What is Deductible
Deductible business expenses reduce your company’s taxable income and the amount of tax you need to pay.
|- Deductible Business Expenses||5,000|
|- Non-Deductible Business Expenses||10,000|
|Income Subject to Tax ('Taxable Income')||80,000 - 5,000 = 75,000 |
(Income minus deductible expenses)
Generally, deductible business expenses are those 'wholly and exclusively incurred in the production of income'. In other words, they must satisfy all these conditions:
- The expenses are solely incurred in the production of income.
- The expenses are not a contingent liability i.e. they do not depend on an event that may or may not occur in the future. In other words, the expenses must be incurred. An expense is 'incurred' when the legal liability to pay the expense arises, regardless of the date of actual payment of the money.
- The expenses are revenue, and not capital, in nature.
- The expenses are not prohibited from deduction under the Income Tax Act 1947.
Learn more about the tax deductibility of expenses by watching our e-Learning video.
What is Non-Deductible
Non-deductible business expenses are activities you or your employees pay for that do not fulfil the conditions above. These include personal expenses (such as travel, or entertainment not related to the running of the business) and capital expenses (such as expenses incurred to incorporate a company and the purchase of fixed assets).
Examples of Deductible & Non-Deductible Business Expenses
Bad debts (trade debtors)
|Bad debts (non-trade debtors)|
CPF, skills development levy
Certificate of entitlement (COE) for motor vehicles1
Depreciation (you may instead claim capital allowances)
Exchange loss (trade and revenue in nature)
Entrance fee (country club or other clubs)
|Foreign worker levy (FWL) (only the reduced FWL incurred by your company, after deducting the FWL rebate for the corresponding period, is allowed tax deduction)|
Fixed assets written off
Fixed assets acquisition cost (you may instead claim capital allowances)
Insurance for underwriting bad trade debts
Singapore income tax and any tax on income in country/ territory outside Singapore
Installation of fixed assets
Interest expenses on non-income producing assets (interest adjustment)
Legal and professional fees (trade and revenue transactions)
Upfront lease expenses incurred by tenants (commission, advertising, legal fees and stamp duty incurred in obtaining, renewing or extending leases), subject to Section 14ZE of the Income Tax Act 1947
|Legal and professional fees (non-trade or capital transactions)|
Medical expenses (restricted
to 1%/ 2% of total remuneration if company is under Portable Medical Benefits Scheme (PMBS) or Transferable Medical Insurance Scheme (TMIS))
Motor vehicle expenses (such as upkeep, maintenance, running and financing costs of goods/ commercial vehicles e.g. van, lorry and bus)
Medical expenses (amount exceeding 1%/ 2% of total remuneration if company is under PMBS or TMIS)
Motor vehicle expenses (S-plated, Q-plated and RU-plated cars)
Periodicals and newspapers
Printing and stationery
Provision for bad and doubtful debts (specific) (note impairment loss on trade debts)
Provision for obsolete stocks (specific)
Additional Petrol Duty Rebate (Budget 2021)2
Prepaid expenses (not relating to the relevant basis period)
Provision for bad and doubtful debts (general) (note impairment loss on trade debts)
Provision for obsolete stocks (general)
Reinstatement costs (expenses
incurred to reinstate premises to its original condition prior to vacating it at the end of the tenancy agreement)
Road tax rebate (Budget 2021)3
Renovation or refurbishment works (you may claim Section 14N deduction for qualifying expenditure)
Staff remunerations (salary, bonus and allowances)
Tax fees (service fees paid to tax agent)
Transport (public transport and goods/ commercial vehicles)
|Transport (S-plated, Q-plated and RU-plated cars)|
Water and electricity
|Withholding tax on interest payments borne by companies on-behalf of non-residents|
1 If the vehicle qualifies for capital allowances (goods/ commercial vehicle), you can include the cost of COE to the cost of vehicle and claim capital allowances.
2 Taxi operators and private-hire car (PHC) operators who disburse the additional petrol duty rebate (APDR) on behalf of the Government to active drivers of petrol and petrol-hybrid taxis and PHCs, can claim a tax deduction on such payments to the drivers. Learn more about the APDR at the Land Transport Authority’s (LTA) website.
3 Taxi operators and vehicle lessors who received the road tax rebate (RTR) for their petrol and petrol-hybrid vehicles and passed on the savings from the RTR to eligible taxi and PHC drivers, can claim a tax deduction on such payments to their drivers. Learn more about the RTR at LTA's website.
4 Expenses incurred by your company on staff welfare or benefits that are taxable in the hands of employees do not automatically qualify for tax deduction and vice versa. Such expenses must meet the tax deductibility conditions to qualify for tax deduction.
Learn more about the tax treatment of business expenses:
Further/ Enhanced/ Double Deductions
There are various tax schemes that provide for further/ enhanced/ double deductions on qualifying business expenses.
Learn about the following tax schemes:
- Business and IPC Partnership scheme (BIPS)
- Double Tax Deduction for Internationalisation scheme
- Research and Development (R&D) tax measures
- Productivity and Innovation Credit (PIC) scheme (The PIC scheme has expired after the Year of Assessment (YA) 2018. Businesses are no longer allowed to claim PIC benefits on expenditure incurred after the basis period of YA 2018.)