Depending on the situation and the value of the gifts, some gifts given by employers to employees may be subject to taxation in Singapore. Gifts given in conjunction with public holidays, for the employee’s birthday or wedding, or for the birth of the employee’s child are not taxable unless their value is deemed to be substantial and if the gifts are generally available to all staff.
Gift Value and Taxation
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.
When immovable properties or shares are given as gifts, they are also taxed differently compared to most other gifts. Both immovable properties and shares are related to stamp duty charges when they are given as gifts.
If a property is transferred to another person as a gift and no consideration is paid to the owner or if the property to be given as a gift is to be distributed without a Will, Intestate Succession Act, or Muslim Law of Inheritance, current stamp duty rates are to be applied.
Ever since February 22, 2014, the first S$180,000 of the property’s market value is to be taxed at a stamp duty rate of 1%. The next S$180,000 of the property’s market value is taxed at 2%, and the remaining amount is subject to a stamp duty rate of 3%.
When shares are transferred to another person as a gift, starting from February 22, 2014, 0.2% of the purchase price or market value of shares must be paid as stamp duty.
Singapore’s tax authorities will conduct audit checks on all documents related to transfers of property or shares as gifts. Anyone who has been found to have deliberately undervalued the value of the property to be transferred, filed and submitted any misleading documents, or underpaid on the stamp duty which should have been paid has committed a serious offense and will be suitably punished. The remaining amount of tax will also be recovered.
To prevent breaking any tax laws, the person who is transferring the property or shares as a gift is highly advised to be aware of any changes or updates related to Singapore taxes. It is also important that the giver of the gifts keeps all documents related to the transfer of the gifts up-to-date.
If you are a foreigner thinking of setting up a business or as an individual in Singapore, it is crucial to have tax advice on Singapore tax residency, income source and incentives for your company or personal tax planning.