Managing employee expenses can be a logistical and administrative nightmare—especially when it involves travel. Whether it’s for a regional sales meeting, overseas training, or short-term assignments, reimbursing travel costs fairly and efficiently is key to maintaining employee satisfaction and financial control. One solution? Per diem allowances.
In this comprehensive guide, we’ll break down what per diem allowance means in Singapore, how it's calculated, whether it’s taxable, and how HR and finance teams can streamline the process using expenses management tool.
What Is Per Diem Allowance?
The term per diem comes from Latin, meaning “per day.” In a business context, a per diem allowance is a daily allowance paid to employees to cover expenses incurred while travelling for work. This includes meals, accommodation, and incidental costs such as transport or communication.
Rather than reimbursing employees for actual expenses (which requires collecting receipts and reviewing claims), companies pay a fixed daily rate. It simplifies the admin process and gives employees flexibility.
Is Per Diem Allowance Common in Singapore?
Yes, many companies in Singapore—especially multinationals and SMEs with regional operations—use per diem allowances. It is particularly popular for:
- Overseas business travel
- Project-based assignments abroad
- Short-term secondments
- Trade shows and conferences
The allowance rates often vary by destination, reflecting the cost of living in each country or city.
Benefits of Per Diem Allowance
1. Simplified Claims Process
No more mountains of receipts or itemised reimbursements. Employees know what they’ll receive, and employers can easily budget for travel costs.
2. Cost Predictability
With fixed rates, finance teams can estimate trip expenses upfront without surprises.
3. Employee Convenience
Employees don’t need to dip into their savings or get frustrated with delayed reimbursements.
4. Administrative Efficiency
HR and payroll teams can process claims faster, improving operational efficiency—especially when integrated with platforms like claim management.
What Does Per Diem Cover?
Typically, a per diem allowance is meant to cover:
| Expense Category | Covered by Per Diem? |
|---|---|
| Meals (breakfast, lunch, dinner) | Yes |
| Lodging / hotel stays | Yes (if not prepaid by company) |
| Local transport (taxis, trains) | Yes (sometimes partial) |
| Incidental expenses (e.g. laundry, tips, Wi-Fi) | Yes |
| Flights / airfares | No (usually booked by company) |
| Visa / travel insurance | No (typically reimbursed separately) |
Note: Some companies separate accommodation from the general per diem, providing it directly via hotel bookings.
MOM and IRAS Guidelines on Per Diem in Singapore
In Singapore, there is no legal obligation under the Employment Act to provide per diem allowances. However, companies are encouraged to:
- Be transparent about policies
- Define entitlements clearly in employment contracts or travel policies
- Follow reasonable market rates
Tax Implications: Is Per Diem Taxable?
According to IRAS (Inland Revenue Authority of Singapore) here is the tax treatment of payments/expenses incurred overseas:
| Nature | Taxable/Not Taxable |
| Per diem allowance | Amount in excess of IRAS acceptable rates are taxable. See Per Diem Allowance (below). |
| Per diem reimbursement for business expenses incurred | Not taxable E.g. reimbursements for actual amount incurred on meals, laundry, telephone calls, overseas accommodation, overseas airport transfer and entertainment expenses for business purpose. |
| Combination of per diem allowance and reimbursement | The reimbursement portion is not taxable. As for the per diem allowance, the amount in excess of IRAS acceptable rates are taxable. |
| Parking fees at the airport when employee drives to the airport | Taxable |
| Travel insurance premium | Not taxable if it is for the period which an employee is overseas for business. |
| Travel between home and airport due to overseas business trips | Reimbursements made in 2005 and subsequent years are not taxable. Per-trip allowance for an actual trip made is not taxable from 2007 onwards. |
| Payment to buy warm clothing for business trips | Allowance is taxable. This allowance does not form part of the per diem allowance. Reimbursement based on actual expenses incurred is not taxable. |
| Payment to buy luggage for business trips | Allowance is taxable. This allowance does not form part of the per diem allowance. Reimbursement based on actual expenses incurred is not taxable. |
Always refer to IRAS’s official site or speak to a tax advisor to stay compliant.
What Are the IRAS-Acceptable Per Diem Rates?
Each year, the Inland Revenue Authority of Singapore (IRAS) publishes a set of acceptable per diem rates for various overseas destinations. These rates are intended for income tax assessment and do not dictate what employers must pay. Rather, they set the threshold for taxable vs non-taxable allowances.
Important: If your company pays per diem above the IRAS acceptable rate, the excess amount is taxable and must be reported accordingly.
The acceptable rates vary by country and are reviewed annually. For the latest information, refer directly to the acceptable rates for per diem allowance.
Sample Per Diem Policy Template
1. Policy Purpose
This policy outlines the per diem allowance provided to employees travelling for official business, ensuring consistency, transparency, and administrative efficiency.
2. Eligibility
- Applicable to all full-time employees travelling on approved work-related assignments, both regionally and internationally.
- Temporary or contract staff may be considered on a case-by-case basis.
3. Scope of Coverage
The per diem allowance is intended to cover:
- Daily meals (breakfast, lunch, dinner)
- Local transportation (e.g. taxis, ride-hailing, public transport)
- Incidental expenses (e.g. laundry, minor tips, internet)
Note: Accommodation expenses are not included in the per diem allowance. These will be:
- Prepaid by the company, or
- Reimbursed separately upon submission of receipts.
4. Per Diem Rates
- Rates are determined based on the destination and duration of travel.
- Refer to Appendix A for a complete table of destination-specific rates.
- Rates will be reviewed annually or when significant changes in cost of living arise.
5. Payment Procedure
- Per diem allowances will be disbursed prior to departure, typically via the monthly payroll cycle or as a separate transfer.
- Travel must be approved at least two weeks in advance to allow for timely disbursement.
6. Receipt Requirements
- Employees are not required to submit receipts for expenses covered by per diem.
- This policy assumes responsible spending in accordance with the allowance provided.
7. Unused Allowances
- Employees may retain unspent per diem amounts.
- However, the company reserves the right to review allowance reasonableness periodically.
8. Exceptions & Special Approvals
- Any deviations from this policy (e.g. extended stays, high-cost destinations, or special dietary needs) must be approved in writing by:
- The employee’s Department Head, and
- The HR Department
Per Diem vs Actual Reimbursement: Which Is Better?
| Criteria | Per Diem | Actual Reimbursement |
|---|---|---|
| Admin effort | Low | High |
| Predictability | High | Variable |
| Employee flexibility | High | Low |
| Fraud risk | Lower | Higher (with inflated receipts) |
| Accuracy | Lower | High |
Companies often adopt a hybrid approach, using per diem for travel expenses and reimbursement for items like airfares, taxis, or hotel bookings.
Do I Need to Report Per Diem Allowance on Form IR8A?
Yes — but only if the per diem allowance exceeds the IRAS acceptable rate.
Here’s how it works:
| Scenario | Report in Form IR8A? | Taxable for Employee? |
|---|---|---|
| Per diem ≤ acceptable rate | No | Not taxable |
| Per diem > acceptable rate | Yes (only the excess) | Taxable (only the excess) |
Note: You cannot use lower per diem from one trip to offset higher amounts from another trip.
What If the Employee Is Travelling Into Singapore?
The same tax logic applies for inbound business travel from 1 January 2016 onwards:
| Scenario | Report in Form IR8A? | Taxable for Employee? |
|---|---|---|
| Per diem ≤ acceptable rate | No | Not taxable |
| Per diem > acceptable rate | Yes (only the excess) | Taxable (only the excess) |
There is one exemption: if the employee travels into Singapore for business purposes for 60 days or less in a calendar year, their earnings are not subject to tax here.
Looking for a complete breakdown of employer tax reporting? Check out our guide to Form IR8A and Auto-Inclusion Scheme (AIS) — we walk you through everything.
How to Calculate the Taxable Portion of Per Diem (with Examples)
Here are two examples to illustrate how to assess tax liability and reporting requirements:
Example 1: Allowance Below the Acceptable Rate
- Destination: Canada
- IRAS Acceptable Rate (2025): $160/day
- Allowance Given: $155/day
- Trip Duration: 7 days
Since $160/day is below the acceptable rate, the entire $1,085 allowance is non-taxable and does not need to be reported on Form IR8A.
Example 2: Allowance Exceeds the Acceptable Rate
- Destination: Japan
- IRAS Acceptable Rate (2025): $170/day
- Allowance Given: $180/day
- Trip Duration: 6 days
Calculation:
Excess per day = $180 - $170 = $10
Total taxable amount = $10 × 6 days = $60
Only the $60 excess should be in Form IR8A and treated as taxable income.
Are CPF Contributions Required for Per Diem?
Whether CPF applies depends on how the allowance is administered:
| Type of Per Diem | CPF Payable? | Notes |
|---|---|---|
| Lump Sum Allowance | Yes | Considered part of employee's wages |
| Reimbursement for Actual Expenses | No | Treated as business expense reimbursement |
If your company provides a flat per diem upfront, CPF applies. But if you’re reimbursing for specific receipts (e.g. hotel or meals), CPF contributions are not required.
Want to go deeper into CPF rules? Read our Employer's CPF Contribution Guide for full clarity on what counts as wages.
The Smarter Way to Handle Travel Allowances
Per diem allowances are a practical, fair, and efficient way to manage business travel expenses—especially as companies move away from traditional receipt-based reimbursements. In today’s fast-paced work environment, having clear policies and streamlined processes is key.
While Gutsy's team still working on per diem allowances feature, our HR and payroll platform helps businesses stay organised and compliant by simplifying core processes like payroll, leave tracking, and employee data management.
Looking to streamline your HR and payroll operations? Book a demo with Gutsy to see how we can support your team’s efficiency and compliance.
