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.
Medical claims offer an opportunity to deduct expenses incurred for yourself, your employees, or their dependents. However, these claims are subject to stringent rules.
Medical claims can be made for:
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).
Non-deductible medical expenses include:
Employers need to retain proper documentation, including invoices, receipts, and records of employee medical insurance coverage. This ensures compliance during tax audits.
Fixed asset costs for renovation and refurbishment (R&R) are an essential part of business operations. These costs are deductible under specific rules.
R&R costs cover expenses incurred to improve your business premises. Examples include:
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.
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.
To support your claim:
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.
The total cost of small value assets claimed in a year must not exceed $30,000. This ensures businesses manage their deductions effectively.
Businesses must retain purchase receipts and ensure that each asset is used exclusively for business purposes.
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 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.
Donations to overseas organisations or private charities not registered as IPCs in Singapore are not eligible for tax deductions.
Ensure you obtain:
Motor vehicle expenses can be claimed if the vehicles are used solely for business operations. However, strict rules govern their deductibility.
Expenses related to these vehicles include:
Expenses incurred for private cars registered under the company are generally not deductible. This includes:
Employers can claim deductions for their share of CPF contributions to employees, within statutory limits.
Expenses for employee skill upgrades or professional courses are deductible, provided they align with business needs.
Qualifying businesses can claim enhanced deductions for innovation-related expenses such as R&D and digital transformation.
To ensure smooth claims and avoid penalties:
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.