Say two companies want you at the same salary. One hands you the keys to a new S$180,000 company car. The other pays you a S$1,100 monthly car allowance and leaves the car to you. On your tax bill the gap is small: the company car comes out about S$286 a year cheaper. The bigger difference is who pays for the car, because after tax the allowance covers less than half of what the same car costs to own and run. Here's how IRAS taxes each kind of car perk in Singapore, the company car formula with a worked example, and where each figure goes on your Form IR8A.
IRAS starts from one rule. Everything you get because of your job is taxed unless it's exempt or IRAS has made an exception for it, which it calls a concession. That includes perks given in kind, like a car, not just cash.
For cars, most cases come down to what the trip was for. Money for driving you do for work is usually tax-free. Money towards your commute or your own car usually isn't.
The table puts IRAS's car rules and its transport rules side by side.
| What your employer gives you | Taxable? | IRAS condition or formula |
|---|---|---|
| A fixed monthly car or transport allowance | Yes, in full | No formula, the whole amount is income |
| A company car you can use privately | Yes | 3/7 x [(car cost - PARF rebate) / 10 + running costs] |
| A driver or chauffeur | Yes | Annual cost of driver x private mileage / total mileage |
| Mileage paid for work trips in your own car | No | No IRAS rate, but the rate must be reasonable |
| Mileage paid for private driving, including your commute | Yes | Taxed as a benefit |
| Parking at or near the office when you drive in from home | Yes | Season, daily or free tickets, at one office or several |
| Parking paid back for client meetings | No | Must be for work |
| Parking at the airport while you are on a business trip | Yes | The drive to the airport can still be claimed tax-free |
| A fixed ERP allowance | Yes | Taxed like any allowance |
| ERP charges paid back | No | Only charges incurred for work |
| Road tax, repairs and servicing of your own car | Yes | Whatever your employer pays |
| Transport home after ad hoc overtime | No | The policy must be open to all staff |
| Petrol and parking when you take a company van, lorry or motorcycle home | No | Commercial vehicles only |
To IRAS, a car allowance is pay. The car benefit formula doesn't apply to it, so the whole allowance is declared, whatever you spend it on and whether you own a car or not.
A S$900 monthly allowance is S$10,800 of extra income for the year, taxed like the rest of your pay.
You can't knock your car costs off it either. IRAS lets you deduct work expenses your employer didn't pay back, as long as they aren't private. But it lists the costs of your own car, and travel between home and office, as claims you can't make.
Bus, train and taxi fares for work trips can be deducted. Nothing you spend on your own car can.
A car allowance also counts as wages for CPF. The CPF Board lists transport subsidies among the payments that attract CPF contributions. Money paid back for travel on official duty doesn't.
So unless your pay is already above the CPF ordinary wage ceiling, part of a car allowance goes into your CPF accounts instead of your bank account. Your employer adds its share on top.
With a company car, you're not taxed on the price. If your employer owns or leases the car and lets you use it outside work, IRAS works out a value for that use and taxes you on it.
For a new car, where your employer is the first owner, IRAS has used this formula since YA 2020:
Taxable value = 3/7 x [(car cost - PARF rebate) / 10 + running and maintenance costs paid by your employer].
A company bought a new car for S$120,000, COE and fees included, and gave it to an employee. In 2025 it spent S$10,450 to run the car. The PARF rebate at 9 to 10 years is S$24,000.
The car cost part is scaled down by days. A car handed to you on 1 August is yours for 153 days of the year. So (car cost - PARF rebate) / 10 is multiplied by 153/365.
Running costs are what your employer actually spent in that period. Insurance and road tax are often paid a year ahead. IRAS accepts the running costs incurred in the calendar year, so employers don't have to split those bills.
For a used car, the 10 in the formula becomes B. B is the time left on the COE from the day your employer bought the car, rounded up to whole years. In IRAS's example the COE has 6 years and 2 months left, so B is 7.
If the car was more than 10 years old when your employer bought it, there's no PARF rebate to take off. The value is then 3/7 x (car cost / B + running costs).
Your employer may renew the COE on a car it already owns and keep you in it. The value is then 3/7 x [(C + D) / E + running costs].
C is the price paid to renew the COE. D is the PARF rebate given up by not deregistering the car at 10 years. E is how long the renewed COE lasts, currently 5 or 10 years.
Our guide to renewing a COE covers what the renewal itself costs.
For a car your employer rents, the rent takes the place of the car cost. The value is 3/7 x (rental cost + the running costs the leasing company leaves to your employer).
In IRAS's example, the rent is S$30,000 a year and the running costs are S$6,500. That gives 3/7 x S$36,500 = S$15,642.
IRAS publishes a Car Benefit Calculator spreadsheet for employers that runs every version of the formula. If the benefits-in-kind figure on your tax bill looks high, ask HR for the working with your car's numbers.
A driver is valued a different way: the driver's yearly cost, times your private kilometres over total kilometres. Unlike the car formula, this one needs a record of private and work kilometres.
Say a driver costs your employer S$42,000 a year and 30% of the kilometres are private. Then S$12,600 is added to your income, reported apart from the car.
IRAS has no rule written for fuel cards. What counts is whose car gets filled. With a company car, petrol your employer pays for, by card or by refund, is a running cost inside the formula, so 3/7 of it is taxed.
With your own car, IRAS taxes any road tax, repairs and servicing your employer pays, and any private mileage it pays you back. None of its concessions covers petrol for private driving in a car you own.
What IRAS leaves alone is mileage paid for specific work trips. A per-trip mileage claim keeps that share out of tax, which a card that covers all your driving can't do.
Commercial vehicles get a concession. Your employer may give you a van, lorry, truck, minibus or motorcycle that you drive home after work. IRAS doesn't tax that side benefit, and that covers petrol and car park charges your employer pays back.
A company saloon car parked at your block overnight gets no such concession. It goes through the 3/7 formula.
These smaller rules are for your own car, and they turn on what the drive was for. With a company car, any parking or ERP your employer pays or pays back is a running cost. So 3/7 of it is taxed through the formula.
IRAS treats the trip from home to your usual office as private. A trip to a client, a course venue, or the airport for an overseas business trip counts as work.
So parking near the office is taxed when you drive in from home. That's true whether your employer gives you season parking, pays the daily charges or hands you a free ticket. If you move between two offices and get free season parking at both, IRAS taxes the market value of both.
Parking paid back after a client meeting isn't taxed at all. Airport parking is the odd one out. Mileage from home to the airport for an overseas business trip is tax-free, but the car park bill while you're away is taxed.
ERP follows the same split. A fixed ERP allowance is taxed, and ERP charges paid back for work trips aren't.
Transport after overtime is tax-free, whether it's paid as an allowance or a claim. The overtime has to be ad hoc, not regular, and the policy has to be open to all staff (or only to junior staff). A taxi between home and office is taxed unless you were working overtime.
If your employer accepts that you work from home most of the time, your home counts as your office. That turns trips from home to clients into work trips.
IRAS doesn't set a mileage rate. Your company's policy sets one, and IRAS only asks that it be reasonable. Four kinds of trip can be paid as mileage without tax:
Say you're weighing two job offers with the same salary. Without any car benefit, your chargeable income, your income after reliefs, would be S$90,000. The car figures below are made up for the example. Put your own into our income tax calculator to see your bill.
Offer A gives you a new company car that cost S$180,000 including COE, with a PARF rebate of S$20,000 at 10 years. The company pays S$9,000 a year to run it, and you can drive it at weekends.
Offer B pays a car allowance of S$1,100 a month, or S$13,200 a year. You buy and run your own car.
From YA 2024, residents pay 11.5% tax on chargeable income between S$80,000 and S$120,000. So every extra dollar in that band costs you 11.5 cents. That's your marginal tax rate, and both offers stay inside the band.
| Offer A: company car | Offer B: car allowance | |
|---|---|---|
| Added to your income | S$10,714 | S$13,200 |
| How it is worked out | 3/7 x [(S$180,000 - S$20,000) / 10 + S$9,000] | S$1,100 x 12 |
| Extra tax at 11.5% | About S$1,232 | About S$1,518 |
| Who pays for the car and its running costs | Your employer | You |
| Where it is reported | Appendix 8A item 4i, then IR8A item d8 | IR8A item d1, Allowances |
Your employer reports the two kinds of car benefit on different lines. A car allowance goes in item d1, Allowances, on your Form IR8A.
A company car is a benefit-in-kind, a perk you get in a form other than cash. It goes on Appendix 8A under item 4i, Car benefits, and any driver goes under item 2h. The Appendix 8A total is then carried into item d8, Value of benefits-in-kind, on the IR8A.
IRAS's notes ask employers to report most benefits at what they actually cost, and to use the 3/7 formula for cars.
For income earned in 2026, employers have to give you the forms or file them by 1 March 2027. If your employer is in the Auto-Inclusion Scheme, it sends the figures to IRAS electronically and they flow into your tax bill. So don't enter them again in your tax form.
Check the pre-filled employment income when you file your return on myTax Portal. If the benefits-in-kind number looks wrong, ask HR for the car benefit working. Our guide to how income tax in Singapore works covers the rest of the bill.
A car line in an offer letter tells you little about the tax. These questions get you the numbers that matter.
Yes, in full. IRAS says the car benefit formula doesn't apply to car allowances. Your employer declares the whole amount as an allowance on your Form IR8A, so a S$900 monthly allowance adds S$10,800 to your income for the year. The exception is mileage paid for specific work trips at a reasonable rate, which isn't taxed.
For a new car, IRAS uses 3/7 x [(car cost including COE - PARF rebate) / 10 + running costs your employer pays]. The 3/7 is IRAS's estimate of private use outside office hours. Second-hand cars, cars with a renewed COE and leased cars each have their own version of the formula.
For your own car, it depends on the trip. Parking paid back for client meetings isn't taxed. Parking at or near your office when you drive in from home is taxed. So is airport parking while you're away on a business trip, even though mileage to the airport isn't. With a company car, parking your employer pays or pays back is a running cost, and 3/7 of it is taxed.
Benefits in kind are perks from your job that aren't paid in cash, such as a company car, a driver or housing. IRAS taxes them unless they're exempt or covered by a concession. Your employer reports the taxable value on Appendix 8A, which feeds item d8 of Form IR8A.
No. IRAS lists transport costs on your own car, and travel between home and office, as wrong claims for employment expenses. You're taxed on the full allowance whatever the car costs you. You can claim bus, train and taxi fares for work trips your employer didn't pay back.
This is general financial information for Singapore, not personal financial advice. Figures change, so verify current rates against the official sources above before acting. See our full disclaimer.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).