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Singapore Guides On First-Year Business Expense Change

by Mary Swire, Tax-News.com, Hong Kong

30 September 2016


Singapore's tax authority has released a new guide on changes to the tax rules on how expenses incurred before the commencement of business can be deducted.

In Singapore, qualifying expenditure relating to intellectual property protection, research and development, renovation, or refurbishment and design incurred before business activity commences (pre-commencement expenses) are deemed to be incurred on the first day on which the business activity commences (actual date of commencement). As such, the pre-commencement expenses are generally tax deductible in the basis period in which the business activity commences.

The guidance explains that, under Section 14U of the Income Tax Act, a person is treated as having commenced his business on the first day of the accounting year in which the business earns its first dollar of business receipt (deemed date of commencement). To be deductible as Section 14U expenses, these expenses should be incurred within 12 months of the deemed date of commencement.

The update to the Guide follows a change in the 2016 Budget. Prior to the Budget, where a person's income from a business activity was subject to tax at different rates of tax in the first YA, the person was not required to allocate the pre-commencement expenses and s14U expenses to normal income, concessionary income, and tax-exempt income.

Now, for expenses incurred after March 25, 2016, new rules apply, to ensure the fair allocation of expenses to income subject to different tax rates, with comprehensive rules set out in the guide.

TAGS: compliance | tax | business | tax compliance | revenue guidance | law | intellectual property | accounting | Singapore | tax authority | tax rates | trade | research and development | Tax

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