Why Are Some Business Expenses Not Allowed For Tax Deduction By IRAS?
There are various provisions of the Singapore Income Tax Act that have been applied in arriving at the tax adjusted loss / profit.
In very broad terms, some of the basic principles are that the expense allowed must be “wholly and exclusively in the production of the (company’s) income” (Section 14(1) of the income Tax Act) and that the expenses must not be capital in nature (Section 15(1)(c)).
As such, following from the former, legal expenses incurred on behalf of another company are not deductible, while following from the latter, expenditure incurred on acquiring fixed assets and depreciation are capital in nature (capital allowances pursuant to other sections of the legislation are allowed).
Expenditure which allowed the company to commence a source of income (e.g. new licenses) are also considered capital in nature.
For assets/items on which PIC Cash Payout is to be claimed, no deduction/capital allowance claims are allowed per the legislation and thus the relevant add backs need to be done.
Hope the above helps to explain the different adjustments needed to be made against profits for year end corporate income tax computations for Form C/ C-S Tax filing to IRAS.
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