SINGAPORE

Compliance requirements of frequent business travellers

SINGAPORE - Compliance requirements of frequent business travellers

February 2019

Businesses and companies now operate in an increasingly global environment where employees work across borders with greater ease. Consequently, ensuring that you remain compliant with regards to immigration, social security, taxes, etc. is more important than ever.

Over the years, Singapore’s various government agencies, including the Inland Revenue Authority of Singapore (IRAS), have reviewed and revised the requirements and employer’s obligations in respect of frequent business travellers (FBT). A FBT is defined as an employee who is based outside of Singapore and makes frequent business trips into Singapore. Although Singapore does not have monthly withholding requirements, companies still face risk in the other areas relating to FBTs travelling into Singapore for business purposes.

Immigration

An employment pass (EP) has to be obtained before an individual is able to carry out work in Singapore regardless of the duration of the stay. The only exception to this is where the intended work is the following:-

  • Company meetings, corporate retreats or meetings with business partners;
  • Study tours or visits as a participant;
  • Company training courses/workshops/team building events as a participant;
  • Seminars and conferences as a participant; and
  • Exhibitions as a trade visitor.

Aside from the above, an EP has to be obtained before the FBT’s arrival into Singapore. Generally, an FBT cannot carry out any employment activities in Singapore without an EP.

Tax reporting and filing obligations

An annual review of all FBT’s business days into Singapore is to be done by 31 January of the following year by the employer. The individuals would therefore fall into the following categories depending on their number of business days:-

Individuals with not more than 60 business days in a calendar year in Singapore

Under the Singapore Income Tax Act, employment income is exempt from Singapore tax if the individual is a non-resident for tax purposes and does not exercise employment for more than 60 days in a calendar year. This does not apply to a non-tax resident director or public entertainer

If the employee does not hold an EP, as an administrative concession, there is no employer’s reporting requirement to the IRAS. By the 1 March of the following year, an employing entity has to submit travel dates into Singapore to the IRAS for all FBTs with valid EP as at 31 January of the following year. Additionally, upon cancellation or expiry of the EP, the employing entity is to notify the IRAS within 2 months of the cancellation/expiration to prevent any enforcement actions by the IRAS.

Individuals with more than 60 days but less than 183 days in Singapore

Where an individual has more than 60 business days in Singapore but less than 183 days, they are liable to tax on their employment income earned in respect of  their business days in Singapore. They will be taxed on this income at the non-resident tax rate. A tax exemption could be possible to the extent that the employee qualifies under the criteria of a relevant Double Taxation Agreement (DTA) that Singapore has with the relevant country. This is typically the country where the individual is tax resident and where  their employment is based. Where a treaty exemption is available, the employer must make an application on the employee’s behalf to the IRAS before the filing deadline of 15 April. All employees with this level of travel will very likely be engaging in activities that requires an EP.  

In respect of the filing requirement, filing of the FBT’s Return of Employee's Remuneration (Form IR8A) is required by 1 March unless a Form IR21 is applicable in the case of an EP cancellation or expiry. As part of the tax clearance process, a Form IR21 (notification of a foreign employee’s cessation) should be filed at least 2 months from the date of cancellation or expiry of the EP, unless a request for an extension is obtained.

Once it is certain that a FBT will no longer be making business trips into Singapore, the employer should cancel the EP and a Form IR21 needs to be filed within 2 months from the final business day in Singapore.

Individuals with more than 183 days in Singapore

FBTs who have more than 183 business days in the preceding calendar year and still have a valid EP at the time of the employer filing the employees’ Form IR8E. The filing requirement and deadline will be the same as all regular employees. They will not be able to claim exemption under the Double Tax Treaty; the employment income will be taxed at the resident rate.

An individual is regarded as tax resident in Singapore in the year they are physically present or exercising employment in Singapore for at least 183 days in the preceding calendar year.

Taxable income

From 1 January 2016 onwards, the IRAS has revised the tax treatment of compensation provided to a FBT. Currently, the following items are not taxable:

  • Airfare;
  • Accommodation;
  • Transport and entertainment allowance for business purposes;
  • Per diem within the acceptable rate laid out by the IRAS (the excess per diem is taxable); and
  • Other reimbursements for business expenses.

Aside from the above, any other compensation provided to the FBT is taxable in Singapore and required to be reported to the IRAS unless the FBT qualifies for tax exemption.

Social security (Central Provident Fund)

The Central Provident Fund (CPF) is a mandatory savings scheme for working Singapore citizens and Singapore permanent residents. Foreign individuals are not eligible to participate in this scheme. However, upon becoming a permanent resident of Singapore, participation in the CPF would be compulsory.

Should a Singapore citizen or Singapore permanent resident who works for an overseas employer make business trips into Singapore, CPF contributions are not required to be made by the employing entity. However, both the employer and FBT employee can continue with voluntary contributions into the CPF.

BDO comment: Next steps

Due to difficulties in tracking FBTs and a lack of understanding and knowledge of the reporting requirements for FBTs, the risk of non-compliance is high. Such risk may lead to company reputational damage and heavy penalties and even prosecution; in some cases this can cause business disruption. Companies should review the current process to manage these FBTs and to ensure immigration and tax/social security compliance.

Some preliminary questions which the company can ask:-

  1. How are the business days of travelers being tracked?
  2. Is the appropriate work pass being applied for before a FBT travels?
  3. What are the compensation items provided to the FBT during the trips?
  4. Is the company familiar with the various compliance regulations?
  5. Is there any possible corporate tax implications (i.e. Permanent Establishment) in the destination country of the FBT?

Soo Mee Wu
soomee@bdo.com.sg