The Central Provident Fund (CPF) Board in Singapore recently provided an update to the treatment of cash reimbursements made under employee/flexible benefits schemes which will take effect from 1 January 2020. Consequently, reimbursements for dental treatment for an employee’s spouse and child will no longer attract CPF contributions while reimbursements to an employee for holiday-related expenses will attract CPF, regardless of whether such reimbursement is attributable to the employee or his/her immediate family member.
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The Central Provident Fund (CPF) Board in Singapore recently provided an update to the treatment of cash reimbursements made under employee/flexible benefits schemes which will take effect from 1 January 2020.1 Consequently, reimbursements for dental treatment for an employee’s spouse and child will no longer attract CPF contributions while reimbursements to an employee for holiday-related expenses will attract CPF, regardless of whether such reimbursement is attributable to the employee or his/her immediate family member.
Flexible benefit schemes are commonly used by employers to allow employees to claim reimbursement for a variety of staff benefits. However, operating such schemes may create additional complexity in respect of Central Provident Fund contributions.
This update brings greater clarity around certain forms of cash reimbursements and the application of CPF contributions.
In general, CPF contributions are payable on wages which are paid to employees as reward for services rendered. Section 2(1) of the CPF Act defines wages as remuneration in money, including any bonus, due or granted to a person in respect of this employment. Wages include payments for employee’s expenses which are not necessarily incurred on behalf of the employer (i.e., reimbursement of personal expenses). In contrast, cash reimbursements to employees for expenses incurred necessarily on behalf of the employer (i.e., business expenses) are not regarded as wages for CPF purposes, provided that the reimbursement does not exceed actual expenditure.
Effective 1 January 2020, the CPF treatment of employee benefits via cash reimbursement is summarized below.
|Cash Re-imubrsements||Subject to CPF?|
|Employee||Employee's spouse||Employee's child|
|Medical treatment2, 3||No||No||No|
|Dental treatment2, 3||No||No1||No1|
1 Applicable with effect from 1 January 2020.
2 Expenses incurred locally or overseas (including medical tests such as blood tests, x-ray, etc.) must be deemed necessary by a registered doctor, dentist, or Traditional Chinese Medicine (“TCM”) practitioner.
3 Expenses incurred on health screenings or medical examinations that are not part of medical treatment by a registered doctor, dentist, or TCM practitioner (i.e., employees go for the health screening or medical examination on their own accord), will attract CPF contributions.
4 CPF contributions are payable on reimbursement of personal expenses (e.g., medical insurance, gym memberships, vision care, child care, elderly care fees, etc.)
This update is a welcome change as it provides greater clarity on the overall CPF treatment of select cash reimbursements under flexible benefit schemes and provides further consistency on the CPF treatment for reimbursement of personal expenses. This is expected to ease the administrative burden on employers when undertaking CPF reporting.
This article is excerpted, with permission, from “Update to Central Provident Fund (‘CPF’) treatment of employee benefits given via cash reimbursements – Effective 1 January 2020,” in Tax Alert (Issue 09, November 2019), a publication of the KPMG International member firm in Singapore.
1 See this webpage of the Central Provident Fund Board.
The information contained in this newsletter was submitted by the KPMG International member firm in Singapore.
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