Pre-filling of Income and Fixed Expense Deduction Ratio for Self-Employed Persons (SEPs)

Self-employed individuals such as Commission Agents and Taxi / Private Hire Car (PHC) drivers, who have participated in pre-filling of their income, can now enjoy more convenience when filing their income tax returns by having their gross income information pre-filled in their income tax returns. They can also elect to deduct a deemed amount of expenses based on a prescribed percentage of the gross income earned.

Pre-filling of Income for Self-Employed Persons (SEPs)

The pre-filling of income for self-employed persons is an initiative to simplify tax filing and ease compliance for taxpayers. This scheme, which pre-fills the tax returns of taxpayers with income information automatically transmitted to IRAS by intermediaries, was first introduced in 2015 for individual self-employed persons earning commission income. The scheme was extended to Private Hire Car (PHC) and Taxi drivers in 2018, and will be further extended to other groups of individual self-employed taxpayers progressively.

If you and your organisation are participating in the pre-filling scheme, you can view your pre-filled information in the “Income, Deductions and Reliefs Statement (IDRS)” at
myTax Portal.

Please verify the pre-filled information and declare your other sources of income, if any, e.g. rental income. You can amend the 2-line / 4-line statement at the Sole-Proprietorship / Self-employed income page under the Trade, Business, Profession or Vocation section of the tax return if your total income is different from the pre-filled information.

Even if you or your organisation is participating in the pre-filling scheme, you are required to file an Income Tax Return if:

a) You received a letter, form or an SMS from IRAS informing you to file this year; or

b) You did not receive any notification from IRAS, and your net trade exceeded $6,000 in 2019.

Commission agents such as general commission agents, real estate agents, insurance agents, Multi-Level Marketing (MLM) agents and remisiers can check if their commission-paying organisation is participating in the pre-filling scheme here (PDF, 482KB).

The commission income transmitted by the commission-paying organisation to IRAS will include any allowances, incentives, referral fees, benefit-in-kind and other payment.

For more information, please refer to FAQ on Pre-filling of Income for Commission Agents (DOC, 21.4KB) 

Transport service operators who are in the pre-filling scheme will notify their drivers to join the scheme in the month of Jan. Drivers who accept the invitation to participate will have the following income information transmitted to IRAS electronically: 
  • Gross Passenger Fares
  • Incentives / Rebates / Promotion / Miscellaneous Payments

For more information, you may refer to FAQ on Pre-filling of Income for PHC / Taxi Drivers (DOC, 21.5KB)

Video on Pre-filling of Income for PHC / Taxi Drivers

Fixed Expense Deduction Ratio (FEDR)

To simplify tax filing and ease the burden of record keeping, qualifying taxpayers can elect to deduct a deemed amount of expense based on a prescribed percentage of the gross income earned. This initiative was first introduced in the Year of Assessment (YA) 2019 for Private Hire Car (PHC)/ Taxi drivers. In YA 2020, it was extended to self-employed commission agents with gross commission income of $50,000 or less annually.

Qualifying PHC/ Taxi drivers and commission agents whose income have been pre-filled under the pre-filling scheme will be automatically allowed the prescribed deemed expense against their pre-filled income. Individuals whose income have not been pre-filled can still opt to claim the deemed expense ratio during e-Filing.

Alternatively, PHC/ Taxi drivers and commission agents may choose to claim the actual amount of deductible business expenses incurred if their amount of actual expenses is more than the deemed expenses. 

Qualifying commission agents refer to general commission agents, real estate agents, insurance agents, Multi-Level Marketing (MLM) agents and remisiers who meet the following conditions:   

  • Carrying on a trade, business, profession or vocation and incurred deductible business expenses on the commission income earned.
  • Received commission income not exceeding $50,000 annually (Total commission income received from all commission sources)

From Year of Assessment (YA) 2020 (i.e. for income earned in 2019), qualifying commission agents can claim 25% of the gross commission income earned subject to the condition that the income does not exceed $50,000. The amount of business expense is deemed to be the sum of all deductible business expenses incurred (including expenses on entertainment, transport, gifts and telecommunications) in earning the commission income.

If you derive commission income from more than one sources in the same year, you will need to exercise the same option for all your commission income sources. You cannot claim the 25% prescribed deemed expenses against one commission income source and actual deductible business expenses against other commission income source.

Example 1:

The example below illustrates the application of the prescribed deemed expense ratio for commission:

 

Agent A

$

Agent B

$

Commission 40,000

15,000

(As an Insurance agent)

40,000

(As a Real estate agent)

Deemed Business Expenses Agent A will qualify for deemed expense ratio of 25%

Agent B will not qualify for deemed expense ratio as the total gross commission income in the calendar year has exceeded $50,000.

He must claim actual business expenses incurred against both sources of income.

 
Example 2:

Andrew derived commission income of $400 as an MLM distributor and he did not incur any deductible business expenses.

The prescribed deemed expense ratio of 25% would not be applicable to Andrew as he did not incur any deductible business expenses on the commission earned.

Example 3:

Ben was an insurance agent for the first 6 months in year 2019 and switched to become a real estate agent subsequently. Ben wished to claim actual business expenses incurred against his commission income as an insurance agent and the prescribed 25% deemed expense ratio against his commission income as a real estate agent.

Ben has to claim either actual business expenses incurred or deemed expenses against all of his commission income earned in the same year.

For more information, you may refer to FAQ on the 25% Fixed Expense Deduction Ratio for Commission Agents  (DOC, 23KB)

Video on Fixed Expense Deduction Ratio for Commission Agents 

Infographic on Simplifying Tax Filing for Commission Agents (PDF, 119KB)

The prescribed deemed expense ratio for all self-employed private-hire car (PHC) and taxi drivers is set at 60% of the gross driving income and the amount is deemed to be the sum of all deductible business expenses incurred (including car rental, fuel, parking fees, service fees paid to booking service operators) in earning the driving income. 

All self-employed PHC drivers can claim tax deduction on car-related expenses incurred such as car rental, fuel and parking fees against their driving income. However, PHC drivers will not be allowed to deduct the purchase costs of their private cars from their driving income. 

To simplify tax filing and ease the burden of record keeping for both PHC and taxi drivers who have incurred deductible business expenses to derive driving income in a basis period, they may claim, in lieu of the actual amount of such expenses, a tax deduction based on a prescribed deemed expense ratio.

The example below illustrates the application of the prescribed deemed expense ratio for a PHC / taxi driver:    

   $
Gross Passenger Fares 50,000
Incentives / Rebates / Promotion / Miscellaneous Payments 10,000
Revenue 60,000
Less: 60% Deemed Expenses (i.e. 60% x $60,000) (36,000)
Net Earnings / Assessable Income24,000


Both PHC and taxi drivers with deductible business expenses that are more than 60% of their gross driving income can still choose to claim their actual amount of such expenses. Drivers who wish to claim actual deductible business expenses are subject to the following conditions: 

  1. If the expenses are incurred partly for earning the driving income and partly for private or other purposes, you are required to ensure that the amount you claim is correctly apportioned. You can claim only the portion of expense that is incurred in earning your driving income which could be apportioned by usage or mileage.
  2. PHC drivers will not be allowed to deduct the purchase cost of the private car against their income.  
  1. If the amount of actual expenses claimed by you is more than your driving income, you can carry forward the losses to be offset against future years’ driving income. However, these losses cannot be claimed against your other sources of income in the same or future years of assessment.  
  2. If you derive income as both PHC and taxi driver in the same year, you will need to exercise the same option for all your driving income. You cannot claim the 60% prescribed deemed expenses against your PHC driving income and actual deductible business expenses against your taxi driving income, or vice versa.     

For more information, you may refer to FAQ on 60% Fixed Expense Deduction Ratio for chauffeured PHC / Taxi Drivers (DOC, 29KB)

Infographic on Simplifying Tax Filing for Taxi and Private Hire Car Drivers (PDF, 177KB)