Concessionary tax treatment that currently is available to employer contributions to an overseas pension fund or social security scheme will be withdrawn in Singapore for contributions made on or after 1 January 2024 (i.e., year of assessment 2025).
Technically, employers’ contributions to overseas pension plans or social security schemes are taxable benefits that must be reported by the employer to the Inland Revenue Authority of Singapore (IRAS) in the relevant Return of Employee’s Remuneration Form. However, as an administrative concession, the IRAS treats the employer contributions as not taxable if all of the following conditions are fulfilled:
As noted above, the concessionary tax treatment will cease to apply as of year of assessment 2025. As a result, all contributions made by the employer to an overseas pension fund or social security schemes on or after 1 January 2024 will be taxable in the hands of the employees, regardless of whether the contributions are considered mandatory or nonmandatory for the employees during their period of employment in Singapore. With these changes, the contributions to the overseas pension will be deductible to the employer provided the normal tax rules for the deduction of business expenses are met.
The withdrawal of the administrative concessions follows removals of other administrative concessions, such as home leave passage and the provision of housing benefits previously available to foreign employees working in Singapore. The change is in line with the IRAS’ intention to have a consistent application of the principle of taxability of income and benefits in the hands of the employees and will likely increase the tax liability of foreign employees working in Singapore. As the changes will take effect from 1 January 2024, employers should have sufficient time to prepare for the change in tax treatment. Employers are encouraged to review their systems to ensure that information is readily available to meet the tax filing needs.
Wong Sook Ling