EMPLOYERS need not pay tax on the Jobs Credit cash grants they receive for their local workforce.

'The Jobs Credit will not be taxable in the hands of the employers,' an Inland Revenue Authority of Singapore (IRAS) spokesman confirmed when asked. But if employers pass on the government's 12 per cent grant to their employees, the payment becomes part of the employees' income and will be taxable in their hands, the spokesman added.

And 'such amount paid by the employer can be claimed as a deductible expense'. Under the Jobs Credit scheme, the key thrust of the 2009 Budget 'Resilience Package', employers receive grants of 12 per cent of the first $2,500 of each employee with Central Provident Fund contributions. It is temporary and aimed at saving jobs.

Says Owi Kek Hean, head of tax at KPMG Tax Services in Singapore: 'The Jobs Credit received by companies would be regarded as a government grant. To be effective, the grant should not be taxable in the hands of the employer as its recipient.'

Jobs Credit should be a big help to Singapore businesses in riding out the recession, he added.

This article was first published in The Business Times.