top of page

Tax Deductible and Non Tax Deductible Business Expenses

Writer's picture: Sharon ChooSharon Choo

Updated: Jun 18, 2023

Whether you are a business owner, accountant, financial advisor or tax planner, identifying tax and non tax deductible item in your business expense is crucial when it comes to prepare and file a correct tax return. It also navigates you as the decision maker on your company's budgeting and spending as not all business expense are tax deductible. Tax deductible business expenses reduce your company’s taxable income and amount of tax you are going to pay.


tax deductible business expense

What is business expense?

Expenses incurred in the course of running the business.


What is tax deductible business expense?

There are several criteria for business expenses to be considered deductible for taxation purposes:

1. Type of expense must be incurred in the process of generating business income

2. Type of expense must be revenue and not capital in nature.

3. Expenses are not a contingent liability, meaning the expense has to be already incurred and does not depend on an event that may or may not occur in the future.

4. Type of expenses that are not disallowed under Income Tax Act 1947


What is non tax deductible business expense?

Are all other expenses that fall outside above criteria. For example: Employee’s entertainment or travelling expense incurred but not related to business purposes. Or purchase of a fixed asset which is capital in nature.


Here are list of tax deductible business expense:

Accounting fee

Administrative expenses

Advertisement

Auditors' remuneration

Bad debts (trade debtors)

Bank charges

Book-keeping services

Borrowing costs as a substitute for interest expense or to reduce interest costs

Carbon credits

Commission

CPF, skills development levy

CPF-related Statutory contributions to CPF

Ad-hoc contributions to employees' CPF MediSave Account via the Additional MediSave Contribution Scheme

Topping-up Employees' CPF Retirement Accounts/ Special Accounts on Their Behalf

Voluntary cash contributions to self-employed persons' MediSave Account

Digital taxes imposed in the form of turnover taxes (not income taxes)

Directors' fees

Directors' remuneration

Employee Equity-Based Remuneration (EEBR) Scheme

Employment Assistance Payment (EAP)

Entertainment

Exchange loss (trade and revenue in nature)

Exhibition expenses

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)

Income tax of employee borne by employer (in accordance with employment contract)

Insurance premium

Insurance for underwriting bad trade debts

Interest expenses

Interest incurred on late payment of fees to a Management Corporation for a Strata Title Plan (MCST)

Interest incurred on loans to re-finance prior loans or borrowings

Intellectual property (IP) licensing expenditure

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

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)

Office upkeep

Periodicals and newspapers

Postage

Printing and stationery

Property tax

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

Reinstatement costs (expenses incurred to reinstate premises to its original condition prior to vacating it at the end of the tenancy agreement)

Rental of business premises

Registration of patents, trademarks, designs and plant varieties

Repairs and maintenance

Research and development

Road tax rebate (Budget 2021)3

Retrenchment payments

Contractual retrenchment payments

Ex-gratia retrenchment payments and outplacement support costs, where there is no complete cessation of business

Secretarial fees

Staff remunerations (salary, bonus and allowances)

Staff training

Staff welfare/ benefits

Statutory and Regulatory expenses

Stock obsolescence

Supplementary Retirement Scheme (SRS)

Tax fees (service fees paid to tax agent)

Telephone bills

Transport (public transport and goods/ commercial vehicles)

Travelling

Wages

Water and electricity


And here are list of non-tax deductible business expense:

Amortisation

Bad debts (non-trade debtors)

Certificate of entitlement (COE) for motor vehicles1

CPF-related Voluntary contributions to CPF (refers to CPF contributions exceeding the statutory rate)

Topping-up Employees' CPF MediSave Accounts on Their Behalf

Interest incurred on late CPF contributions

Depreciation (you may instead claim capital allowances)

Digital taxes imposed as income taxes

Dividend payments made on preference shares

Donations

Entrance fee (country club or other clubs)

Exchange loss (non-trade or capital in nature)

Expenses incurred before commencement of business

Fixed assets written off

Fixed assets acquisition cost (you may instead claim capital allowances)

Fines

Goodwill payment

Impairment loss on non-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 (non-trade or capital transactions)

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)

Penalties

Prepaid expenses (not relating to the relevant basis period)

Private and domestic expenses (expenses not incurred for business purpose)

Private hire car

Provision for bad and doubtful debts (general) (note impairment loss on trade debts)

Provision for obsolete stocks (general)

Renovation or refurbishment works (you may claim Section 14N deduction for qualifying expenditure)

Retrenchment payments

Ex-gratia retrenchment payments and outplacement support costs, where there is a complete cessation of business

Transport (S-plated, Q-plated and RU-plated cars)

Withholding tax on interest payments borne by companies on-behalf of non-residents


Source: IRAS


Need help to file your upcoming tax? Averie is here for your statutory compliance.

Contact us now for more information.





8 views0 comments

Comments


bottom of page