Running a business in Singapore comes with various costs—but not all expenses are treated equally when it comes to tax. Understanding which expenses are deductible can help you lower your taxable income and optimise your business finances. This guide breaks down deductible vs non-deductible expenses under Singapore’s Income Tax Act.
What Are Deductible Business Expenses?
Deductible expenses reduce your company’s taxable income, thereby lowering the tax payable. To qualify, expenses must:
- Be wholly and exclusively incurred in the production of income
- Be incurred (i.e., the legal liability to pay has arisen)
- Be revenue in nature (day-to-day operational costs)
- Not be explicitly prohibited under the Income Tax Act 1947
Example:
- Total Income: S$80,000
- Deductible Expenses: S$5,000
- Taxable Income = S$75,000
What Are Non-Deductible Business Expenses?
Non-deductible expenses don’t meet the criteria above. These may include:
- Personal or private expenses (e.g. non-business entertainment)
- Capital expenses (e.g. cost of fixed assets)
- Fines, penalties, and some voluntary contributions
- Depreciation
These should be added back when computing taxable income.
Examples of Deductible Expenses
- Salaries, wages, and bonuses
- CPF statutory contributions
- Rent and utilities for business premises
- Business-related travel and transport (excluding personal commuting)
- Legal and professional fees for trade-related services
- Capital allowances (instead of depreciation)
- Insurance premiums (trade-related)
- Staff welfare and training (with limits under Budget 2023)
Examples of Non-Deductible Expenses
- Private car (S-plate) expenses (including maintenance, parking and fuel costs)
- Voluntary CPF top-ups beyond statutory limits
- Capital expenditures (asset purchases)
- Employee income tax paid by employer
- Non-trade bad debts or impairment losses
- Statutory fines or penalties
- Entertainment unrelated to business operations
Summary Table: Business Expense Tax Treatment in Singapore
Expense Type | Deductible? | Notes |
Staff Salaries & CPF (statutory) | ✅ Yes | Bonus, wages, allowances included |
Office Rent & Utilities | ✅ Yes | Must be for business premises |
Entertainment (business-related) | ✅ Yes | If wholly incurred for business purposes |
Entertainment (personal use) | ❌ No | Non-business purpose |
Private Car Expenses (S-plate) | ❌ No | Not allowed under current tax rules |
Commercial Vehicle Expenses (e.g. van) | ✅ Yes | COE can be claimed via capital allowances |
Voluntary CPF/MediSave Contributions | ❌ No | Beyond statutory limits |
Training (SkillsFuture-aligned) | ✅ Yes (300%) | From YA 2024–2028, under Enterprise Innovation Scheme (EIS) |
Legal Fees (business-related) | ✅ Yes | Trade-related transactions |
Legal Fees (non-trade or capital) | ❌ No | Not deductible |
Depreciation of Assets | ❌ No (but claimable) | Use capital allowances instead |
Donations (non-approved) | ❌ No | Unless made to approved IPCs |
Fines & Penalties | ❌ No | Both statutory and non-statutory |
Bad Debts (trade-related) | ✅ Yes | Non-trade debts are non-deductible |
Insurance for Business Risks | ✅ Yes | Including underwriting for bad trade debts |
Need Help with Corporate Tax or Expense Deductions?
Our tax specialists can help you structure your expense reporting for maximum deductions while staying IRAS-compliant. Contact us today for hands-on support with tax computation, adjustments, and documentation!