Deductible vs Non-Deductible Business Expenses: A Complete Singapore Tax Guide
- 2 days ago
- 4 min read
11 November 2025
Editor: ET
Running a business in Singapore involves more than just generating revenue — it also requires careful financial management and tax planning. One of the key elements of effective tax management is understanding which business expenses are deductible and which are non-deductible. Knowing the difference can significantly reduce your company’s taxable income and help you stay compliant with the Income Tax Act 1947.
At Expede.com.sg, we often guide Singapore-based SMEs on how to structure their financial records efficiently so they can claim eligible tax deductions and optimize their annual tax filing. Here’s a comprehensive breakdown to help you navigate deductible and non-deductible business expenses confidently.
Further Reading: How Corporate Secretaries Enhance Shareholder Relationships
Understanding Business Expenses and Their Impact on Tax
Every business incurs expenses to operate, whether it’s for employee salaries, rental costs, or marketing. However, not all these expenses are tax-deductible.
Deductible business expenses are those “wholly and exclusively incurred in the production of income.” In simpler terms, they are the costs directly related to earning your business income.
When these expenses are properly accounted for, they reduce your taxable income, lowering the amount of corporate income tax you need to pay to IRAS.
Why Understanding Tax Deductions Matters for Singapore Businesses
With the corporate tax rate in Singapore set at 17%, maximizing your allowable deductions can result in meaningful savings for your business. For example, a company that identifies an additional $10,000 in deductible expenses could potentially save $1,700 in taxes.
Effective expense tracking and proper documentation aren’t just about compliance — they are strategic tools that help business owners and financial managers enhance profitability while maintaining transparency.
At Expede Tech Pte Ltd, we’ve observed that businesses that regularly review their expense policies and engage professional corporate secretarial and accounting support are more likely to identify legitimate deductions while avoiding errors that might trigger IRAS queries.
What Are Deductible Business Expenses?
Deductible business expenses are those that meet these three conditions:
Wholly and exclusively incurred in the production of income.
Actually incurred (not just planned or budgeted).
Revenue in nature, meaning they are recurring operational costs rather than capital investments.
Examples of Deductible Expenses:
Employee salaries, CPF contributions, and bonuses
Rental expenses for business premises
Office utilities such as water, power, and internet
Professional fees (e.g. accounting, legal, audit)
Advertising, marketing, and promotional costs
Business travel and transport directly related to operations
Repairs and maintenance (excluding major capital improvements)
These expenses are generally claimable in the Year of Assessment (YA) in which they were incurred.
What Are Non-Deductible Business Expenses?
Non-deductible expenses are costs that do not meet the above criteria. They may be personal, capital in nature, or simply disallowed under the Income Tax Act 1947.
Common Examples of Non-Deductible Expenses:
Capital expenses (e.g. purchase of fixed assets such as machinery or vehicles)
Private or personal expenses (e.g. director’s private car expenses)
Fines, penalties, and illegal payments
Income tax or property tax payments
Depreciation of fixed assets (instead, you can claim capital allowances)
Donations that are not made to approved IPCs (Institutions of a Public Character)
Knowing what not to claim helps businesses avoid unnecessary IRAS audits or adjustments later during tax filing.
Enhanced and Double Deductions for Qualifying Expenditures
Singapore’s tax system offers additional incentives to encourage innovation, training, and productivity improvements. These are often referred to as enhanced or double deductions.
Some notable schemes include:
Double Tax Deduction for Internationalisation (DTDi) – for overseas market expansion.
Enhanced Training Deductions – for employee upskilling under approved programs.
Research & Development (R&D) Deductions – for innovation-driven expenses.
These deductions can help businesses grow while ensuring tax efficiency. Consult with a professional accounting partner like Expede Tech Pte Ltd to assess your eligibility and prepare the necessary documentation.
Building Smarter Expense Strategies
Maintaining accurate accounting records is key to claiming deductions smoothly. Businesses should:
Use digital accounting software to categorize expenses properly.
Retain all supporting invoices, receipts, and contracts.
Separate personal and business spending.
Schedule periodic reviews with a corporate accountant.
At Expede.com.sg, our experts emphasize proactive tax planning as part of sustainable business management. Understanding deductible and non-deductible expenses not only ensures compliance but also supports long-term financial clarity and resilience.
Further Reading: How to Reduce Tax Liabilities with Smart Planning in Singapore
A Smarter Way to Manage Business Taxes
Recognizing which expenses are deductible and which are not can make a major difference in your bottom line. As Singapore continues to foster a pro-business environment, companies that maintain clean financial records and adopt transparent accounting practices will always be better positioned for growth and compliance.
With the right guidance, such as that offered by Expede Tech Pte Ltd, businesses can turn their tax obligations into opportunities for efficiency and strategic advantage.
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