A complete guide for sole proprietors in Singapore on what business expenses can be claimed, how to maximise tax savings, and how to stay compliant with IRAS rules.
📌 Understanding Sole Proprietorship Taxation
In Singapore, a sole proprietorship is taxed as part of your personal income. The profit from your business — calculated as gross income minus allowable expenses — is added to your other personal income and taxed at progressive resident tax rates.
Claiming allowable business expenses reduces your taxable income, meaning you pay less tax while staying fully compliant with the Inland Revenue Authority of Singapore (IRAS).
✅ What Qualifies as an Allowable Business Expense?
IRAS allows deductions for expenses that are:
- Incurred wholly and exclusively in the production of income
- Not personal or private in nature
- Not capital in nature (i.e., not related to purchasing fixed assets)
Examples include:
- Office rent and utilities
- Employee salaries and CPF contributions
- Marketing and advertising expenses
- Professional services (accountants, lawyers, consultants)
- Business travel costs
- Telephone and internet charges
🚫 Non-Deductible Expenses
Some expenses cannot be claimed for tax purposes, including:
- Personal expenses unrelated to business
- Capital expenses like buying property or vehicles
- Fines and penalties
- Private entertainment costs not related to income generation
📊 Example of Tax Savings from Expense Claims
Suppose your sole proprietorship earns a gross income of SGD 150,000 and you have SGD 50,000 in allowable expenses.
- Gross Income: SGD 150,000
- Less Allowable Expenses: SGD 50,000
- Net Taxable Profit = SGD 100,000
Instead of paying tax on SGD 150,000, you are only taxed on SGD 100,000 — a significant reduction in your tax bill.
🧾 Record Keeping Requirements
To support your claims, IRAS requires you to:
- Keep invoices, receipts, and payment vouchers for all business transactions
- Maintain a proper accounting system (manual or digital)
- Store records for at least 5 years
Failure to maintain proper records can lead to disallowed deductions and penalties.
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💡 Tax Planning Tips for Sole Proprietors
- Track all expenses throughout the year to avoid missing deductions
- Separate personal and business finances with different bank accounts
- Consider voluntary CPF contributions for additional tax relief
- Review IRAS guidelines annually for updated deduction rules
📅 Filing Deadlines
Sole proprietors must file their tax returns using Form B by:
- 15 April — Paper filing
- 18 April — e-Filing
Meeting these deadlines ensures you avoid late filing penalties and interest charges.
🔍 Final Takeaway
Claiming business expenses correctly can dramatically reduce your tax liability as a sole proprietor in Singapore. By keeping proper records, understanding what is deductible, and filing on time, you can legally lower your taxes and keep more of your earnings.
