Certain business expenses can be deducted from your revenue. These deductions can reduce the income that is subject to tax. However, it is important to note that not all business expenses can be deductible.

 

Here are some general rules:

  1. Expenses must be incurred. (An expense is incurred when the legal liability to pay has arisen. It may not match the actual payment of the monies)
  2. Expenses must be related to your business. (You should be able to show that this expense is incidental to the business. This expenditure is necessary for you to earn revenue.)
  3. Expenses that are personal and private in nature are not allowable.
  4. Expenses that are capital in nature are not allowable business expenses.
  5. Expenses should be supported by proper and complete source documents. These documents should be kept for at least 5 years.

 

Disallowable business expenses are expenses that cannot be claimed against business income. They may be disallowed under the Income Tax Act or because they are not wholly and exclusively incurred to generate business income.

 

 

Some examples of allowable business expenses

 

Employee and/or Staff Costs

  • Compulsory CPF contributions by employer
  • Insurance for staff
  • Medical expenses for staff
  • Retrenchment benefits
  • Salary, bonuses, allowances of staff

Professional Costs

  • Accounting and Corporate Secretarial fees
  • Hire purchase interest
  • Interest on money borrowed for use in business
  • Legal fees incurred that are incidental to the business

Running Costs

  • Rent
  • Utility, telephone charges
  • Stationery
  • Advertising costs
  • Upkeep of business machinery
  • Upkeep od motor vehicles
  • Business licence renewal fees
  • Capital allowances on fixed assets purchased for business use
  • Motor vehicles COE
  • Public transport cost
  • Renovation, refurbishment and repairs (qualifying expenditure)
  • Trade debts which became bad and irrecoverable during the accounting year

 

Some examples of disallowable business expenses

 

Employee and/or Staff Costs

  • Employees’ medical expenses exceeding the allowable amounts
  • CPF contribution for employees above statutory limit
  • Your own personal drawings, medical fees, income tax, insurance and donations

Capital Expenses

  • Capital contributions or withdrawals
  • Depreciation of fixed assets
  • Entrance fees to professional bodies
  • Purchase of fixed assets
  • Start up expenses like licence, registration and signboard fees

Private Expenses

  • Travelling costs to and from personal home
  • Club subscriptions
  • Personal expenses
  • Personal insurance premiums
  • Personal medical expenses
  • Personal travelling expenses

Private Car Expenses

  • Expenses such as repair, maintenance, parking fees, petrol costs are disallowable. These expenses are NOT allowable even if the private cares were used for business purposes.