Singapore employers do not need to pay income tax on JSS wage subsidies

Out-Law News | 11 Nov 2020 | 9:59 am | 1 min. read

Employers in Singapore will not have to pay income tax on wage subsidies they receive under the Jobs Support Scheme (JSS).

The Income Tax Act had its reading in parliament earlier this week. The measures relate to the Self-Employed Person Income Relief Scheme (Sirs), JSS or Covid-19 Support Grant for the period of 2021 or 2022.

The Act also includes stricter measures against the practice of missing trader fraud under changed Goods and Services Tax Act (GST). Those guilty of the fraud will face a surcharge equal to 50% of the additional GST or additional income tax payable.

There are currently no surcharges imposed for such arrangements, and those who have flouted the rules are required to pay only the original amount of taxes due.

The Covid-19 Support Grant provides up to $800 a month for three months to Singaporeans and permanent residents who have lost their jobs.

Eligible self-employed people receive $3,000 each in May, July and October 2020 under Sirs.

The JSS launched to help firms to keep people employed during the crisis. The government funds between 25% to 75% of the first $4,600 of gross monthly wages paid to each local employee in a 10-month period and 10% to 50% of the same in the subsequent seven-month period.

Mayumi Soh of Pinsent Masons MPillay, the Singapore joint law venture between MPillay and Pinsent Masons, the law firm behind Out-Law, said, "It is sensible that the JSS payouts are exempt from income tax, as it allows employers to enjoy the benefit of the support grant without incurring additional tax obligations as a result. This also shows that the government has taken the position that the JSS payouts should be considered income, but has taken the policy reason to exempt them from income tax obligations."

"If this position is not taken, employers may find that they are in fact receiving less financial support than they had thought, seeing as the actual support received would be net of taxes paid. The government would also have to gross up the JSS payout amounts if it wished for employers to enjoy the full benefit of the amounts which are currently paid out under the JSS."