Motor vehicle expenses are one of the most common sources of disallowed deductions in Singapore, because the rule does not follow business logic. Whether the expense is deductible depends on what kind of vehicle it is, not on whether it was used for business.
Goods and Commercial Vehicles Are Deductible
Expenses on goods and commercial vehicles, such as vans, lorries and buses, are deductible. That covers repairs, maintenance, parking, road tax and petrol.
Car Expenses Are Not
No deduction is allowed for motor vehicle expenses incurred on:
- private cars (for example S-plated cars); and
- business cars (for example Q-plated and RU-plated cars) registered on or after 1 April 1998.
This applies even where the car is used wholly for business, and it applies whether the company pays the cost directly or reimburses an employee for it. Business use does not rescue the deduction. This catches out companies that reimburse staff for petrol and parking on client visits and expect it to be deductible.
Summary Table
| What | Treatment |
|---|---|
| Goods and commercial vehicles (vans, lorries, buses) | Deductible |
| Private cars (S-plated) | Not deductible |
| Business cars (Q-plated, RU-plated) registered on or after 1 Apr 1998 | Not deductible |
| Business cars (Q-plated, RU-plated) registered before 1 Apr 1998 | Deductible, subject to a $35,000 cap on the vehicle cost |
| Reimbursement of an employee’s S-plated car expenses | Not deductible |
| Transport allowance paid to staff | Deductible to the company, and taxable as employment income to the employee |
| Foreign-registered car used exclusively outside Singapore for business | Deductible |
The $35,000 cap for pre-April-1998 business cars restricts the claim by reference to the cost of the vehicle: the deductible proportion is $35,000 divided by the cost of the car, applied to the expenses for that car.
Private hire cars and cars registered for instructional purposes are treated differently again. Where such a car is genuinely hired out, or used to provide driving instruction, in the course of the company’s business, capital allowances can be claimed on it. The blanket bar on car expenses is aimed at cars provided for private benefit, not at vehicles that are the business itself.
Transport Services Versus Hiring a Car
This distinction is worth understanding, because it decides whether a very ordinary expense is deductible.
- Paying for a transport service is a payment to be taken from one place to another. The passenger has no possession or control of the vehicle. A ride booked through an app falls here.
- Hiring a car puts the vehicle at the hirer’s disposal.
Payment for a transport service is deductible where it was incurred for business purposes, even where the vehicle involved is an S-plated or private hire car. Hiring charges for those same cars, used in Singapore, are not deductible.
So a staff member taking a booked ride to a client meeting is a deductible expense. The same staff member renting a car for the day to make the same visit is not.
This is a general guide. Vehicle categories and caps are set by IRAS and can be revised, so confirm the current treatment on IRAS’s business expenses pages or with your tax adviser before relying on it.