Singapore is famous for being a global business center. In fact, the industrious Lion City rates second in
the global ease of doing business index
. It’s no wonder Singapore has a consistent influx of business travelers year in and year out.As your employees chase down meetings from Marina Bay Financial Centre to Raffles Place and beyond, they’re liable to rack up those miles for reimbursement. But first, you’ll need a thorough understanding of current mileage rates in Singapore to ensure you’re neither overpaying nor under-compensating your employees.In this article, we’ll guide you through everything you need to know on mileage rates in Singapore.How does mileage allowance in Singapore work?
Mileage allowance refers to the amount employees can claim to cover the cost of fuel, insurance, road tax, and wear and tear when traveling for business using a personal vehicle.However, Singapore (unlike many other countries) does not have a standard mileage rate mandated by a centralized governmental body. Instead, the rate of mileage reimbursement for employees depends on your company’s policy and general benchmarks for various industries.While no official rates for mileage allowance exist, The Inland Revenue Authority of Singapore (IRAS) provides
acceptable per diem mileage rates in Singapore
as $150 per day. However, these rates are strictly for income tax return purposes and don’t necessarily determine the allowance employers need to pay their employees.In other words, it’s totally up to a combination of your company’s policy and the individual costs employees incur while traveling on business in Singapore. Employees should save their receipts for fuel, parking, and other trip expenses in a log. These expenses serve as the basis for your traveling allowance reimbursement rates. If you’ve included other car benefits, you’ll need to add the value of these benefits to your employee’s taxable income.Providing car-related and travel allowance benefits to your employees makes them responsible for paying the income tax on these benefits. As an employer (self-employed or otherwise), you’ll need to include the value of these additional benefits in your employee’s Keep in mind that you’ll need to file your IR8A complete with the value of car-related benefits for the previous years’ benefits by the 1st of every March. To provide a car to your employee, you’ll also need a Certificate of Entitlement (COE), representing the right of vehicle ownership for a period of ten years.The IRAS also provides standardized goods and services (GST) tax treatment guidelines for car and car-related benefits provided by the employer:
Form IR8A
.This document has several purposes, including:- Stating annual remuneration: including salaries, bonuses, benefits, and the total remuneration you pay to each employee
- Tax compliance: the IRAS uses the information in the IR8A to assess income tax payable by each employee, including all income tax components (such as car-related benefits)
- Record keeping and audit trail: IR8A information acts as an official record for employee remuneration and provides an audit trail for any discrepancies and issues that arise during tax assessments
Nature of car-related benefit
Taxable or not taxable
Car provided by an employer
Taxable
Driver or chauffeur services
Taxable
[Annual cost of driver x (private mileage / total mileage)]
Car park charges are reimbursed or provided by the employer at one or more locations when an employee drives from home to work and parks their own car in the office car park or a nearby car park
Taxable
Reimbursement on car park charges for client meetings
Not taxable
Car park charges are reimbursed by the employer when an employee parks their own car at the airport when he goes on business trips
Taxable
Allowance on electronic road pricing (ERP) charges
Taxable
Reimbursement on ERP charges
Not taxable if charges are incurred for work purposes
Reimbursement on mileage for business usage
Not taxable.
The rate of reimbursement for mileage depends on the company's policy. While there is no prescribed mileage or tax rate, the reimbursement made by the company should be reasonable.
Taxes, repairs and maintenance expenses of employee's own vehicle
Taxable
Incidental benefit (including any reimbursement of petrol and car park charges) derived from a commercial vehicle provided by the employer (e.g. motorcycle, van, truck, minibus, lorry) when the employee drives the vehicle home from work and vice versa
Not taxable
With the table above, you can determine which car-related benefits are subject to income taxes for your employees. However, if you’ve provided a car to your employees as a benefit, you’ll still need to determine the benefit’s value for your IR8A.
How to reimburse your employees for mileage in Singapore
While Singapore doesn’t have mandated reimbursement policies, your company will still need to create a standardized practice to ensure compensation. Here’s how you can create a structured approach and reimburse employees for mileage:
- Establish a mileage reimbursement policy: start by developing a clear document outlining the conditions for mileage reimbursement, including guidance on reporting mileage, eligible trips, rate calculations, and examples
- Align your company reimbursement rate with industry standards: it’s up to you to set a fair reimbursement rate for employee mileage. According to industry standards and rates by international companies, the typical reimbursement rates range between SGD 0.50 to SGD 0.80 per kilometer.
- Have employees record and submit mileage logs: employees should document the date, trip’s purpose, location, destination, and the total distance traveled through either a physical logbook or a digital tracking tool.
- Introduce a process for submitting mileage claims: next, set up a process for employees to submit mileage claims. Typically, this involves filling out a mileage reimbursement form, attaching a log, and necessary receipts.
- Set up a review, approval, and payment process: allocate reviewing, approval, and payment for mileage reimbursement rates to managers, supervisors, and your finance team. Establish a system and determine whether reimbursement will be added to your employees’ salary or be a separate expense reimbursement.
It’s as simple as that! Keep in mind that with highly flexible and tax-free mileage allowance rates comes great responsibility. Keep your pulse on the reimbursement rate ranges, as they’re subject to change each year.
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Mileage allowance in Singapore FAQs
Why doesn’t Singapore have a mandated mileage allowance rate?
What type of travel expenses are commonly reimbursed in Singapore?
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