Running a business in Singapore means staying tax-savvy. One of the most effective ways to reduce your tax burden is by claiming allowable business expenses.
Understanding what qualifies—and what doesn’t—can help you legally reduce the amount of tax payable, while keeping your operations compliant and efficient.
What Are Allowable Business Expenses?
Allowable business expenses are costs directly incurred in the day-to-day running of your business. These are deductible from your business revenue and help reduce your taxable income.
Example:
If your business earns S$80,000 and incurs S$5,000 in allowable expenses, your taxable income is S$75,000. (S$80,000 – S$5,000)
To qualify, the expenses must:
- Be incurred (you have a legal liability to pay them)
- Be wholly and exclusively related to your business
- Not be capital, private, or prohibited under the Income Tax Act
- Be supported by source documents for at least 5 years
Instead of Tracking Every Dollar: FEDR
Self-employed individuals like taxi drivers and commission agents can opt for the Fixed Expense Deduction Ratio (FEDR), a simplified method that allows claiming expenses as a percentage of gross income.
Common Examples
✅ Allowable Expenses
- Staff salaries and bonuses
- Compulsory CPF contributions
- Business insurance premiums
- Legal/accounting fees
- Rental and utilities
- Research & development (R&D)
- Bad trade debts
- Upkeep of delivery vehicles
- Renovation and refurbishment (under Section 14N)
❌ Disallowable Expenses
- Personal insurance and medical expenses
- Private car expenses (S/Q-plated)
- Club memberships and donations
- Depreciation (use capital allowances instead)
- Your own salary or CPF
- Travel between home and work
Special Schemes You Can Tap Into
- Enterprise Innovation Scheme (EIS)
- Corporate Volunteer Scheme (CVS)
- Double Tax Deduction for Internationalisation (DTDi)
- Land Intensification Allowance (LIA)
- Section 14N for Renovation & Refurbishment (R&R)
Each of these schemes expands the definition of allowable expenses or increases deduction caps—designed to help you reinvest in growth.
Summary Table: Tax Deductibility at a Glance
Expense Type | Allowable? | Notes |
Staff Salaries & CPF | ✅ Yes | Only for employees, not owner |
Business Insurance | ✅ Yes | Excludes personal life insurance |
Private Vehicle Expenses | ❌ No | Only goods/commercial vehicles allowed |
R&D Expenditure | ✅ Yes | Must be business-owned, not service-based |
Renovation Costs | ✅/❌ | Only qualifying R&R under Sec 14N |
Personal Medical Expenses | ❌ No | Exceptions under staff schemes |
Club Memberships | ❌ No | Considered private |
FEDR for Self-Employed | ✅ Yes | Alternative to actual expense tracking |
Need Help Navigating Business Deductions?
We assist self-employed individuals, partnerships, and SMEs with tax planning, expense audits, and IRAS-compliant filings. Contact us today to streamline your tax deductions legally and efficiently.