Tax Write-Up: Employers don’t have to pay income tax on JSS wage subsidies

By: Angela, Aries, Huiyi, Kimhan (Research and Training Department)

In this month’s publication, we refer to an article by The Straits Times on the tax exemption applied to the subsidies granted by the government to the corporations and individuals as well as the issue about missing trader fraud and tax avoidance in Singapore.

As you recalled, the Jobs Support Scheme that was granted to employers in the view of the pandemic to retain local workers. It was in the form of wage subsidies paid to Singaporean or permanent residents. Meanwhile, the government had also disbursed cash to eligible self-employed people under the Self-Employed Person Income Relief Scheme. In addition, the Covid-19 Support Grant had also provided money to those who had lost their jobs. All these monetary subsidies are tax exempted under the changes made in the Income Tax Act passed in the parliament. This means that both the corporations and individuals do not need to pay tax on the cash grants. The tax exemption is applicable for the year of assessment 2021 or 2022 depending on the payout dates. 

In last December, it was found out that more than 300 businesses audited in Singapore were involved in missing trader fraud. Missing trader fraud occurs when a seller collects tax from the buyer and disappears without passing the tax over to the taxman. The buyer then continues to claim tax refund resulting in the loss of cash in the goods and services tax (GST) system. Hence, there will be stricter measures put in place where the Inland Revenue of Singapore (IRAS) will be allowed to deny GST refund claims.

With GST being levied on the import of digital services, there are more stringent tax avoidance arrangements involving penalties such as surcharge will be imposed under the changes in Income Tax Act and GST Act.

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