With the 2016 tax year ahead, there’s no better time to think about deductions you can claim for your small business. The Singapore government has allowed for tax deductions on several areas of operations for businesses, and ignoring them is as good as leaving money on the table.
Here are some of the most commonly overlooked areas:
- Office Renovations
In Singapore, companies can claim deductions on the cost of renovating business premises, up to a total of $300,000. These costs cover a wide range of applications, from lighting, to bathroom fittings, and even certain decorations.
The deduction needs to be claimed over three consecutive years, starting from when the costs are incurred. You also need to keep supporting documents, including a list of work done and related costs, for five years. Therefore, remember to file these invoices during your accounting.
- Research and Development
Incentives for research and development (R&D) are substantial in Singapore – up to 100% of the costs are tax deductible.
To claim for R&D, your business needs to bear the costs and own the results. Activities also need to meet certain requirements: your objective must be to acquire new knowledge, create, or improve products or processes. It must also possess an element of novelty or attempt to improve upon technical risks, and must undertake a systematic, investigative and experimental (SIE) study.
Additionally, it is important to note that R&D related to trade is 100% deductible, while projects not related to trade only attract the same deductions if they’re conducted in Singapore.
- Employee Medical Expenses
Maintain a clean bill of health for your employees and lower tax bills for your business at the same time by claiming for employee medical expenses. Medical expenses, which also cover dental and preventative treatments, are tax-deductible as long as they are capped at 1% of an employee’s total remuneration, including salary, allowances and bonuses. This increases to 2% if you implement certain government medical and insurance schemes, or if you contribute directly to your employees’ Medisave accounts.
- Goods and Commercial Motor Vehicles
When it comes to vehicles, capital allowance deductions for wear and tear are fairly well known. In Singapore, you can claim capital allowance for vans, lorries and motorcycles acquired for commercial use, as well as cars so long as they’re hired out, or used for driving instruction. This includes the cost of obtaining and renewing your Certificate of Entitlement (COE) for vehicles. Additionally, motor vehicle expenses such as parking fees, maintenance, and petrol costs can also be deducted from your taxes.
Giving back to society not only improves your community, it also benefits your books. Donations made to an approved Institution of a Public Character (IPC) are tax-deductible. Apart from cash donations, you can also claim for donations of shares, computers and even artefacts to approved museums.
Moreover, you needn’t have to deal with the hassle of including donation claims in your income tax return. IPCs will submit the information with your Tax Reference Numbers to the Inland Revenue Authority of Singapore.
Being aware of tax deductions that your business is eligible for is the first step. Next, ensure that your expenses are well-tracked throughout the year so you don’t miss out on any deductions come tax time. For this, consider an accounting software such as QuickBooks Online, which helps you to manage your accounts with ease and convenience.