Singapore Company Tax FAQs - Part II

What income is taxable for Singapore companies? How do I determine taxable income for my Singapore company?

The answer to this question is well covered in Singapore Corporate Income Tax and Calculating Taxable Income for Singapore Companies guides.

Can I deduct pre-incorporation expenses for my Singapore company?

As a general rule, expenses incurred before the company has been registered are not deductible. For example, the following incorporation expenses are not deductible until the business has commenced its activites:

• Fees related to the company registration
• preparing of feasibility reports, project reports, conducting marketing surveys, etc. 

Can directors take loans from a Singapore registered company?

As a general rule, companies (other than exempt private companies) cannot lend to a director, unless the loan has received approval at a general meeting and is granted to meet company expenditure (for example, travel expenses) or to buy a home. The Companies (Amendment) Act 2003 clarifies this by limiting this to a single loan at any one time and that the property must be occupied by the director. Some exceptions here would be where lending money is in the company's ordinary course of business, or where the loan is in accordance with a loan scheme for full-time employees and executives previously approved by the company in a general meeting. 

Can a Singapore company pay rent for the accommodations of its directors?

Yes, that is possible. This benefit comes under the umbrella of benefits-in-kind and will have certain taxable implications for the director in Singapore. This term benefits-in-kind refers to benefits received by employees from the employer in non-cash form. In general, the taxable amount of the rental benefit in Singapore is lower than the rent paid and is derived as follows: 

• If the director's annual salary is less than the annual value of the rental property, the taxable amount is the annual value of the property.
• If the director's annual salary is more than the annual value of the rental property, the taxable amount is the lower of the a) annual value of the property; or b) 10% of the annual compensation. 

What is meant by the annual value of the property? It is the market rent the property can reasonably expect to fetch for the year as determined by the authorities. In most cases, this value is a little lower than the actual rental prices on the street. 

A properly structured compensation package (i.e. salary plus benefits in kind) for the executives can help reduce their individual tax liability in Singapore. 

What kind of business expenses are tax deductible for a Singapore company? 

In Singapore, tax deductions are allowed on business expenses wholly and exclusively incurred in producing the income being assessed, unless specifically disallowed in the tax law. In general, deductions are not allowed for

• domestic or private expenses;
• income or other similar taxes;
• pre-incorporation, preliminary or start-up expenses;
• expenses associated with cessation of business, capital withdrawn;
• capital employed in improvements.