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 on Deduction for Statutory and Regulatory Expenses (256KB).  

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. For details on annual SRS contribution cap for each employee, please refer to Amount of SRS Contribution.

For more information on SRS, you may refer to the Ministry of Finance's (MOF) website.

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

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 tax deduction available to a company has been from $1,500 to $2,730 per SEP per year. 

For more details on the qualifying conditions, please refer to Voluntary Contributions to Medisave Account (VC-MA) by Companies.


 

Withholding Tax on the Interest Payments Borne by Companies on-behalf of non-residents

Generally, a company (“payer”) is required to withhold tax on interest paid to a non-resident, unless tax exemption or waiver of withholding tax obligation is granted. In some cases, the withholding tax on the interest may be borne by the payer on behalf of a non-resident.

Updated! Where the payer is contractually required to bear the tax on interest for the non-resident, the withholding tax borne is treated as part of the interest paid. The interest expense (including the withholding tax borne on behalf of the non-resident) is deductible if the loan is taken up to finance income-producing assets. With effect from YA 2020, the payer may be required upon request by the Comptroller of Income Tax, to provide documents to substantiate that he is contractually liable to bear the withholding tax.

In cases where there is no contractual requirement for the payer to bear the tax on behalf of the non-resident but the payer decides to bear, the withholding tax borne by the payer is not treated as part of the interest paid. It is also not a prescribed borrowing cost that is specifically deductible under the Income Tax Act. The tax deductibility of the withholding tax borne on behalf of the non-resident depends on the purpose of the loan. If the loan is taken up for revenue purposes (for example, to finance the purchase of trading stock), the withholding tax expense will be deductible in the hands of the payer as it is a revenue expense. Conversely, if the loan is taken up for capital purpose (for example, to finance capital assets), the payer will not be able to claim a tax deduction on the withholding tax expense. 

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