As a small business owner in Singapore, understanding your business expenses and their tax deductibility is crucial for financial health and compliance. At Counto, we’re committed to helping you navigate these complexities. Let’s dive into the world of business expenses and how they impact your tax position.
Business expenses are costs incurred in the ordinary course of running your business. For an expense to be considered deductible by the Inland Revenue Authority of Singapore (IRAS), it must be:
These are day-to-day costs necessary for running your business. Most operating expenses are tax-deductible in Singapore.
Examples:
💡 Tax Tip: Keep detailed records of all operating expenses. Even small costs can add up, and many are deductible. For instance, travel allowances for employees are generally deductible business expenses.
For businesses selling products, COGS represents the direct costs of producing goods.
Examples:
💡 Tax Tip: COGS is fully deductible, but ensure you have a robust inventory management system to accurately track these costs.
These are costs incurred to acquire or upgrade physical assets.
Examples:
💡 Tax Tip: While not immediately deductible, you can claim capital allowances over time. These allowances are deductions for the wear and tear of qualifying fixed assets used in your trade or business.
Costs that fluctuate based on business activity.
Examples:
💡 Tax Tip: These are generally deductible. Implement a good tracking system to ensure all variable expenses are captured.
Regular costs that remain constant.
Examples:
💡 Tax Tip: While fixed, not all of these may be fully deductible. For instance, only the interest portion of loan repayments is tax-deductible.
Regular expenses that may vary in amount.
Examples:
💡 Tax Tip: Set up a system to regularly review these expenses. You may find opportunities for cost savings or better allocation for tax purposes.
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Costs related to borrowed funds.
Examples:
💡 Tax Tip: Interest on borrowings used for business purposes is generally deductible. However, interest on late tax payments is not.
Unexpected or additional costs.
Examples:
💡 Tax Tip: While these can be deductible, they’re often scrutinised. Keep detailed records and ensure they’re reasonable and necessary for business.
As experts in outsourced accounting services, we go beyond traditional offerings to provide a comprehensive suite of financial solutions, including:
By partnering with us, you can ensure that your business expenses are properly managed, documented, and optimised for tax purposes.
Understanding your business expenses and their tax implications is crucial for the financial success of your small business in Singapore. While this guide provides an overview, tax laws can be complex and change frequently. It’s always advisable to consult with a trusted accounting firm to ensure you’re maximising your deductions while remaining compliant.
Counto is the trusted 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 us at [email protected], or contact us using this form.
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