Maximising Tax Relief: What Every Singapore SME Should Know

For small and medium-sized enterprises (SMEs) in Singapore, every dollar counts. Properly claiming tax deductions and exemptions can make a meaningful difference to cash flow and long-term profitability. Below is an overview of key deductions and reliefs that every SME should be aware of — including startup exemptions that can ease the financial load in the first few years of business.

1. Business Operating Expenses

Ordinary and necessary expenses incurred wholly and exclusively for business purposes are generally tax-deductible. These include:

• Staff salaries, bonuses, and employer CPF contributions

• Office rent and utilities

• Business travel, transport, and logistics

• Marketing, advertising, and professional service fees

  
  

Clear separation between personal and business expenses is essential. Maintaining accurate records, invoices, and receipts will support claims and reduce the risk of issues during an IRAS audit.

2. Capital Allowances and Asset Write-Offs

Fixed assets such as machinery, equipment, and office furniture are generally not deductible in full in the year of acquisition. Instead, businesses may claim capital allowances, which allow the cost of these assets to be spread over a period of time. For lower-value purchases used exclusively for business purposes, immediate write-off may be permitted under certain conditions.

3. Start-Up Tax Exemption (SUTE) and Partial Tax Exemption (PTE)

Newly incorporated companies can benefit from the Start-Up Tax Exemption (SUTE), which provides substantial savings during the first three Years of Assessment (YAs).

If eligible, the scheme grants:

• 75% exemption on the first S$100,000 of chargeable income

• 50% exemption on the next S$100,000

  
  

After the initial three years, companies may continue to enjoy the Partial Tax Exemption (PTE), which provides:

• 75% exemption on the first S$10,000 of chargeable income

• 50% exemption on the next S$190,000

  
  

To qualify, companies must be tax-resident in Singapore, have no more than 20 shareholders, and at least one shareholder must hold at least 10% of the shares. The exemption is applied automatically when filing annual tax returns.

4. Staff Welfare and Employee Benefits

Expenses that support employees can also be deductible, such as:

• Employer CPF contributions

• Approved Medisave contributions

• Reasonable staff welfare expenses like team events, meals, or training

  
  

These deductions not only provide tax relief but also help foster employee satisfaction and retention.

5. Bad Debts and Impairment Losses

Unpaid invoices may qualify as deductible bad debts if the income was previously recognised and reasonable recovery efforts have been made. Businesses must write off these debts in their accounts during the same fiscal year and retain documentation of recovery attempts to support their claims.

Practical Tips for SMEs

• Maintain well-organised financial records and supporting documents

• Separate business and personal finances to avoid confusion

• Plan asset purchases to maximise capital allowances

• Review eligibility for startup exemptions early to capture full benefits

• Seek professional tax advice before filing to avoid costly mistakes

  
  

The Bottom Line

Singapore’s tax system rewards businesses that plan ahead and stay compliant. By understanding key deductions and exemptions, SMEs can reduce their tax burden and redirect savings toward growth.

We partner with SMEs to organize their accounts, identify potential tax deductions, and stay compliant with IRAS requirements. Get in touch with us to learn how your business can better navigate Singapore’s tax incentives and manage its finances with confidence.

Disclaimer: This article is intended for general informational purposes only and does not constitute professional tax or legal advice. Tax regulations and eligibility criteria may change. SMEs should consult a qualified tax advisor or accountant before making decisions or filing returns.