Withdrawal of Concessionary Tax Treatment of Employer’s Contributions to Overseas Pension / Provident Fund Contributions With Effect from Year of Assessment (YA) 2025

Employer’s Contributions to Overseas Pension / Provident Fund of Foreign Employees Employed in Singapore

It is common for employers in Singapore to continue contributing to the overseas pensions or provident funds of foreign employees while they are on international assignments. This is to ensure, amongst others, the continuity in their retirement benefit accumulation in their home countries and as an added incentive to attract foreign talent to explore employment opportunities in Singapore.

The table reflects a broader trend of phasing out expatriate tax concessions such as those relating to home leave passage, housing benefits and the popular but now defunct Not Ordinarily Resident Scheme with a view to influence hiring practices in favour of local talent.

 

Impact Arising from the Change in Tax Treatment

The obvious implication would be the increase in tax costs for the foreign employee. Conversely, if it is contractually agreed upon that the employer would bear the employee’s income tax, the employer’s employment costs would increase.

Going forward, employers would not be required to track the contributions that are exempted in the hands of employees under the concessionary tax treatment to make the relevant tax adjustments in their own (corporate) tax returns as these are likely to be tax deductible, subject to the prevailing tax rules. This applies if the Singapore employer bears the contributions. In a case where such contributions are borne by an overseas entity (as in the case with certain international assignments) and the Singapore employer did not incur such costs, tax deductions should not be available.

Employers should take the above into consideration to review and refine its internal payroll, tax accounting systems to reflect the requisite change as required when it comes to its reporting obligations with respect to its employees’ remuneration for the YA 2025 and onwards.

 

Why Work With Us?

At CLA Global TS Tax Services, we acknowledge that global employers must ensure that they and their employees are fully aware of and comply with local filing requirements. A well-organised international assignment arrangement requires employers to strike a balance between competitive compensation and cost control, as well as putting in place effective policies and procedures for regulatory compliance.

 

Take the First Step Today

The time is nigh to review your current employer / employee reporting obligations in view of these ongoing individual tax changes. Contact us today to learn more about how we can assist you in adhering to the ever-evolving Singapore individual tax landscape.


View the full article in PDF here.

 

CONTACT US

Contact our Tax Advisory Specialists for a Discussion

Edwin Leow
Co-Advisory Leader
Head of Tax
edwinleow@sg.cla-ts.com
Shaun Zheng
Director, Tax
shaunzheng@sg.cla-ts.com
Tan Xin Yi
Manager, Tax
tanxinyi@sg.cla-ts.com

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