Can I Claim Staff Salaries and CPF as a Business Expense in Singapore?
Fully deductible. Salaries, wages, bonuses, and employer CPF contributions (17%, capped at S$1,258/month on ordinary wages) are all deductible as business expenses. The Skills Development Levy (SDL) is also deductible.
What Inland Revenue Authority of Singapore (IRAS) says
Under section 14(1)(b) of the Singapore Income Tax Act, all remuneration paid to employees in connection with the trade or business is deductible, including gross salary, employer CPF contributions, SDL, and other employment-related costs, provided they are revenue in nature and not capital.
When you can claim
- Basic salary for all employees (SC, PR, and foreign workers on valid work passes) incurred in the production of income.
- Employer CPF contributions at the statutory rates for SC and PR employees, capped at the Ordinary Wage ceiling of S$7,400 per month.
- Annual Wage Supplement (AWS or 13th month bonus), performance bonuses, and commissions paid to employees.
- SDL at 0.25% of gross monthly wages for all employees, both local and foreign.
- Staff insurance premiums and group hospitalization insurance premiums where these are part of the employment package.
When you cannot claim
- Owner-directors' drawings or profit distributions classified as salary but not reflecting genuine employment services.
- Salary payments to non-employees (e.g., independent contractors; these may still be deductible but as professional fees rather than salaries).
- Amounts above arm's length market rates for services rendered by connected persons without commercial justification.
- Salary costs that are capital in nature (e.g., costs of setting up a new business division that should be capitalised).
Good to know
Pro tip: If you are the sole director-shareholder of a Singapore Pte Ltd, optimise between salary (CPF-eligible, reduces corporate taxable income) and dividends (no CPF, tax-free at shareholder level under the one-tier system). For SC/PR directors, a moderate salary keeps CPF entitlements accumulating while dividends provide the balance. Run the numbers for your specific tax rate.
Stop guessing what you can claim in Singapore
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