Understanding business expense categories and tax deductions in Singapore (2026)

Introduction to business expenses in Singapore

Business expenses are the costs incurred to generate business income. They are deducted from revenue to determine a company's taxable income.

To be eligible to be tax-deductible, business expenses must be 'ordinary' and 'necessary'. An ordinary expense is common, while a necessary expense is essential to operating a business. Not all business expenses are tax-deductible, though. Under the Inland Revenue Authority of Singapore (IRAS) guidelines, personal expenses, fines resulting from legal violations, loan repayments, and more don't qualify for deductions. Business entertainment expenses may be deductible when incurred wholly and exclusively for business purposes and properly documented. Private or non-business entertainment generally does not qualify. Some start-up expenses may qualify for tax deductions or capital allowances, depending on whether they are revenue or capital in nature.

A proper understanding of essential business expense categories is crucial for monitoring expenses, identifying areas for savings, and maximising business tax deductions.

These days, there are sophisticated accounting software and expense management software that ease the process of categorising expenses, tracking spend, and identifying deductible expenses.

Types of business expenses

Business expenses are broadly classified as:

Fixed expenses

Fixed expenses stay the same over several reporting periods. Examples include rent and interest payments.

Variable expenses

Variable expenses change over time, such as wages, utility (water, power) bills.

Periodic expenses

So-called because they occur occasionally, such as bonuses and maintenance expenses.

Direct expenses

These cover costs that go directly into producing goods and services, such as raw materials and labour.

Indirect expenses

These aren't directly linked to the production of goods/services but are necessary for overall business operation (rent, utilities).

9 common business expense categories in 2026

Expense categories are a systematic way to group similar costs. They serve as a framework for organising, tracking, and managing business spend. When done right, they provide valuable insights that strengthen decision-making and resource allocation.

There is no single way to categorise business expenses. Grouping expenses based on the business activities they are related to is fairly common. Here's a list:

1. Operational expenses

Expenses incurred through normal business operations are called operational expenses. One of the most essential business expense categories, this spend category is absolutely necessary for keeping the business running smoothly.

Common examples of operating expenses include rent or mortgage payments, utilities, office supplies, employee salaries, equipment, and inventory costs.

Plant and equipment maintenance and repair fees also come under operating expenses as they are essential to day-to-day operations. Businesses today also incur significant technology and software expenses, which now form a core operating cost for many companies. These include cloud hosting services, SaaS subscriptions such as CRM and accounting platforms, AI tools, cybersecurity software, data storage, and system integration tools.

Many industries now face rising regulatory and compliance costs. These may include audit fees, compliance software, data protection expenses, regulatory filings, and licence renewal fees.

These qualify as deductible business expenses as long as they are ordinary and necessary expenses.

2. Employee-related expenses

There are many workforce-related expenses, such as salaries, bonuses, commissions, and employee training costs.

Most businesses run employee benefit programmes offering perks like life insurance, healthcare, childcare, retirement benefits, and stock options, all of which are eligible for tax deductions.

Another employee-related business expense is workers' compensation insurance, which provides benefits to employees who become ill or are injured on the job. It covers hospitalisation and treatment costs, disability pay, and lost wages. In Singapore, it is called Worker Injury Compensation Insurance and is a mandatory provision for certain groups of workers, including those who perform manual labour.

Remote and hybrid work also generates several employee-related expenses across various categories. These include reimbursements for home office and internet allowances, technology expenses such as remote collaboration software, and facilities costs such as co-working space rentals.

3. Marketing and advertising expenses

This category covers costs incurred in promoting the business' products and services. Billboards, hoardings, flyers, ads for social media, television and print, and brochures are some examples. Also included are fees paid to advertising and marketing firms to produce the promotional material. These, too, are tax-deductible business expenses.

4. Financial expenses

Financial expenses refer to the costs associated with funding a business. Bank fees – such as monthly maintenance charges, overdraft fees, wire transfer fees, and transaction charges – are a type of financial expense. So is interest paid on a loan or an ongoing credit line, as well as mortgage interest.

Bank fees associated with business accounts and business-only credit cards are deductible expenses.

Another growing cost area is payment and financial processing fees. Businesses that operate digitally often incur expenses such as payment gateway charges, merchant discount rates, foreign exchange conversion fees, and subscription billing platform costs.

Business insurance expenses also come under financial expenses, but deserve their own category (see below).

5. Insurance expenses

Businesses rely on insurance plans – such as property insurance, general liability insurance, and malpractice insurance – to cushion them from unforeseen losses and risks. Business insurance premiums are a major subset of tax-deductible business expenses.

Other business-related insurance plans include:

• Business Interruption Insurance, also called Business Continuity Insurance, covers income loss resulting from disruptions to business caused by fires, natural disasters, and cyberattacks.
• Employee-related insurance plans, including the previously mentioned Workers' Compensation Insurance and employee health insurance.
• Cyber insurance may cover certain legal and recovery costs following a data breach, but government fines and penalties may not always be tax-deductible, depending on regulations.

6. Cost of goods sold (COGS)

This covers all expenses directly associated with producing the goods a company sells, such as materials, labour, storage, and freight. Indirect expenses such as rent, advertising, and distribution are excluded. It is also a deductible expense that brings down a company's tax liability.

7. Selling, General, and Administrative (SG&A) expenses

Selling, General, and Administrative (SG&A) expenses are a major component of operating expenses and include costs related to sales, marketing, administration, and general business operations. It excludes costs directly associated with producing the goods/services (which are separately grouped as COGS) as well as R&D. Rent, wages, marketing and advertising costs, and distribution charges are included in SG&A expenses. Because SG&A is considered an ordinary and necessary expense, it is a tax-deductible category.

8. Depreciation

Depreciation is a non-cash expense assigned to the loss in value of a fixed asset (machinery, buildings, furniture, vehicles, etc) due to wear and tear from usage and the passage of time. Accounting depreciation is not tax-deductible in Singapore; instead, businesses may claim capital allowances on qualifying assets.

9. Capital expenses

Also called capital expenditure (capex), this is what a business spends on long-term assets (plants, equipment, technology) to fuel growth and improve efficiency. Examples include money spent on acquiring or upgrading long-term assets. Routine maintenance costs are treated as operating expenses, not capital expenditure. Although capex is an expense incurred for business purposes, it is considered more of an asset that increases the value of the business – and is recorded as such on the balance sheet – rather than an actual business expense.

Business expense categories and expense management

Expense management is the process of tracking, analysing, and controlling business expenses. But it goes beyond keeping tabs on how much your employees spend on business travel, renting office space, or paying professional service fees. It includes creating effective spending strategies that ensure every penny spent is accounted for, aligns with organisational goals, and complies with tax regulations. Smart expense management allows businesses to know when to cut back, where to invest, and where to deploy resources.

Correct expense categories streamline spend management and eliminate administrative waste. They also get to focus on the more important task of growing the business rather than getting bogged down by administrative processes.

Spend management requires regular review and reconciliation of a company's financial accounts and bank statements. A manual process is both time-consuming and error-prone. Using expense management software eliminates most of these challenges. It automates receipt generation, tracking, and reconciliation, and stores them in a centralised database. It automates approvals, ensures in-policy spending, and streamlines reimbursements by integrating with employees' business-only credit cards. Built-in expense reporting tools help identify tax deductions and benefits, making tax filing less painful.

Business expense categories and tax deductions in Singapore (2026) 

A proper understanding of business expense categories is needed to identify tax-deductible expenses, which helps companies increase tax savings, lower taxable income, and improve cash flow.

Tax regulations and laws differ from region to region. Businesses, especially those that trade across international borders, must be familiar with region-specific laws in order to remain compliant and avoid penalties and legal trouble. Furthermore, being conversant with the rules will help them take advantage of the business tax deductions, credits, and incentives to which they are entitled. 

As mentioned above, not all business expenses are tax-deductible and differentiating between the two can be confusing and time-consuming. But not if you use spend management software. By efficiently tracking and categorising business expenses, these solutions make it quick and simple to determine which categories are tax-deductible. By making tech tools an integral part of their spend management and consulting with tax professionals, businesses need no longer fear tax time.

Business expenses: What's tax-deductible and what's not in 2026

Take control of business expenses with Aspire expense management

Automating, tracking, and analysing business expenses is a breeze with Aspire's expense management platform. 

Here are some of its top features that have won the hearts of our clients:

• Real-time monitoring across cards and claims
• In-built tools to keep expenses in check and in-policy
• Automatic reconciliation for faster reimbursements
• Unlimited virtual corporate cards for employees
• Receipt scanning and claim submission on the app
• Centralised expense database for maximum visibility