The Inland Revenue Authority of Singapore (IRAS) has updated its public guidance on deductible and non-deductible business expenses for corporate taxpayers. The new examples provide additional clarity for companies preparing their tax computations and assessing expense eligibility under the Income Tax Act 1947 (ITA).
1. Newly Added Examples of Deductible Business Expenses
IRAS’ expanded list includes the following categories, which may now be referenced as deductible—subject to the general tests of wholly and exclusively incurred for the production of income, and not being capital or private in nature.
a. Employee Transport Reimbursements (Business-Related)
- Reimbursements for transport costs incurred purely for business purposes, excluding private car expenses.
- Includes transport provided for employees working overtime or travelling off-site for work.
- Employers should maintain clear documentation (e.g., purpose of trip, receipts, overtime records).
- Companies should differentiate between private commuting and genuine business travel to avoid disallowance.
b. Registration of Intellectual Property
- Costs incurred to register patents, trademarks, designs and plant varieties.
- These costs, while sometimes capital in nature from an accounting standpoint, are specifically deductible under the updated IRAS guidance.
- Companies should ensure correct categorisation in fixed asset vs tax schedules.
c. Upfront Rental-Related Expenses (s 14ZE ITA)
- Deductible expenses include commission, advertising, stamp duty and legal fees incurred in obtaining, renewing or extending leases.
- Deductibility is subject to statutory conditions under section 14ZE ITA.
- Taxpayers must confirm that the lease satisfies s14ZE conditions, including the minimum lease period and purpose of the premises.
- Upfront costs should be tracked separately and evaluated for deductibility in the year incurred.
d. Sponsorship Expenses (Genuine Commercial Transactions)
- Sponsorships—whether in cash or in-kind—are deductible when they arise from genuine commercial arrangements carried out in the normal course of business, and are not private, capital or otherwise prohibited.
- Documentation proving commercial intent (e.g., marketing agreements, visibility deliverables) is essential.
- Non-commercial or philanthropic sponsorships remain non-deductible.
2. Newly Listed Non-Deductible Expenses
IRAS also clarified categories of expenses that are not allowable as deductions.
a. Compensation or Damages (Capital in Nature)
- Payments relating to the termination of capital assets, breach of long-term contracts, or other capital transactions remain non-deductible.
- Companies must assess the underlying purpose of the payment—income vs capital—to avoid misclassification.
b. Statutory Fines or Penalties
- Fines for regulatory breaches, non-compliance, or late payments remain specifically disallowed.
- These should be separately tracked to ensure correct tax add-backs during computation.
c. Non-Business Transport Reimbursements
- Employee transport reimbursements are non-deductible when incurred for:
- private commuting between home and office, or
- non-business activities.
- Employers must implement clear transport reimbursement policies and maintain robust records to demonstrate business purpose.
d. Certain Withholding Tax on Interest Payments Borne on Behalf of Non-Residents
- When a company bears the withholding tax on behalf of a non-resident creditor, such tax expenses may be non-deductible depending on their nature and statutory treatment.
- Companies must review intercompany financing and interest arrangements to ensure WHT borne does not lead to unintended tax cost.
3. Key Takeaways
- Reassess expense deductibility: Companies should update internal tax checklists and ensure correct add-back treatment in tax computations.
- Enhance documentation practices: Many deductions rely on proving business purpose—particularly for transport, sponsorships, and upfront rental expenses.
- Review lease agreements and IP strategy: New examples may support claiming deductions previously treated conservatively.
- Update employee reimbursement policies: Separate business-related transport clearly from private commuting to avoid disputes.
Source: IRAS, 23 October 2025