Singapore’s Inland Revenue Authority of Singapore (IRAS) updated its guidance on the tax treatment of employee loan benefits, including interest-free and subsidized interest loans, loans to company directors and waived principal sums. The update also covered the applicable interest rate for calculating taxable benefits for FY 2026.
Singapore’s Inland Revenue Authority of Singapore (IRAS) has updated its guidance on the tax treatment of Benefits Relating to Loans, setting out the tax rules for interest-free and subsidised interest loans, loans provided to company directors and waived principal sums.
The guidance covers loans provided directly by employers as well as loans obtained from financial institutions where the employer pays the interest.
Tax treatment of loan benefits
Interest benefits from interest-free or subsidised interest loans, including housing, vehicle, computer and personal loans, are not taxable where the employer provides the loan directly to an employee and the scheme is available to all employees.
This treatment applies only where the employee does not have substantial shareholdings, or control, or influence over the company by virtue of their shareholdings or otherwise. If this condition is not met, the benefit is taxable.
Where an employer or employee obtains a loan from a financial institution, and the employer pays the interest, the resulting interest benefit is taxable. Interest benefits on loans provided to company directors are also taxable.
The guidance also states that any amount of the principal sum waived by an employer is taxable.
Interest benefit calculation
For calculating the value of taxable interest benefits, IRAS uses a rate set at 1.5% above the 3-month compounded Singapore Overnight Rate Average (SORA) published by the Monetary Authority of Singapore on 1 March and 1 September each year.
For FY 2026, covering 1 April 2026 to 31 March 2027, the applicable rate is 2.6% for April to September 2026, October to December 2026 and January to March 2027. IRAS has also provided an example of how interest benefits are calculated for YA 2026.
The updated guidance provides the applicable methodology and rates for determining taxable loan benefits, while earlier years were subject to previous calculation approaches, including the use of the Average Prime Lending Rate for YA 2023 and earlier.
