Employers in Singapore may contribute to an expatriate employee’s pension or provident fund in the employee’s home country. Such contributions made to an overseas pension or provident fund are taxable to the employee. However, as an administrative concession, such contributions are currently not taxable if all the following conditions are satisfied:
- The contributions are mandatory under social security schemes operated, regulated and supervised by the employees' home country government even though the employees are working outside their home country;
- The contributions are not borne by, or no deduction is claimed by, any permanent establishment or company in Singapore; and
- The employees are not working for certain prescribed entities such as an investment holding company, a tax-exempt body, a representative office, a foreign company not registered in Singapore or a service company that adopts the “cost plus mark-up” basis of tax assessment.
It was previously announced by the Inland Revenue Authority of Singapore (IRAS) that the administrative concession will be withdrawn from the Year of Assessment (YA) 2024. This means contributions made by an employer on or after 1 January 2023 to mandatory overseas pension/provident fund will be taxable to the employees and be deductible to the employer as per normal tax rules.
To give employers more time to prepare for the change in the tax treatment, the IRAS has updated its website to indicate that the administrative concession will be withdrawn from the YA 2025 instead of YA 2024. In this regard, the administrative concession will continue to apply to eligible employer’s contributions to mandatory overseas pension/ provident fund made up to 31 December 2023.