Maximise Your Tax Savings with Eligible Reliefs

Navigating the complexities of tax reliefs can be daunting, but understanding the various deductions and reliefs available can significantly reduce your taxable income and optimise your savings. This guide provides an in-depth explanation of the tax reliefs you can claim in Singapore, including medical claims, fixed assets, small value assets, donations, and motor vehicle expenses.

1. Medical Claims: Deductible Expenses for Health Needs

Medical claims offer an opportunity to deduct expenses incurred for yourself, your employees, or their dependents. However, these claims are subject to stringent rules.

Eligibility for Medical Claims

Medical claims can be made for:

• Hospitalisation Costs: Expenses incurred for hospital stays and surgeries.
• Medical Consultations: Fees paid for professional consultations, including general practitioners and specialists.
• Preventive Health Screening: Costs related to regular health screenings for early detection of illnesses.

Limits on Medical Claims

Medical claims are capped at 1% of the total remuneration paid to employees. However, this limit can be increased to 2% if the employer opts into certain medical insurance schemes for employees, such as the Portable Medical Benefits Scheme (PMBS).

What’s Not Covered

Non-deductible medical expenses include:

• Cosmetic surgeries that are not medically necessary.
• Vaccinations not tied to job-related health risks.

How to Claim

Employers need to retain proper documentation, including invoices, receipts, and records of employee medical insurance coverage. This ensures compliance during tax audits.

2. Fixed Asset Costs: Renovation and Refurbishment (R&R)

Fixed asset costs for renovation and refurbishment (R&R) are an essential part of business operations. These costs are deductible under specific rules.

What Qualifies as R&R?

R&R costs cover expenses incurred to improve your business premises. Examples include:

• Painting and redecoration.
• Replacement of electrical wiring.
• Installation of fittings such as air conditioning and lighting.

Deduction Cap

You can claim up to $300,000 in R&R costs over a consecutive three-year period of assessment. This cap ensures that businesses can manage expenses sustainably without compromising on quality upgrades.

What’s Excluded?

Costs that are capital in nature, such as the construction of a new building or the purchase of land, are not deductible under R&R.

Documentation Requirements

To support your claim:

• Maintain invoices and payment receipts.
• Ensure that expenses are directly tied to business property.

3. Small Value Assets: Full Deduction for Essential Business Tools

Small value assets (SVAs) are items that cost less than $5,000 each. These assets play a crucial role in daily business operations and are eligible for immediate deduction.

Examples of Small Value Assets

• Office Equipment: Printers, scanners, and laptops used for business purposes.
• Furniture: Chairs, desks, and shelves for office use.
• Specialised Tools: Instruments or devices critical to operations.

Cumulative Claim Cap

The total cost of small value assets claimed in a year must not exceed $30,000. This ensures businesses manage their deductions effectively.

Benefits of Claiming SVAs

• Immediate cost recovery for small investments.
• Simplified accounting processes.

Claiming Process

Businesses must retain purchase receipts and ensure that each asset is used exclusively for business purposes.

4. Donations: Tax Incentives for Giving Back

Donations made to approved institutions of public character (IPCs) are not only altruistic but also tax-efficient. Singapore offers generous tax deductions for qualified donations.

Eligible Donations

• Cash Donations: Monetary contributions to IPCs or government-related charitable causes.
• Shares and Properties: Transfer of equities or immovable properties to approved entities.
• Artefacts: Donations of cultural, artistic, or historical significance to museums or public galleries.

Deduction Rate

Eligible donations enjoy a 2.5 times deduction of the donated value. This means that for every dollar donated, you can deduct $2.50 from your taxable income.

Exclusions

Donations to overseas organisations or private charities not registered as IPCs in Singapore are not eligible for tax deductions.

Documentation

Ensure you obtain:

• Official donation receipts.
• IPC certification where applicable.

5. Motor Vehicle Expenses: Deductions for Business Transport

Motor vehicle expenses can be claimed if the vehicles are used solely for business operations. However, strict rules govern their deductibility.

Qualifying Vehicles

• Goods Vehicles: Lorries, vans, and trucks used for the transport of goods.
• Commercial Passenger Vehicles: Taxis or private-hire cars operated for business purposes.

Deductible Expenses

Expenses related to these vehicles include:

• Fuel and oil costs.
• Maintenance and repair expenses.
• Parking charges and Electronic Road Pricing (ERP) fees.

Exclusions

Expenses incurred for private cars registered under the company are generally not deductible. This includes:

• Depreciation of private cars.
• Motor insurance premiums for private vehicles.

How to Claim

• Retain receipts for all vehicle-related expenses.
• Maintain a logbook detailing business and personal use.

Other Tax Deductions and Reliefs

CPF Contributions

Employers can claim deductions for their share of CPF contributions to employees, within statutory limits.

Training and Development

Expenses for employee skill upgrades or professional courses are deductible, provided they align with business needs.

Enterprise Innovation Scheme (EIS)

Qualifying businesses can claim enhanced deductions for innovation-related expenses such as R&D and digital transformation.

Compliance Tips for Claiming Tax Reliefs

To ensure smooth claims and avoid penalties:

• Maintain Clear Records: Retain receipts, invoices, and supporting documents for all claimed expenses.
• File Accurately: Use the appropriate tax forms and adhere to filing deadlines.
• Engage a Tax Professional: Seek expert advice to optimise your claims and ensure compliance.

Understanding and utilising tax reliefs is a vital aspect of financial management for businesses and individuals alike. From medical claims and small value assets to donations and motor vehicle expenses, these deductions can significantly reduce your taxable income.

If you’re unsure about how to navigate the complexities of tax reliefs, let JWC Accounts & HR guide you. Our team of experts provides customised solutions to optimise your tax savings and ensure compliance with Singapore’s tax regulations. Visit jwc.com.sg today to learn more.