IRAS Tax Treatment for Medical Expenses


IRAS allows tax deductions for medical expenses of employees. These deductions are normally restricted to 1% of the total salary of the employee accrued for the year. So, if the salary of an employee is S$200,000, the amount deductible from taxes can’t be more than S$2,000, unless the employer has implemented a portable medical benefit scheme.

Medical expenses eligible for tax deduction

  • Maternity care
  • Natal care
  • Preventive and therapeutic treatments
  • Dental treatment
  • Medical and dental insurance premium
  • Medical care provided by the employer
  • Cash allowances in place of medical expenses
  • Employer’s contribution to the employees’ CPF Medisave accounts

Portable medical benefits for employees

Employers can claim additional tax exemptions by adopting portable medical benefits for their employees. With portable medical schemes, employees are allowed to keep their medical benefits even after they change their jobs. Non-portable medical benefits cease to exist when an employee stops working or changes jobs.

There are three portable medical schemes available. When an employer implements any one of these, the cap on tax-deductible medical expenses increases to 2% of the total remuneration of the employee.

  • Portable Medical Benefits Scheme (PMBS)
  • Transferable Medical Insurance Scheme (TMIS)
  • Portable Integrated Shield Plans (ISP) to provide inpatient medical insurance benefits. The additional deduction excludes rider premiums. However, if the medical expenses (including rider premium) are less than 1% of the total salary of the employees, the full amount will be deductible.

Here’s an illustration of how it works with and without portable medical benefits:

Total remuneration of the employee Medical expenses Deductible amount when the employer hasn’t implemented portable medical benefits Deductible amount when the employer has implemented portable medical benefits
    Deductible amount — 1% of S$200,000 = S$2,000 Amount that doesn’t qualify for tax deductions Deductible amount —2% of S$200,000 = S$4,000 Amount that doesn’t qualify for tax deductions
S$200,000 S$4,000 S$2,000 S$2,000 S$4,000 Nil

Please note that employees cannot claim any tax deductions on premiums of employer-provided medical care.

Ad-hoc contributions to the employees’ Medisave accounts

If the employer has not implemented any of the portable medical benefits, but has made ad-hoc contributions to their employees’ Medisave accounts, they will still be able to enjoy additional tax deduction over the regular 1%. This additional tax deduction, however, can’t be more than S$2,730 from 1 January 2018. In any case, the total tax deduction for medical expenses can’t exceed 2% of the employee’s remuneration.

Let’s say the total salary of an employee in a financial year is S$4 million. The employer adopted no portable medical benefits but made contributions to the employees’ Medisave accounts. Currently, the cap for such contributions is S$2,730 per employee per year. Total deduction can’t exceed 2% of the employee’s remuneration — 2% of S$4 million (S$80,000).

Here’s an illustration of how tax deductions will be calculated when the employer makes only the ad-hoc Medisave contributions:

Case (A) Medical expenses when there are no ad-hoc Medisave contributions made by the employer (B) Deductible amount (1% of the employee’s remuneration) (C) Ad-hoc Medisave contributions made by the employer (D) Additional deductions allowed, with ad-hoc Medisave contributions made by the employer Lower of (C) or [S$80,000-(B)]
1 S$30,000 S$30,000 S$20,000 S$20,000 Lower of S$20,000 or S$50,000 (S$80,000-S$30,000)
2 S$40,000 S$40,000 S$20,000 S$20,000 Lower of S$20,000 or S$40,000 (S$80,000-S$40,000)
3 S$45,000 S$40,000 S$45,000 S$40,000 Lower of S$45,000 or S$40,000 (S$80,000-S$40,000)
4 S$25,000 S$25,000 S$40,000 S$40,000 Lower of S$40,000 or S$55,000 (S$80,000-S$25,000)

Employee remuneration

Employee remuneration includes:

  • Salary
  • Allowances
  • Bonuses
  • Director’s remuneration
  • CPF contributions

Employee remuneration excludes:

  • Directors’ fees
  • Cash allowances in place of medical expenses
  • Other benefits, such as accommodation, employee stock options, and home leave passage
  • Medical expenses
  • Foreign worker levy
  • Skills development levy

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