Business Expenses are expenses you have incurred to run the business.
Some of the examples are CPF Contributions, wages, rentals, advertising, etc.
Business Expenditures may be deductible or non-deductible.
When deductible, they reduce your taxable income and
eventually the amount of tax they need to pay.
When non-deductible, they need to be added back to the Income Statement
thus increasing their taxable income.
(Under tax planning, we will look into greater details of each individual items and provide advice on how to better structure between the two)
Deductible Business 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:
Expenses are solely incurred in the production of income
Expenses are not a contingent liability,
i.e. it does not depend on the occurrence of an event in the future.
In other words, the legal liability to pay the expenses must have arisen,
regardless of the date of actual payment of the money.
Expenses are revenue, and not capital, in nature.
Expenses are not prohibited from deduction under the income Tax Act.
Non-Deductible Business Expenses
Non-deductible business expenses are activities you or your employees incur for that do not fulfill the conditions above.
This includes 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(I.e.Goodwill) and purchase of fixed asset.
Examples of Deductible and Non-Deductible Business Expenses
Periodicals & newspapers
Printing and stationery
Rental of business premises
Repairs and maintenance
Transport (public transport and goods / commercial vehicles)
Water & electricity
Private and domestic expenses (expenses not incurred for business purpose)
|Bank Charges and Interests
Borrowing Costs as a substitute for interest expense or to reduce interest costs
Interest incurred on loans to re-finance earlier loans or borrowings
Provisions and Accruals
Bad Debts (Trade Debtors)
Provision for bad and doubtful debts (specific)
(note impairment loss on trade debts)
Provision for obsolete stocks (specific)
|Bad Debts (Non-Trade Debtors)
Impairment loss on non-trade debts
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)
|Salaries and Wages
Employment Assistance Payment (EAP)
Employee’s income tax borne by employer (in accordance with employment contract)
Staff remunerations (salary, commission, bonus and allowances)
CPF, skills development levy, foreign worker’s levy
Statutory Contributions to CPF
Ad-hoc Contributions to employee’ Medisave Account
Topping-up of Employees’ CPF Minimum Sums
Voluntary cash contributions to self-employed persons’ Medisave Account
Supplementary Retirement Scheme (SRS)
Voluntary contributions to CPF (refers to CPF contributions exceeding the statutory rate)Donations
Interest incurred on late CPF contributions
|Directors’ Salaries and Equity-Based Payment
Employee Equity-Based Remuneration (EEBR) Scheme
|Dividend payments made on preference shares|
|Sales-Related And Misc Expenses
Exchange loss (trade and revenue in nature)
|Entrance fee (country club or other clubs)
Exchange loss (non-trade or capital in nature)
Expenses incurred before commencement of business
Interest expenses on non-income producing assets ( interest adjustment)
Interest incurred on late payment of fees to a Management Corporation for a Strata Title Plan (MCST)
Intellectual property (IP) licensing expenditure
Legal and professional fees (trade and revenue transactions)
Registration of patents, trademarks, designs and plant varieties
Research and development
Tax fees (service fees paid to tax agent)Govt-Related Expenses
Statutory and Regulatory expenses
|Singapore income tax and any tax on income in country outside Singapore
Legal and professional fees (non-trade or capital transactions)
|Medical and Insurances
Insurance premium (group term life insurance where employees are the intended beneficiaries, keyman insurance, workman injury compensation)
Insurance for underwriting bad trade debts
Medical expenses (restricted to 1%/ 2% of total remuneration if company is under Portable Medical Benefits Scheme (PMBS) or Transferable Medical Insurance Scheme (TMIS)
|Medical expenses (amount exceeding 1%/ 2% of total remuneration if company is under PMBS or TMIS)|
|Capital Assets Expenditure
Motor vehicle expenses (such as upkeep, maintenance, running and financing costs of goods / commercial vehicles, e.g. van, lorry and bus)
Reinstatement costs (expenses incurred to reinstate premises to its original condition prior to vacating it at the end of the tenancy agreement)
Depreciation (you may instead claim capital allowances )
Fixed assets written off
Fixed assets acquisition cost (you may instead claim capital allowances )
Installation of fixed assets
Motor vehicle expenses (S-plated and RU-plated cars)
Private hire car
Renovation or refurbishment works (you may claim Section 14Q deduction for qualifying expenditure incurred from 16 Feb 2008)
Transport (S-plated and RU-plated cars)
Contractual retrenchment payments
Ex-gratia retrenchment payments and outplacement support costs, where there is no complete cessation of business.Win Global Solutions – Accounting services for small businesses Singapore
|Ex-gratia retrenchment payments and outplacement support costs, where there is a complete cessation of business.|