The Tax Implications of Running a Home-Based Business in Singapore
- 3 days ago
- 4 min read
26 November 2025
Editor: ET
Running a home-based business in Singapore has become increasingly popular—especially among freelancers, solo entrepreneurs, online retailers, consultants and service-based professionals. With lower operating costs, flexible work environments and growing digital opportunities, more Singaporeans are embracing home entrepreneurship as a scalable and sustainable business model. However, while operating from home may seem straightforward, the tax implications remain just as important as they are for traditional businesses.
With insights from Expede Tech Pte Ltd, a trusted corporate governance and compliance partner in Singapore, this article explains how tax rules apply to home-based entrepreneurs, what expenses can be deducted and how to stay compliant with IRAS regulations.
Further Reading: The Corporate Secretary’s Guide to Handling Mergers and Acquisitions
Understanding Home-Based Business Taxation in Singapore
Although your business is operated from home, it is still treated as a legal income-generating activity and is subject to Singapore’s corporate or individual tax frameworks, depending on your business structure.If you register as a:
Sole Proprietor or Partnership: Your business income is taxed as personal income.
Private Limited Company: Your business is taxed under corporate tax, with potential benefits such as partial tax exemptions and start-up tax exemptions.
Regardless of structure, you must maintain proper records, account for expenses, and report income accurately to the Inland Revenue Authority of Singapore (IRAS).
1. Deductible Expenses for Home-Based Businesses
One of the key advantages of running a home-based business is the ability to claim proportionate deductions on certain household expenses. IRAS allows deductions only for expenses that are directly related to producing income, and the amount must be reasonable and supported by proper records.
Common deductible expenses include:
Electricity and utilities used for business operations
Home office equipment (laptop, printer, software subscriptions)
Broadband internet and phone bills
Costs of raw materials or supplies for production
Marketing and advertising expenses
Professional services (accounting, corporate secretarial support, website maintenance)
IRAS may require you to apportion expenses based on floor area or time usage. For example, if your workspace takes up 10% of your home, only that portion of utilities may be deductible.
2. Non-Deductible Home-Based Business Expenses
Some expenses cannot be claimed as deductions because they do not fulfil the “wholly and exclusively incurred” principle. These include:
Rental of your home (unless you operate a registered office with specific business use)
Mortgage or home loan repayments
Renovations for personal comfort
General household items (furniture, appliances, groceries, cleaning supplies)
Family or entertainment-related costs
Understanding the difference between deductible and non-deductible expenses helps you avoid filing errors and ensures compliance with IRAS guidelines.
3. GST Considerations for Home-Based Businesses
You must register for Goods and Services Tax (GST) if your home-based business:
Exceeds S$1 million in annual taxable turnover, or
Is expected to exceed this threshold in the next 12 months.
Once registered, you must charge GST on your goods or services, file quarterly GST returns, and maintain GST-compliant invoicing. Even home-based e-commerce sellers dealing with online platforms must comply with these GST rules when applicable.
4. Record-Keeping Requirements
IRAS requires all home-based business owners to maintain accurate financial records for at least five years. These records may include:
Receipts and invoices
Bank statements
Sales ledgers
Online platform transaction histories
Utility bills and supporting breakdowns for apportionment claims
Proper bookkeeping not only ensures compliance but also gives you clearer visibility of business performance. Many home-based entrepreneurs engage corporate service providers—like Expede Tech Pte Ltd—to maintain accurate financial and compliance records.
5. Declaring Home-Based Business Income
Your income declaration depends on your business structure:
Self-Employed: Report your net profit in your personal tax return (Form B/B1).
Company: Submit Estimated Chargeable Income (ECI) and file Form C-S or Form C annually.
Failure to declare income accurately can result in penalties. IRAS also conducts audits, especially for digital and online-based home businesses, so transparent reporting is crucial.
6. Benefits of Incorporating a Home-Based Business
While starting as a sole proprietor is common, many home-based entrepreneurs eventually incorporate a company for benefits such as:
Lower effective tax rates
Limited liability
Greater credibility with customers and partners
Access to corporate banking, grants and tax exemptions
Easier business scaling and expansion
Expede Tech Pte Ltd frequently advises home-based entrepreneurs on when and how to transition into a private limited structure.
Further Reading: Breaking Down the Tax Reliefs Available to Singapore Businesses
Running a home-based business in Singapore offers tremendous flexibility and growth potential, but staying compliant with IRAS tax requirements is essential. By understanding allowable deductions, GST obligations, record-keeping rules and the impact of business structure on taxation, entrepreneurs can maximise tax savings while avoiding compliance issues.
Whether you're just starting out or planning to scale, expert guidance can make managing taxes easier and more efficient. With the right support from corporate service providers like Expede Tech Pte Ltd, home-based entrepreneurs can focus on growing their business while ensuring strong financial governance.
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