IRAS Update on Tax Treatment of Motor Vehicle Expenses
Inland Revenue Authority of Singapore("IRAS") has published the following update pertaining to the tax treatment of motor vehicle expenses on 13 August 2015.
Tax Treatement of Motor Vehicle Expenses
Motor vehicle expenses incurred on goods and commercial vehicles such as vans, lorries and buses are deductible. Some examples of motor vehicle expenses are repairs, maintenance, parking fees and petrol costs.
No deduction is allowed on motor vehicle expenses incurred on S-plated cars, RU-plated cars and company cars (excluding Q-plated cars registered before 1 Apr 1998), whether they are directly incurred or paid in the form of reimbursement. This is so even if these cars are being used for business purposes.
The tax treatment of motor vehicle expenses incurred by a company is summarised as follows:
|Private cars (S-plated cars), and company cars (Q-plated and RU-plated cars registered on or after 1 Apr 1998 and S-plated cars)
|Reimbursement of employees' S-plated car expenses
|Transport allowance to staff
|Foreign registered cars used exclusively outside Singapore
|Q-plated and RU-plated business cars that were registered before 1 Apr 1998
Note that the transport allowance is taxable as part of the employment income of employees.
|From YA 2014:
Deductible in full
Before YA 2014: Deductible subject to following cap: $35,000/cost of vehicle x motor vehicle expenses relating to that vehicle
|Deductible subject to following cap: $35,000/cost of vehicle x motor vehicle expenses relating to that vehicle
Following IRAS’s review of the tax treatment of Motor Vehicle Expenses, expenses incurred on transportation services are to be distinguished from expenses to hire a motor car. The former is a payment for services to commute from one place to another without the passenger having any control or possession of the motor car whereas in the latter scenario, the motor car would be at the disposal of the hirer.
Such payment for transportation services (e.g. bookings for SZ-plated or S-plated car via mobile applications) will qualify for tax deduction, if such expenses were incurred for business purposes. On the other hand, the hiring charges for SZ-plated or S-plated cars used in Singapore will not qualify for tax deduction.