Tax Deductions and Incentives Available for F&B Businesses in Singapore

F&B businesses in Singapore face a range of operational challenges, but tax deductions and government incentives provide valuable opportunities to reduce costs and improve profitability. Understanding the various tax advantages available can be a powerful way to maximise savings, reinvest in your business, and ensure long-term sustainability. In this blog, we will break down common tax deductions, key government grants and incentives, and the importance of maintaining detailed records to fully benefit from these opportunities.

Common Tax Deductions for F&B Businesses in Singapore

There are several tax deductions available for F&B businesses that can reduce your taxable income and improve cash flow. Here are the most common ones:

1. Capital Allowances on Equipment and Assets

• What it is: F&B businesses can claim deductions for the depreciation of capital assets, such as kitchen equipment, furniture, and machinery.
• Example: If you purchase $20,000 worth of kitchen equipment, you can claim a deduction on a portion of the cost over several years.
• Benefit: This helps offset the upfront cost of significant investments and spread the expense over time, reducing your taxable income year-on-year.

2. Renovation and Refurbishment Expenses

• What it is: Businesses can claim tax deductions on renovation and refurbishment costs, subject to specific rules under the Renovation and Refurbishment Scheme.
• Example: If you spend $50,000 on renovating your restaurant, you could claim $16,667 annually over three years.
• Benefit: This deduction enables businesses to invest in improving their premises while reducing the impact of renovation costs on their finances.

3. Employee Wages and Contributions

• What it is: Employee wages, salaries, and contributions to the Central Provident Fund (CPF) are deductible expenses for businesses.
• Example: If your business spends $100,000 annually on employee wages, you can claim that amount as a deduction.
• Benefit: These deductions help reduce your tax liability and ensure compliance with Singapore’s labour laws.

4. Marketing and Advertising Expenses

• What it is: All expenses related to marketing and advertising, including digital campaigns, are tax-deductible.
• Example: If you spend $10,000 on an online marketing campaign, the entire amount can be deducted.
• Benefit: This deduction encourages businesses to invest in growth and visibility while reducing their tax burden.

Government Grants and Incentives for F&B Businesses

In addition to tax deductions, the Singapore government offers several grants and incentives aimed at helping F&B businesses grow, innovate, and improve productivity. These programmes can provide significant financial relief for eligible businesses.

1. Enterprise Development Grant (EDG)

• What it is: The EDG provides funding for businesses that want to upgrade their operations, expand into new markets, or adopt technology to improve productivity.
• Example: If you invest in upgrading your kitchen equipment or implementing a new POS system, the EDG can cover up to 80% of the project cost.
• Benefit: This grant reduces the financial burden of improving operations and can help businesses stay competitive in a fast-evolving industry.

2. Productivity Solutions Grant (PSG)

• What it is: The PSG offers funding to businesses adopting IT solutions and equipment that enhance productivity.
• Example: You could receive up to 70% funding for implementing a new POS system or kitchen automation technology.
• Benefit: This incentive encourages businesses to innovate and streamline operations, improving efficiency without bearing the full cost.

✅Navigate tax season with confidence: Our tailored, all-in-one accounting plans optimise your finances year-round. Discover how we can streamline your taxes and accounting today. Click here to learn more.

3. SkillsFuture Enterprise Credit (SFEC)

• What it is: The SFEC helps businesses offset the cost of employee training, which is vital for enhancing workforce capabilities.
• Example: If you invest in training your employees in customer service or food safety, the SFEC could subsidise some of the costs.
• Benefit: This grant allows businesses to develop their staff’s skills while reducing the financial burden of training programmes.

4. Food Industry-Specific Incentives

• What it is: There are various incentives available for F&B businesses that focus on sustainability, energy efficiency, and waste reduction.
• Example: If you implement energy-efficient kitchen equipment or sustainable food waste management practices, you may qualify for government incentives that reduce these operational costs.
• Benefit: These incentives align businesses with Singapore’s environmental goals while reducing operational expenses.

Importance of Keeping Detailed Financial Records for Tax Deductions and Incentives

For F&B businesses, maintaining accurate and organised financial records is essential to maximise tax deductions and ensure full compliance with tax laws. Here’s why it matters:

1. Supporting Your Claims

• Why it’s important: Detailed documentation of purchases, employee wages, and other expenses allows you to substantiate your tax claims, reducing the risk of disputes with the tax authorities.
• Example: Keeping all receipts and invoices for equipment purchases and renovations can ensure you can support claims under the capital allowances and renovation schemes.
• What to track: Maintain a well-organised filing system for receipts, invoices, and other financial documents to back up your claims.

2. Ensuring Compliance

• Why it’s important: Proper record-keeping helps ensure your business complies with the regulations set by the Inland Revenue Authority of Singapore (IRAS) and the Ministry of Manpower (MOM).
• Example: Clear records of employee wages and CPF contributions will keep you compliant with tax laws and avoid penalties.
• What to track: Monitor all employee-related costs, taxes, and other business expenses to ensure compliance with Singapore’s tax requirements.

3. Improving Financial Management

• Why it’s important: Accurate records provide insights into your business’s financial health, enabling you to make informed decisions about budgeting, investments, and cash flow management.
• Example: If you notice high expenditure on marketing without a proportional increase in sales, your financial records will help you decide whether adjustments are needed.
• What to track: Regularly review income, expenses, and investments to identify areas for improvement and ensure better financial planning.

4. Preparation for Audits

• Why it’s important: Well-maintained records ensure that your business is prepared for audits and can quickly provide the necessary documentation when required.
• Example: During an audit, having organised records of your expenses, including wages and capital purchases, will ensure the process runs smoothly.
• What to keep: Keep all financial documentation, including receipts, invoices, and contracts, well organised for easy access during audits.

Summary

F&B businesses in Singapore can benefit from various tax deductions, such as capital allowances, renovation expenses, and employee wages. Additionally, government grants like the Enterprise Development Grant and Productivity Solutions Grant offer financial support for innovation and growth. Maintaining accurate financial records is essential to maximise these benefits and ensure compliance with tax regulations. With the right tax strategies, F&B businesses can improve profitability and streamline operations.

Experience the Counto advantage

Counto is the trusted outsourced provider of accounting, tax preparation and CFO services for startups and SMEs. Get accounting plans that combine bookkeeping with corporate tax filing to help you stay compliant at an affordable price. To learn more, speak to us directly on our chatbot, email [email protected], or use our contact form to get started.

Here are some articles you might find helpful:

Per diem allowances 

Year-end tax strategies

ECI filing