Singapore: Tax treatment of termination payments made under separation agreement

Singapore: Tax treatment of termination payments

The High Court affirmed the July 2020 findings of the Board of Review, that a termination payment made to a former managing director of a Singapore company pursuant to an employment separation agreement was not taxable to the individual because it constituted compensation for loss of office.


The case is: Comptroller of Income Tax v. Forsyth [2020] SGHC 258


In general, payments made to compensate for the loss of an income source are regarded as capital receipts and are not taxable in Singapore.

The taxpayer in this case had served as managing director with a Singapore company that eventually wound down its business operations in August 2018. In the employment contract, there were specific clauses that provided for termination and other payments in the event of the termination of the taxpayer’s employment. The taxpayer asserted that the entire severance payment was compensation for the loss of office and was not taxable.

The Board of Review agreed and concluded that the entire payment was not taxable because it constituted compensation for loss of office and for a non-competition covenant.

The Comptroller appealed, and the High Court dismissed the appeal, thereby upholding the decision of the Board of Revenue.

Read a March 2021 report [PDF 360 KB] prepared by the KPMG member firm in Singapore

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