would be subject to the per diem allowance rates annually set by IRAS. Any amount in excess of the IRAS-prescribed rates would be taxable to the employee.

TEI Recommendations

Before the issuance of the IRAS guidelines, the reimbursement of transport expenses to attend meetings or visit clients for business purposes (e.g., traveling from the employee's office to the client's office or from the office of one client to another) was not taxable because these expenses were viewed as incurred to enable the employees to discharge their official duties. Likewise, transport reimbursement as a result of commuting from home to a meeting venue--such as a client's office or the airport for business trips--enables the employees to perform their duties. The commencement point of the business trips is not relevant, especially where the traveling distance between the employee's home and the client's office...