Government Grants and Payouts: Taxable or Not in Singapore

Grants and payouts are commonly received by companies in Singapore to support their operations, enhance growth, or fund specific initiatives. However, the tax treatment of these grants depends on their nature and purpose. Understanding whether a grant is taxable or non-taxable is essential for businesses to comply with the Inland Revenue Authority of Singapore (IRAS) regulations and optimize their tax positions. This guide explains the tax implications of grants and payouts and highlights key considerations for businesses.

Tax Treatment of Grants and Payouts

Grants or payouts are classified as either taxable or non-taxable based on their nature:

1. Taxable Grants/Payouts

Grants or payouts are considered taxable if they are:

• Revenue in Nature:
  • Given to supplement trading receipts or defray operating expenses of the company.
  • Examples include grants for rental subsidies, wage support, or operational expenses.

2. Non-Taxable Grants/Payouts

Grants or payouts are considered non-taxable if they are:

• Capital in Nature:
  • Provided for the acquisition of capital assets, such as machinery, property, or equipment.
  • Examples include grants for purchasing fixed assets or funding capital-intensive projects.

Tax Deductions and Allowances for Grants

For grants received on or after 1 January 2021, new tax rules apply to capital grants:

1. No Tax Deductions on Expenditure Funded by Capital Grants:
   • Businesses cannot claim tax deductions, capital allowances, or investment allowances on expenditures fully funded by capital grants from the Government or Statutory Boards.
2. Partial Funding:
   • For expenditures partially funded by capital grants, tax deductions and allowances are only allowed on the net amount (i.e., the portion not covered by the grant).

Examples of Taxable and Non-Taxable Scenarios

Scenario 1: Taxable Grant

• A company receives a $50,000 grant to subsidize rental costs for its office space.
• Since the grant is used to defray operating expenses, it is taxable.

Scenario 2: Non-Taxable Grant

• A company receives a $100,000 grant to purchase new manufacturing equipment.
• Since the grant is for acquiring capital assets, it is non-taxable.

Detailed List of Common Grants and Their Tax Treatment

The list of grants below is not intended to be exhaustive. Learn more about other types of grants available at Enterprise Singapore's website.

How to Report Grants to IRAS

1. Taxable Grants
   • Taxable grants must be included in the company’s income tax return (Form C or Form C-S) under Other Income.
2. Non-Taxable Grants
   • Non-taxable grants do not need to be reported as taxable income, but businesses should maintain proper documentation to support their classification.

How Apexia Corporate Advisory Can Help

At Apexia Corporate Advisory, we assist businesses in navigating the complexities of grant taxation. Our services include:

1. Tax Advisory Services
   • Provide guidance on the tax treatment of grants and payouts.
2. Tax Filing Assistance
   • Ensure accurate reporting of taxable grants in income tax returns.
3. Grant Compliance Support
   • Help businesses maintain proper documentation and comply with IRAS regulations.
4. Tax Optimization Strategies
   • Advise on tax planning to maximize benefits from grants while remaining compliant.