Running a business in Singapore comes with plenty of financial decisions, and tax planning is one of the biggest. You might already know that some business expenses can help lower your taxable income. But here’s the catch: not everything you spend on your business qualifies for a tax deduction.
Some expenses simply don’t make the cut — and if you’re not careful, claiming them can land you in trouble with IRAS. So, how do you know what counts as deductible and non deductible expense?
In this guide, we’ll walk you through 35 non-deductible business expenses, explain why they don’t qualify, and show you how to handle these financing costs smartly.
Introduction to Business Expenses
Business expenses are costs you incur while running your company. And knowing which ones are tax deductible can help reduce your company’s taxable income, which in turn lowers your overall tax liability.
Now, all business expenses fall into two broad categories:
- Deductible expenses
- Non-deductible expenses
Understanding the difference is key to staying compliant with Singapore’s Income Tax Act and optimising your taxes legally.
Here’s the golden rule: to qualify for a tax deduction, an expense must be wholly and exclusively incurred in the production of income.
That means the expense must be incurred towards your business' income generation. If it doesn’t? You’re likely looking at a non-deductible expense.
Deductible Business Expenses: What Actually Qualifies
So, what counts as a tax-deductible business expense? In simple terms, these are costs that are:
- Expenditure incurred in the production of your business income
- Not capital in nature
- Not disallowed by law
These expenses must directly relate to your income-generating activities, meaning they wouldn’t exist if your business didn’t.
Examples of qualifying expenditures are:
- Administrative costs like office supplies and utilities
- Advertising and marketing spend
- Auditors' remuneration
- Professional services (accounting, etc.)
- Legal and professional fees
- Rent and property tax for your business premises
- Salaries, bonuses, and employee allowances
- Service fees paid to vendors or consultants
- Stationery and office consumables
- Insurance Premiums (but subject to certain conditions)
According to IRAS, even things like property tax provision and service fees can be deducted if they meet the right criteria.
Only expenses incurred for business operations and income generation can be deducted.
Claiming only allowable business expenses and capital allowances can help reduce your company's taxable income without risking non-compliance.
But let’s shift gears and look at the flip side.
35 Common Non-Deductible Business Expenses in Singapore
Certain expenses may appear like costs of doing business, yet are non deductible business expenses under IRAS rules. Following are 35 of them, categorised for convenience:
Understanding Deductible and Non Deductible Expenses
So, how do you really determine if something is deductible and non deductible expense?
Here’s what IRAS says: To qualify for tax deduction, an expense must be wholly and exclusively incurred in the production of income.
Private, capital, or non-business-related costs? These don’t make the cut.
- Only cost incurred directly linked to trade and revenue transactions are eligible for tax deductions, while private and capital expenses are not.
The distinction is especially important when filing your Estimated Chargeable Income (ECI) and Annual Tax Return. Get it wrong, and it could trigger an audit.
Tax-Deductible Expenses and Capital Allowances
As we’ve discussed, deductible business expenses reduce your company’s taxable income. But there’s another powerful tool: capital allowances.
When you buy a long-term asset (like a delivery van or a commercial printer), you can’t deduct its full cost in one go. Instead, you claim capital allowances and spread the cost over several years.
Claiming capital allowances on fixed assets, such as vehicles and equipment, can help reduce taxable income; thus offering tax benefits.
Assets that qualify include:
- Commercial vehicles
- Laptops and computers
- Office furniture
- Factory equipment
The Income Tax Act outlines all these rules and provides the formula for calculating how much you can claim per year.
Claim Capital Allowances (Instead of Deducting Non-Qualifying Expenses)
This is where many businesses in Singapore go wrong.
Capital allowances let you offset the cost of fixed assets over some time, instead of writing them off all at once.
You can claim allowances on qualifying assets such as:
- Commercial vehicles (e.g. vans, lorries — not private cars)
- Equipment and machinery
- Computers and office furniture
How to claim:
- Calculate the cost incurred of the asset.
- Determine the correct write-off period (1 year, 3 years, or based on asset life).
- Submit your claim in your company’s tax return.
This process is governed by the Income Tax Act, and it’s a smart way to manage large capital investments while reducing your tax burden.
Enhanced Double Deductions for Business Growth
There’s some good news too: Singapore offers enhanced double deductions to encourage business expansion.
Under schemes like the Double Tax Deduction for Internationalisation (DTDi), businesses can claim 200% tax deductions on qualifying expenses. That means for every S$1 spent, you get to deduct S$2 from your taxable income.
Examples:
- Overseas business development trips
- Participation in approved trade shows
- Costs of advertising to reach international markets
- Research and development activities
- Portable Medical Benefits Scheme (PMBS)
- Writing off bad trade debts (if conditions are met)
The tax deduction for enhanced double deductions can help reduce taxable amount and lower tax liability while incentivising innovation.
These enhanced deductions are available up to S$150,000 without prior approval for many activities — a fantastic way to save while scaling up.
Managing Business Expenses Incurred
Even if you now know what you can and can’t deduct, how you manage your business expenses incurred matters just as much.
Here’s what smart businesses in Singapore do:
- Keep detailed records (receipts, invoices, transaction logs)
- Use accounting software for tracking
- Work with a qualified tax agent
- Regularly categorise and review expenses
Examples of effective expense management include tracking expenses, categorising expenses, and claiming capital allowances correctly.
Smart expense management is not just about reducing taxes. It’s about avoiding the common mistakes and building a financially resilient business.
Best Practices for Expense Management and Tax Compliance
To avoid penalties or unwanted audits, follow these best practices:
- Always separate business and personal expenses
- Use an expense management software to automate and manage business expenses
- Understand the rules of the Corporate Income Tax
- Claim deductions only for qualifying expenses
- Retain records for at least 5 years
The tax deductibility of expenses depends on the company’s taxable inflow and the relevant basis period.
Wrapping Up: Know What You Can (and Can’t) Deduct
Navigating non deductible expenses doesn’t have to be a guessing game.
By understanding what IRAS allows, keeping accurate records, and using tools like capital allowances or enhanced double deductions, you can stay on the right side of the law — and still optimise your tax bill.
Need help managing all of it?
With Aspire, you can track your business spending, automate income tax categories, and stay ready when tax season hits. That way, you spend less time worrying about IRAS and more time growing your business.
Ready to expense smarter? Let Aspire support your journey. Open a business account today!
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