What you need to know to claim gifts and celebrations this year

Chinese New Year parties

Costs incurred to organise a company new year party for staff are considered as staff welfare and should be deductible to the company. These are typically considered as benefits to foster goodwill or promote camaraderie among staff and would be exempt to staff if the new year party is available to all staff.

Gifts to employees

From the Company’s perspective, expenses related to gifts to staff are tax deductible as they are considered as staff welfare cost.

From the employees’ perspective, red packets provided to all staff which are below S$200 per gift is exempt in the hands of the employees as they are not substantial in value.

Gifts to customers or clients

At this time of year, it is common for businesses to provide gifts to their clients and customers as an act of goodwill and appreciation for their support to the business.

Gifts to clients are generally deductible to companies if they are incurred in the production of income.

Specific GST matter on gifts and parties

If you are a GST-registered company, you can claim the GST incurred on the gifts and cost of the party (unless the party is extended to family member) as input tax, provided that all the conditions for claiming input tax are met.

However, when a total value of the gift items of more than S$200 (excluding GST) are given to employees/customers/clients on a per occasion basis by the GST registered company, output tax must be accounted for (without raising a tax invoice). This essentially nets off the input tax available for claim.

As an administrative concession, IRAS has agreed that if input tax is not claimed on the cost of gift items, output tax is not required to be deemed. Or, where purchases of gift items are made from a non-GST registered supplier, there is no need to account for output tax since no input tax was incurred.