Deductible business expenses reduce a company’s taxable income and the amount of tax a company needs to pay.
In Singapore, 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.
Non-deductible business expenses are activities a company pays for that do not fulfill 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
|Accounting feeAdministrative expensesAdvertisementAuditors’ remuneration
|Bad debts (trade debtors)Bank chargesBook-keeping services
|Bad debts (non-trade debtors)
|Voluntary contributions to CPF
|Directors’ feesDirectors’ remuneration
|DepreciationDividends on preference sharesDonations (except to recognised charities)
|Employee equity-based remunerationEmployee expenses including CPFEntertainmentExchange losses (trade nature)Exhibition expenses
|Expenses incurred before commencement of businessFixed assets write-offFixed assets capital costsFines
|Income tax of employee borne by employerInsurance premiumInterest expensesIntellectual property licensing expenses
|Goodwill paymentsSingapore income tax and any tax on income in country outside of Singapore
|Legal and professional fees (trade nature)Medical expensesMotor vehicle expenses
|Legal and professional fees (non-trade nature)
|Office upkeepProperty taxPrinting and stationeryProvision for bad and doubtful debts (impairment on trade debts)
|PenaltiesPrepaid expensesPrivate and domestic expensesPrivate hire car
|Rental of business premisesRegistration of patents and trademarksRepairs and maintenanceResearch and development expenses
|Renovation or refurbishment worksRetrenchment expenses during cessation of business
|Secretarial feesStaff training, welfare and benefitsFees paid to tax agentTelephone and utilitiesTransport and travelWages
|Withholding taxes on interest payments borne by companies on behalf of non-residents