On 30 September 2021, the Inland Revenue Authority of Singapore (IRAS) updated its website to provide for simplified tax treatment for expenses incurred on work-related assets to facilitate working from home.
Current Tax Treatment
To facilitate working from home, employers may have instructed their employees to purchase work-related equipment (such as work desks and IT equipment). In some cases, the employer would provide a reimbursement to the employee to purchase the work-related equipment, with the employer retaining ownership of the asset.
Capital assets acquired for the employer’s trade will qualify for capital allowances claim. If the asset is subsequently transferred to the employee (e.g., at the end of the work-from-home arrangement or upon cessation of employment), the employer is required to compute the balancing allowance or charge (BA/BC) based on the open market price of the asset. BA and BC are the difference between the sale proceeds or open market price and the tax written down value (TWDV) of the asset.
Simplified Tax Treatment
The current tax treatment will be simplified by deeming the open-market price of qualifying assets as follows:
- Where the cost of asset is less than or equal to S$2,500, the open market price is deemed to be zero, regardless of the Year of Assessment (YA) of transfer;
- Where the cost of asset is more than $2,500, taking the year of acquisition as the first YA, the open market price will be deemed to be:
- 50% of original cost if the asset is transferred within the second YA;
- 25% of original cost if the asset is transferred in the third YA;
- Zero if the asset is transferred in the fourth or subsequent YA.
The simplified tax treatment is a temporary measure for qualifying assets purchased during the YAs 2021 and 2022, and will be limited to qualifying assets that fall within the following scope:
- The sole purpose of purchasing the asset is to facilitate employees to work from home; and
- Meet one of the following two conditions:
- Asset falls within the Income Tax (Automation Equipment) Rules 2004; or
- Asset is a low-value asset, i.e., does not cost more than S$5,000.
Assets purchased with the intention of serving dual purposes (i.e., for work and for personal use by the employee) and assets purchased with the intention of allowing employees to use them in the office, even if these assets were subsequently used by employees when working from home, are not within the scope and do not qualify for the simplified tax treatment.