Singaporean tax laws define a “substantial” gift as any gift with a value that exceeds S$200. This cap is an increase from that prior to the 2008 year of assessment (YA 2008), when the exemption threshold was S$100. Should the value of any gift exceed S$200, its full value is taxable. This rule applies to both cash gifts and non-cash gifts alike.
The threshold of S$200 applies to each individual gift. For example, if an employee were to receive four gifts with values of S$50, S$180, S$120, and S$70 respectively, none of the gifts would be taxable. However, if an employee were to receive one gift with a value of S$242, then the entire value of the gift would be taxable.
Gifts given in conjunction with bereavement are not treated the same way as other types of gifts are. Such gifts are never taxable, even if their value exceeds S$200.
Non-entertainment gifts given to staff (including working directors) are usually exempt from FBT where the total cost is less than $300 inclusive of GST per staff member.
Gift vouchers fall into the non-entertainment category. A tax deduction and GST credit can also be claimed.
The $300 minor benefits exemption also separately applies to any gifts provided to associates meaning that a similar gift can also be provided to a spouse or partner of the staff member with the same favourable tax outcome.
Providing employees “non-entertainment gifts” of $300 or more GST inclusive is less tax effective. A tax deduction and GST credit can still be claimed, but FBT is payable at the rate of 49 per cent on the grossed-up value (currently 2.0802).
Entertainment expenditure incurred in relation to non-employees (i.e. customers, clients, etc.):
- NOT subject to FBT;
- NO income tax deduction; and
- NO GST credit available
Gifts, as opposed to a bonus, to staff are potentially taxable under the FBT rules which makes most people cringe. Consequently, they decide not to give the staff anything as it just makes more paperwork.
However, there is an exemption to the FBT rules for gifts. Those meeting a particular criteria do not require any FBT or any PAYE tax to be paid. Effectively, the employee gets the full value of the gift without being taxed and the employer still gets a tax deduction for the gift.
To meet the exemption, the criteria are:
The total of all the gifts to one employee must not exceed $300 per quarter, ending March, June, September and December.
The gift must not be cash, or redeemable for cash. For larger employers, the total of all employees' gifts must not exceed $22,500 per annum.
The employer can give gifts of up to $300 to an employee without having to worry about the hassle of FBT returns or including it in their PAYE returns. Multiple gifts can be given to one employee, providing the total for the quarter does not exceed $300 and the total threshold noted above is not breached.
By utilising the FBT exemption for gifts, the employee can effectively receive $1200 per annum tax free, while the employer gets a tax deduction for the gift and has no additional paperwork to complete. A win-win for both parties.
Gifts from employers to employees generally constitute taxable employment income. There is no gift tax in China with respect to gifts between individuals. Hence, any gift payable by employer to his employee will be added to the income of the employee for taxation purpose.