Tax Treatment of Business Expenses (S - Z)

Deductibility of specific expenses such as statutory and regulatory expenses, supplementary retirement scheme, topping-up of employees’ CPF minimum sums and voluntary cash contributions to Medisave account.

Statutory and Regulatory Expenses

To support efforts to comply with statutory and regulatory requirements and to provide tax certainty on the deductibility of such expenses, a specific deduction under Section 14X of the Income Tax Act was introduced with effect from YA 2014. Prior to YA 2014, the deduction of statutory and regulatory expenses was allowed as an administrative concession.

The deduction applies to qualifying statutory and regulatory expenses incurred during the basis period relating to YA 2014 and subsequent YAs, subject to conditions below.

What are qualifying statutory and regulatory expenses

To qualify for tax deduction, the statutory and regulatory expenses must be incurred  by taxpayer for his business (including  business from which passive income is acquired) and for the purpose of:

  1. complying with any written law of Singapore or another country;
  2. complying with any code, standard, rule, requirement or other document issued by any government or public authority or by a securities exchange;
  3. studying the impact of any proposed law*/ document#;
  4. preventing or detect any non-compliance with any law*/ document#;
  5. voluntarily complying with any law*/ document#, even though the taxpayer is exempt from complying with it.

* This refers to any written law of Singapore or another country
# This refers to any code, standard, rule, requirement or other document issued by any government or public authority or by a securities exchange.

Some examples are:

  • Accounting fees
  • Annual listing fees
  • Audit fees (includes audit fees incurred by a company that is eligible for audit exemption under the Companies Act)
  • Income tax service fees (e.g. preparation of tax computation, lodging objection to Notices of Assessment)
  • Secretarial fees

Examples of expenses that are capital in nature and not tax deductible include:

  • Incorporation fees
  • Strike-off fees
  • Liquidation fees
  • Property valuation fees (where the property is held on capital account)
  • IPO fees

For more details, please refer to the e-Tax Guide  Deduction for Statutory and Regulatory Expenses (235KB).

Supplementary Retirement Scheme (SRS)

An employer can contribute to his employees' Supplementary Retirement Scheme (SRS) accounts on the employees' behalf. Such contributions are fully deductible as staff costs to the employer , subject to the annual SRS contribution cap.

 

From 1 Oct 2008 to 31 Dec 2010

From 1 Jan 2011 to 31 Dec 2015

From 1 Jan 2016

Employee who is a Singapore Citizen/ Singapore Permanent Resident

$11,475

$12,750

$15,300

Employee who is a foreigner

$26,775

$29,750

$35,700

The total SRS contribution cap consists of the sum of contributions made by the employer to the employee's account and the employee's own contributions in one year.

The SRS is a voluntary scheme that helps Singaporeans to save more for their old age. While CPF savings are meant to be used for housing and medical needs, SRS contributions may be used for investments.

In Budget 2011 and 2015, it was announced that the annual SRS contribution cap will be increased to be in line with the higher CPF Salary Ceiling for the respective years.

Topping-Up of Employees' CPF Minimum Sums

Employers who make cash top-ups for employees' CPF Minimum Sums on their behalf will enjoy an equivalent amount of tax deduction for such top-ups.

The payment to top up an employee's Minimum Sum is considered the employee's taxable income, however, the employee can enjoy CPF Cash Top-Up Relief for Individuals.

Voluntary Cash Contributions to Medisave Account

Updated! Voluntary cash contributions made by eligible companies to the CPF Medisave accounts of Self-Employed Persons (SEPs) are tax-deductible. The tax deduction available to a company is subject to a cap of $1,500 per SEP per year. With effect from 1 January 2018, the cap will be raised to $2,730 so as to encourage companies to make more contributions to the SEP for their medical needs.

To qualify, the following conditions must be satisfied:

  1. The contribution is made to the Medisave Account of a SEP;
  2. The contribution is made in cash by the company;
  3. The company and SEP have entered into a valid contract which is in force on the date that contribution is made and which provides for the:
    1. rental or loan of assets by the company to the SEP, for the SEP to carry on his trade, profession, business or vocation; or
    2. provision of services by the SEP to the company, where the SEP and the company are in the same trade, profession, business or vocation.

For more details, please refer to “ Voluntary Contributions to Medisave Account (VC-MA) by Companies".

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