Employers don't have to pay income tax on JSS wage subsidies

Exemptions apply for year of assessment 2021 or 2022, depending on payout dates


Employers who have received wage subsidies under the Jobs Support Scheme (JSS) will not have to pay income tax on the subsidies, as part of new rules passed in Parliament.

Those who have received government payouts under the Self-Employed Person Income Relief Scheme (Sirs) or Covid-19 Support Grant, among other schemes, also do not have to pay income tax on these payouts, after changes were made to the Income Tax Act.

The exemptions will apply for the year of assessment 2021 or 2022, depending on when payouts were made.

Presenting the Bill for debate yesterday, Second Finance Minister Lawrence Wong said: "This will allow citizens and business owners to benefit from the full amount of the support measures, without having to pay tax on them."

The JSS, which comprises wage subsidies to help retain local workers, was recently extended to cover wages paid up to next March for companies in sectors hit harder by the Covid-19 crisis, and up to next month for sectors that are managing well.

The subsidy funds up to 75 per cent of the first $4,600 of gross monthly wages paid to each Singaporean or permanent resident employee.

Meanwhile, Sirs disburses up to a total of $9,000 in cash over nine months to each eligible self-employed person.

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

Changes were also made to rules governing the goods and services tax (GST) to allow the authorities to take stricter measures to counter the practice of missing trader fraud.

As at last December, more than 300 businesses in Singapore audited were suspected to be involved in such practices, and the total GST involved is about $450 million, said Mr Wong, who is also Education Minister.

Missing trader fraud occurs when a seller disappears after collecting the GST charged on sales and does not hand it over to the taxman. Meanwhile, other businesses along the supply chain continue to claim refunds of GST incurred on their purchases.

Fraudsters are thus able to extract cash from the GST system.

To counter this, the Inland Revenue Authority of Singapore will be allowed to deny the GST refund claims by a business if the company knew or should have known that the purchase was part of a fraudulent arrangement, among other things, said Mr Wong.

More will also be done to deter tax avoidance arrangements.

Errant taxpayers will face a surcharge equal to 50 per cent of the additional GST or additional income tax payable, as part of changes to the Income Tax Act and GST Act.

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.

In response to Workers' Party MP Louis Chua (Sengkang GRC), who had asked for an update on the progress of the Government's study on levying a tax on e-commerce transactions for imported goods, Mr Wong said there will be updates on the issue in time.

He added that while GST is levied on the import of digital services - commonly referred to as the "Netflix tax" - taxing e-commerce transactions is more complex, as shipments can be sent to different countries in order to bypass tax.

Mr Wong said the Government is continuing to study this matter carefully to see how a proper tax regime can be put in place.

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A version of this article appeared in the print edition of The Straits Times on November 04, 2020, with the headline Employers don't have to pay income tax on JSS wage subsidies. Subscribe