Why does the Per Diem Allowance not have the Tax checkbox ticked?
You might have noticed that the Per Diem Allowance under the Recurring and Adhoc Payment/Deduction tab in our system only has the CPF checkbox ticked, and not the Tax checkbox.
That's because, by default, our Per Diem Allowance pay item is non-taxable. However, this allowance is quite special, and whether it's taxable or not depends on the situation.
Should the Per Diem Allowance be Taxable?
To determine if your Per Diem Allowance should be taxed, you can refer to the guidelines set by IRAS and CPF:
IRAS
If the "Per Diem Allowance" exceeds the acceptable rate according to IRAS then the pay item is taxable: https://www.iras.gov.sg/taxes/individual-income-tax/employers/understanding-the-tax-treatment/per-diem-allowance
CPF
For CPF payable, per diem allowance is subject to CPF contributions by default: https://www.cpf.gov.sg/content/dam/web/employer/faq/employer-obligations/documents/Which_allowances_and_payments_attract_CPF_contributions.pdf
How does Talenox handle Per Diem Allowance by default?
“Per Diem Allowance” under the Recurring and the Adhoc Payment/Deduction tab will have only the CPF checkbox ticked and not the Tax checkbox.
Currently, our "Per Diem Allowance" pay items in the system are non-taxable as a default.
How Should I Proceed with Per Diem Allowances?
To proceed with Per Diem Allowances, there are two options available.
The first option is to create two lines of Per Diem Allowances and tick the Tax checkbox for the first pay item, untick the Tax checkbox on the second pay item, and include a remark in the Remarks field before processing.
The second option is to create a Custom Pay Item of Per Diem Allowance (Taxable) to differentiate between pay items in the list during payroll processing.
The guide to creating custom pay items is available here:
Are CPF contributions payable on "per diem" payments?
“Per diem” payments refer to money paid to your employees for daily living expenses, and include the additional expenses incurred for living away from home. They may also be given for trips made by your employees to attend overseas training and conferences where the payments are meant to cover certain living expenses incurred overseas such as the cost of meals, transport expenses and other incidental expenses like laundry.
“Per diem” payments that are given as a lump sum allowance:
CPF contributions are payable on “per diem” payments that are given as a lump sum allowance as they increase your employee’s wages.
“Per diem” payments that are given as reimbursements for official purposes:
CPF contributions are not payable on “per diem” payments that are given as reimbursements for expenses incurred for official purposes (e.g. accommodation, meal expenses).
As the employer, you must be able to prove that the reimbursements are for expenses incurred for official purposes. The amount reimbursed must not exceed the actual expenditure.
We hope this helps! If you need further clarification, please refer to IRAS' FAQ clarifications on the tax treatment of Per Diem Allowance.