Employer providing extra CPF question

[testerjp]

Hi,

If I top up for my employee his CPF Special account say $1000.

Will my employee's chargeable income increase by $1000 for his annual personal income tax declaration?
If it's chargeable, under what area should he key in to?
Is it part of the $7000 RSTU which is tax-deductible?

That $1000 will be considered expenses to my company?

 

[BBCWatcher]

If I top up for my employee his CPF Special account say $1000.
Will my employee's chargeable income increase by $1000 for his annual personal income tax declaration?

IRAS answers most of your questions here. Ordinarily the answer to this question is yes, but possible exceptions apply to your CPF members who are working overseas and to new PRs.

If it's chargeable, under what area should he key in to?

He shouldn’t have to do much of anything since you’ll properly report it to IRAS via the AIS. That same page explains your basic obligations.

Is it part of the $7000 RSTU which is tax-deductible?

No, not when the employer is doing it.

That $1000 will be considered expenses to my company?

It’s just like your other wage expenses.

Have you looked at the Additional MediSave Contribution Scheme (AMCS) instead?

 

[testerjp]

Participation in this scheme is voluntary. Employers may vary the number of employees receiving these additional contributions. Employers may also pay any amount so long as the total contribution to the employee's MediSave Account does not exceed $ 2,730 per year. Any excess contribution will be refunded to the employer without interest. AMCS contributions are not part of the prevailing CPF Annual Limit.

If my 40yo employee already hit BHS $57200.
Next year the BHS say is $60000.

Can i one shot do AMCS $2730 in January 2020?

Then his medisave reach the ceiling again, all his medisave received from wages for the year will overflow to SA?

Will his chargeable income increase by $2730?
I suppose I incur a tax deductible expense of $2730 right?

 

[BBCWatcher]

If my 40yo employee already hit BHS $57200.
Next year the BHS say is $60000.

Can i one shot do AMCS $2730 in January 2020?

There’s no Basic Healthcare Sum limit with AMCS top ups. If your employee has already hit the BHS that’s fine, but AMCS top ups will stay in his MA, pushing it above the BHS. There’s still time to squeeze in an AMCS top up this year, assuming you can get signed up for that scheme.

Then his medisave reach the ceiling again, all his medisave received from wages for the year will overflow to SA?

Yes, provided his SA hasn’t reached the FRS. If it has then the portion of contributions allocated to MA will end up in OA.

To repeat, AMCS top ups always go into MA, even if they push the balance past the BHS.

Will his chargeable income increase by $2730?

No, not unless he has hit the overall $80,000 tax relief limit.

I suppose I incur a tax deductible expense of $2730 right?

Yes, it’s an employee compensation business expense to the employer.

On edit: Correction, it looks like the government changed the AMCS. According to this post if part or all of the AMCS amount is above the Basic Healthcare Sum then the overage will overflow into SA or, if the SA has reached the FRS, into OA.

 

[testerjp]

So if this year, I contribute $2730 via AMCS.
My company suffers a loss of $2730.

My employee's BHS is full so his the ma will overflow and increases his SA by $2730.
His chargeable personal income tax will not increase from the amount, since his total tax relief is below $80k.

For 2020,i top up $2730 again. His BHS should be almost full from this.

Again my company incur an expense of $2730. Correct?

All amount via AMCS is not part of the $7000 rstu so my employee can still top up $7000 for total $7000 tax deductible?

 

[BBCWatcher]

So if this year, I contribute $2730 via AMCS.
My company suffers a loss of $2730.

There are some rules you have to follow. But let's assume you're able to deposit $2,730 into your employee's MA in 2019.

My employee's BHS is full so his the ma will overflow and increases his SA by $2730.

Yes, assuming your employee's SA has at least $2,730 of room below the Full Retirement Sum.

His chargeable personal income tax will not increase from the amount, since his total tax relief is below $80k.

Yes, with that assumption, that's correct.

For 2020,i top up $2730 again. His BHS should be almost full from this.

The 2020 Basic Healthcare Sum hasn't been announced yet, but with another $2,730 added your employee's MA could hit the Basic Healthcare Sum again. It should at least be very, very close.

Again my company incur an expense of $2730. Correct?

That's right, subject to the cap that the Ministry of Manpower explains.

All amount via AMCS is not part of the $7000 rstu so my employee can still top up $7000 for total $7000 tax deductible?

Yes, that's correct, although the $80,000 annual individual tax relief cap applies. Also, the (up to) $2,730 added via the AMCS might push your employee's tax relief on his/her $7,000 Special Account top up partially or fully down into a lower tax bracket.

 

[testerjp]

Ok just checked that the AMCS looks a bit troublesome to commit.

Look like there's no easy way for employer to top up for employee without hitting taxes.

 

[yoongf]

https://www.cpf.gov.sg/Assets/common/Documents/FORM_RSSTPC.pdf

 

[testerjp]

https://www.cpf.gov.sg/Assets/common/Documents/FORM_RSSTPC.pdf

This is the part that confuse me

It says if the employer top up CPF on behalf of the employee, the employee can enjoy the rebate.

But from this, it says that if the employer pay extra CPF contribution, the employee will be taxed.

 

[BBCWatcher]

Look like there's no easy way for employer to top up for employee without hitting taxes.

How about paying a bonus that’s subject to a compulsory CPF contribution?

On edit: The published information is contradictory. However, certainly you could hand $7,000 extra to an employee who then deposits it into his/her own CPF Special Account for tax relief. That’d obviously work all around. Does it particularly matter whether the employer does this directly?

 

[testerjp]

If I pass the 7000 directly to the employee.
The employee's income will increase by 7000 and his chargeable income tax will likewise increase.


I prefer a scenario which allows the company to spend the 7000 as expense. And the employee won't be charged additional personal income tax.

 

[maple96]

If I pass the 7000 directly to the employee.
The employee's income will increase by 7000 and his chargeable income tax will likewise increase.


I prefer a scenario which allows the company to spend the 7000 as expense. And the employee won't be charged additional personal income tax.

are u exploring how to reduce your own company pte ltd business taxable income and at the same time reducing your own employment income from this same business?

 

[alyssax]

are u exploring how to reduce your own company pte ltd business taxable income and at the same time reducing your own employment income from this same business?

sounds like it... he's either contributing to his own CPF or his parents' CPF....

 

[henrylbh]

are u exploring how to reduce your own company pte ltd business taxable income and at the same time reducing your own employment income from this same business?

With my little knowledge of tax, I wouldn't try to answer his questions. That's business talk

 

[BBCWatcher]

If I pass the 7000 directly to the employee. The employee's income will increase by 7000 and his chargeable income tax will likewise increase.

Not if the employee immediately turns around and deposits that $7,000 into his/her CPF Special Account (that has at least $7,000 of room below the Full Retirement Sum). The possible tax relief is exactly the same.

And/or the employee could still defer his/her income tax via a Supplementary Retirement Scheme (SRS) contribution. Qualified SRS withdrawals might end up completely Singapore tax free, depending on the account holder's future tax bracket.

IRAS lists a couple other non taxable forms of compensation here. Notably, group medical insurance (with the benefits provided to all staff) is non taxable, and you've got AMCS possibilities there in addition. I would add that you can throw an office party, and that's often an allowable business expense that's non taxable to the employee. The party must have at least a notional business purchase -- a manager who says a few words about business affairs -- and the benefits must be reasonable in the circumstances. A nice meal is probably OK. For that matter you're certainly allowed to feed employees at the workplace while they're "on the clock." Business trips are generally OK as long as they are for legitimate business purposes. However, the employee is not prohibited from staying longer (at his/her own expense if additional hotel nights -- hotel points can work, of course) or otherwise spending his/her free time enjoying the business destination.

IRAS provides a little related guidance here on special occasion gifts (in short, up to $200 per legitimate special occasion is generally non taxable). Consult a tax expert before doing anything, of course.

 

[The_Davis]

sounds like it... he's either contributing to his own CPF or his parents' CPF....

Usually "my employee" or "my friend" i will link to OP

 

[iMac]

sounds like it... he's either contributing to his own CPF or his parents' CPF....

Ownself pay ownself....Can meh?

Advise TS to seek advise from CPF board or pay a tax expert to handle his company financial matters....Sound too complex..

 

[iMac]

Usually "my employee" or "my friend" i will link to OP

Yea...Trying to top up $1000 in his employee SA...Working backward...Employee salary is about $15k per month...Am I right?

 

[bright_84]

If I pass the 7000 directly to the employee.
The employee's income will increase by 7000 and his chargeable income tax will likewise increase.


I prefer a scenario which allows the company to spend the 7000 as expense. And the employee won't be charged additional personal income tax.

Find a tax professional. You are fringing on the edge and taking any advice from anonymous online sources may bite back later on.