What is reimbursement? 2026 guide for Singapore employers

Key Takeaways:

• Reimbursement means paying someone back for money they've already spent, and in Singapore it comes with specific IRAS and MOM rules that decide what's taxable and what you're legally required to repay.

• Getting your reimbursement policy right protects your business from GST errors, MOM compliance breaches, and disputes with employees over what should be repaid.

• Airwallex helps businesses apply reimbursement policies consistently with automated policy checks, streamlined approvals, and direct employee reimbursements.

What is reimbursement? It's the act of paying someone back for money they've already spent, usually because they covered a work-related cost with their own funds.

In Singapore, reimbursement also has important tax and employment law implications.

This guide explains how IRAS treats different types of reimbursement for tax purposes, when employers are legally required to reimburse employees, how reimbursements differ from disbursements under GST rules, and how to build a compliant reimbursement policy.

If you're looking for a practical walkthrough of the reimbursement process itself, including receipts, approvals and payout timelines, see our guide to expense reimbursements.

4 types of reimbursement in Singapore

Singapore doesn't tax every reimbursement the same way. IRAS and MOM apply different rules depending on what you're reimbursing, so it helps to look at each category on its own.

1. Travel reimbursement

Reimbursing an employee for actual travel costs, such as flights, accommodation, or transport between cities, isn't taxable, as long as the payment matches money the employee genuinely spent¹.

This changes once you move from reimbursing actual costs to paying a flat per diem allowance.

A per diem is a fixed daily sum meant to cover living costs like meals and incidentals while an employee is overseas for work. IRAS publishes acceptable per diem rates for each country every year, and any amount you pay above that rate becomes taxable.

For example, in 2026, the acceptable rate for Germany is S$175 per day¹, so paying an employee S$200 per day for a trip there would make the extra S$25 per day taxable income for them.

2. Medical reimbursement

Most medical reimbursement is left to your company policy, with one exception you can't opt out of.

Under Ministry of Manpower rules, you must reimburse an employee's medical consultation fees if their medical certificate was issued by a doctor at a public institution or by a doctor your company has appointed².

This applies specifically to consultation fees tied to paid sick leave, not to medical costs in general.

3. Education and training reimbursement

Subsidies for course fees, training, and scholarship awards aren't taxable, provided the training is employer-provided and open to all staff, not just a select few.¹

If you restrict a training subsidy to specific employees as a reward for performance rather than a genuine staff development benefit, IRAS treats it as taxable income instead.

4. Entertainment reimbursement

Client entertainment, such as meals or event costs used to build business relationships, is a deductible business expense for your company³.

Reimbursing an employee for entertainment expenses incurred on an overseas business trip also falls outside per diem allowance calculations and isn't taxable to the employee, provided it reflects actual costs incurred for business purposes¹.

Disbursement vs. reimbursement: what it means for GST

Disbursements and reimbursements are treated differently for GST purposes in Singapore.

Understanding the difference is important, because classifying a payment incorrectly can lead to GST reporting errors when you recover costs from a third party.

What counts as a reimbursement under GST

For GST purposes, a reimbursement is the recovery of an expense you incurred as a principal, meaning you contracted with the supplier in your own name and were legally obliged to pay them⁴.

A reimbursement may be subject to GST if it counts as consideration for a supply of goods or services⁵. If you're entitled to claim input tax on the original expense, you can generally still claim it when the recovery constitutes a taxable supply⁴.

What counts as a disbursement under GST

A disbursement is different. It's a recovery of a payment you made on behalf of another party while acting purely as their agent, not in your own capacity⁴.

Because a disbursement doesn't count as a supply, it isn't subject to GST, and you can't claim input tax on it, since the goods or services were supplied to your principal, not to you⁴.

The way you word an invoice isn't enough on its own to decide which category applies. IRAS looks at whether you acted as principal or agent in procuring the goods or services in the first place, not at how the recovery is itemised on your invoice⁵.

A quick example

If your company hires a freelance auditor and pays for their taxi fares while they're working for a client, then recovers that fare from the client, this is a reimbursement, since your company contracted with the taxi service as a principal⁵.

But if your company simply pays a government filing fee on a client's behalf, with the invoice addressed directly to the client, and passes on the exact amount, that's a disbursement⁴.

How to build an effective reimbursement policy

A clear reimbursement policy protects your business from disputes, GST errors, and fraud. Here's what it should cover:

Set clear expense categories

List exactly which expense categories you'll reimburse, such as travel, meals, or client entertainment, and set a spending cap for each one. Employees should be able to check your policy before they spend, not after, so they know what's covered and what isn't.

Require pre-approval for larger expenses

For any expense above a set threshold, require manager sign-off before the employee spends the money. This prevents disputes after the fact and gives you a chance to redirect the employee to a cheaper option if one exists.

Set clear submission rules

Specify what proof you require for a claim, such as an itemised receipt, and set a deadline for submission, such as within 30 days of the expense. Clear submission rules make it easier to close your books on time and reduce back-and-forth between employees and finance.

Build in fraud guardrails

Expense fraud is more common than most employers expect. A study of 2,110 workplace fraud cases worldwide found that companies lost $3.6 billion to occupational fraud⁶, and inflated or fabricated expense claims are a recurring pattern in these cases.

Guard against this by requiring original, itemised receipts rather than card statements, cross-checking claims against your travel or calendar records for anomalies, and rotating who approves claims so the same person isn't approving their own team's expenses without any oversight.

Common mistakes Singapore employers make

Even with a reimbursement policy in place, Singapore employers often make the same avoidable mistakes:

• Confusing reimbursements with disbursements for GST purposes, which can lead to incorrect input tax claims.

• Assuming per diem allowances are automatically tax-free, when IRAS only exempts amounts up to its published rate for each country.

• Overlooking their legal obligation to reimburse MOM-mandated medical consultation fees, treating them as optional when they aren't.

• Failing to document their reimbursement policy clearly, leading to inconsistent decisions and disputes over what should be repaid.

A clear, well-documented policy, combined with consistent application, helps reduce compliance risks and gives employees confidence that claims will be handled fairly.

Reimbursement vs. direct payment

Reimbursement isn't the only way to cover a work expense. The alternative is direct payment, where the company pays the supplier upfront instead of the employee paying out of pocket and waiting to be repaid.

Here’s a quick overview of the differences:

Direct payment methods include corporate cards, virtual cards, and paying a supplier's invoice directly. For a fuller look at how these alternatives work and when they make sense, see our guide to expense reimbursements.

How Airwallex helps you manage reimbursements

A reimbursement policy is only effective if it's applied consistently. As your business grows, manually checking every claim against your policy becomes harder, especially if you have multiple entities or regional teams. Here’s what you can do with Airwallex:

Apply your policy consistently

Airwallex's Expense Policy Agent, available on the Grow plan and above, reviews every expense and reimbursement claim against your policy as soon as it's submitted, helping finance teams apply the same rules consistently instead of relying on manual checks.

Support regional teams from one platform

If you operate across multiple countries, Airwallex lets you manage reimbursement policies for every entity from one platform. Update a policy once and it applies everywhere instantly, while finance teams get a consolidated view of expenses across the business.

Reimburse employees more efficiently

Once a claim is approved, Airwallex pays employees directly to their local bank account in their local currency. Expenses, reimbursements and supporting documents then sync automatically with your accounting software to reduce manual reconciliation.

Frequently asked questions (FAQs)

What's the difference between a reimbursement and an allowance?

A reimbursement pays back the exact amount an employee spent, backed by a receipt. An allowance is a fixed sum paid regardless of actual spend. IRAS treats the two differently for tax purposes: paying a flat allowance for warm clothing or luggage on an overseas business trip is fully taxable, but reimbursing the actual cost based on receipts is not¹.

What exchange rate should I use to reimburse an employee for a foreign currency expense?

You can use your company's in-house exchange rate if you have one. If you don't, IRAS accepts rates published by local banks, locally circulated newspapers, or reputable news agencies, as long as you use the same source consistently¹.

Are expense reimbursements taxable in Singapore?

Generally, reimbursements for actual business expenses aren't taxable because they repay money an employee has already spent on behalf of the business. However, fixed allowances, such as per diem payments above IRAS's published rates, may be treated as taxable income.

Can companies set limits on reimbursements?

Yes. Employers can set reasonable limits on reimbursable expenses, such as meal allowances, hotel rates or travel budgets, provided these are clearly documented in the company's reimbursement policy and communicated to employees.

How long should reimbursement claims remain open?

There's no statutory deadline under Singapore law, so businesses typically set their own submission deadlines, such as within 30 or 60 days of the expense being incurred. Clear deadlines help finance teams close the books and process claims consistently.

Sources:

1. https://www.iras.gov.sg/taxes/individual-income-tax/employers/understanding-the-tax-treatment/per-diem-allowance

2. https://www.mom.gov.sg/employment-practices/leave/sick-leave/medical-reimbursements-and-salary

3. https://www.iras.gov.sg/taxes/corporate-income-tax/income-deductions-for-companies/business-expenses

4. https://www.iras.gov.sg/docs/default-source/e-tax/etax-guide_guide-on-reimbursement-and-disbursement-of-expenses_2019-12-30.pdf

5. https://www.iras.gov.sg/taxes/goods-services-tax-(gst)/charging-gst-(output-tax)/common-scenarios---do-i-charge-gst/recovering-expenses-(re-billing)

6. https://www.straitstimes.com/singapore/fraud-from-within-employers-cautioned-to-look-out-for-bogus-expense-claims