The Fixed Expense Ratio (FER) available for qualifying self-employed persons in specific sectors like delivery and private-hire car driving.
IRAS Compliance 2024
SELF-EMPLOYED DEDUCTIONS.
Strategic tax optimization for sole proprietors and freelancers in Singapore. Understand allowable business expenses to reduce your chargeable income effectively while staying within the Inland Revenue Authority of Singapore (IRAS) legal framework.
Write-off capability for certain low-value assets under Section 19A of the Income Tax Act, allowing immediate capital allowance claims.
Mandatory duration for keeping business records and receipts as per IRAS regulations to support your deduction claims during audits.
ALLOWABLE VS NON-ALLOWABLE.
The "Wholly and Exclusively" Rule
Under Singapore tax law, an expense is deductible only if it is incurred "wholly and exclusively" in the production of income. This means that personal, private, or domestic expenses cannot be mixed with business costs. For self-employed individuals working from home, this requires a clear apportionment of utility bills and rent based on the actual square footage used for business operations.
Common allowable expenses include office rental, staff salaries, CPF contributions for employees, and professional fees paid to accountants or lawyers. However, your own CPF contributions as a self-employed person are treated as personal reliefs rather than business expenses. For more on personal tax mitigation, visit our SG Tax Guide: IRAS Reliefs.
Core Deductible Categories
- Marketing & Advertising: Costs for online ads, website maintenance, and printed collateral used to generate business leads.
- Finance & Interest: Interest on loans taken specifically for business purposes, such as purchasing inventory or equipment.
- Travel & Transport: Public transport, taxi fares, and airfare for business trips. Note: Private car expenses (S-plated) are strictly non-deductible.
FIXED EXPENSE RATIO (FER).
To simplify tax filing for certain groups of self-employed persons (SEPs), IRAS allows the use of a fixed percentage to calculate business expenses instead of tracking every single receipt.
Delivery Workers
Individuals providing food or parcel delivery services can claim 20% of their gross income as business expenses without providing receipts.
How to filePrivate-Hire Drivers
Taxi and PHV drivers are eligible for a 60% fixed expense ratio, covering fuel, car rental, and maintenance costs.
Filing stepsCommission Agents
Real estate and insurance agents earning less than $50,000 in gross commission can opt for a 25% fixed expense claim.
View criteriaCAPITAL ALLOWANCES.
Capital expenditure, such as buying a laptop, office furniture, or heavy machinery, is not deductible as a direct expense. Instead, you claim Capital Allowances (CA) to write off the cost of these assets over their working life. This is a crucial distinction for self-employed professionals who invest heavily in hardware or infrastructure.
Section 19A Concession
Most business assets can be written off in one year (100% write-off) if the individual cost of the asset does not exceed $5,000. This provides immediate cash flow benefits to small business owners.
It is important to note that if you sell the asset later, you may be subject to a "balancing charge," which effectively adds the sale proceeds back to your taxable income. Proper documentation of the purchase date, cost, and disposal price is mandatory. For more information on how charitable activities might further offset your tax, see our section on Charitable Donation Deductions.
Ready to file your taxes?
The IRAS tax filing season for individuals starts on 1 March each year. Ensure your accounts are prepared and all deductions are categorized correctly to avoid penalties.