Pre-Commencement Expenses in Singapore: Can a New Company Claim Costs Incurred Before Its First Sale?

Short answer: Yes, partly. Under section 14R of the Income Tax Act 1947, a Singapore company can deduct revenue expenses incurred up to 12 months before the first day of the accounting year in which it earns its first dollar of business receipts. Older revenue costs, capital items and incorporation fees are not deductible under this rule.

Pre-commencement expenses in Singapore are the costs a new company runs up before its first sale: rent, a website, professional fees, trial marketing. Whether each cost is deductible depends on when it was incurred, whether it is revenue or capital in nature, who paid it and how it was recorded. This guide covers the income tax rule, the GST rules and the records you need, with a worked timeline for a company incorporated in March 2026.

Raffles Corporate Services works with a panel of experienced Singapore law firms who offer cost-effective and efficient legal service and advice. This article is general information only and is not legal advice.

Can a new Singapore company claim pre-commencement expenses for tax?

A new company can claim revenue expenses incurred before its first sale, but only within a fixed window. Normally, costs incurred before a business commences are not deductible, because they set up the business rather than produce income.

Section 14R of the Income Tax Act 1947 (ITA) softens that rule. A business is deemed to have commenced on the first day of the basis period (the company’s financial year, for most companies) in which it earns its first dollar of business receipts. That date is called the deemed date of commencement. Revenue expenses incurred from that date, and revenue expenses incurred up to 12 months before it, are deductible. Expenses in that earlier 12-month window are treated as incurred on the deemed date of commencement, so they are claimed in the YA in which the company first earns income, not earlier.

Section 14R only lets in an expense that would have been deductible had the business already started, so capital spending stays non-deductible. A company can also show IRAS that it actually started earlier, for example when it was ready to market its services and conclude contracts; revenue expenses from that actual date onwards are then deductible. You can read IRAS’s summary on its business expenses (A to F) page and the statutory text of section 14R on Singapore Statutes Online.

Which pre-commencement costs qualify and which do not?

Only revenue expenses qualify under section 14R. Capital costs, incorporation fees and anything outside the 12-month window do not.

A revenue expense is a running cost, such as rent or advertising. A capital expense buys something of lasting benefit, such as equipment or the company itself.

IRAS lists incorporation fees as non-deductible because they are capital in nature, so do not budget for a deduction. See also our guide to claiming company bills a director paid personally.

How does the 12-month window work in practice? A worked timeline

The window is fixed by the start of the financial year in which the first dollar arrives, so the timing of your first invoice can decide whether early costs are deductible at all.

Take Orchid Labs Pte. Ltd., a hypothetical company incorporated on 10 March 2026 with a 31 December financial year end. Its first financial year runs from 10 March 2026 to 31 December 2026, which is its YA 2027 basis period. It spends on rent, a website and marketing from March 2026 onwards. The table shows three possible dates for its first receipt.

In scenario C, the company’s 2026 rent and marketing are lost unless it can prove an earlier actual commencement date. The start-up tax exemption clock also keeps running. Under IRAS guidance, the company’s first YA is YA 2027 because that YA relates to the basis period in which it was incorporated, so its first 3 YAs are YA 2027, YA 2028 and YA 2029. In scenario C, two of those three exempt years pass before any income is earned. Our guide to the start-up tax exemption covers the scheme in detail.

Where section 14R expenses exceed the income of the first YA, the excess becomes a trade loss. IRAS’s e-Tax Guide confirms that such losses may be set off against other income, carried forward, transferred under group relief or carried back, subject to the usual conditions, including the shareholding test for carry-forward.

What happens to expenses a founder paid before incorporation?

Before the company exists, the founder contracts and pays. The company must then take over the contracts and reimburse or owe the founder, with documents to show it.

Section 41(1) of the Companies Act 1967 allows a company, after its formation, to ratify a contract made on its behalf before it was formed. Once ratified, the company is bound by and entitled to the benefit of the contract as if it had existed and been a party at the time. Until ratification, section 41(2) makes the person who acted on the company’s behalf personally bound, unless agreed otherwise. Our article on pre-incorporation contracts under section 41 explains ratification and promoter liability.

A practical sequence is:

1. Keep a list of every pre-incorporation payment, with the invoice, receipt and proof of payment.
2. Pass a directors’ resolution soon after incorporation to ratify the relevant contracts and approve reimbursement of the listed costs.
3. Record the total in the company’s books as an amount due to the director (a director’s loan account), or reimburse it from the company’s bank account.
4. Ask suppliers with ongoing contracts, such as the landlord, to reissue future invoices in the company’s name.
5. Classify each item as revenue or capital and note its date against the section 14R window.

Whether IRAS accepts a deduction for a founder-paid cost depends on the facts, so raise it when the first tax computation is prepared.

Can you claim capital allowances on assets bought before trading?

Equipment bought before the first sale is not deductible as an expense, but it can attract capital allowances once it is used in the company’s trade. Capital allowances are IRAS’s tax relief for the wear and tear of qualifying plant and machinery used in the business.

IRAS allows the cost to be written off over 1 year, 3 years or the asset’s prescribed working life. Low-value assets costing not more than S$5,000 each can be written off in 1 year, subject to a total claim of S$30,000 per YA. Keep the purchase invoice, the date the asset was placed in use and evidence that it is used for the business. Our guide to section 19A capital allowances sets out the methods.

Can a new company claim GST paid before GST registration?

Yes, if the company meets both the general input tax rules and the pre-registration rules. GST paid before the company itself existed can also be claimed, but only with IRAS approval.

According to IRAS’s page on GST incurred before registration or incorporation, the main conditions are:

• Goods bought within 6 months before GST registration must still be held by the business at registration.
• Goods bought more than 6 months before registration must not have been consumed or supplied before registration.
• Services, property rental and utilities must be incurred within 6 months before registration and must not be directly attributable to supplies made before registration.
• Claims need valid tax invoices, and only the portion used for taxable supplies after registration is claimable.

For GST a founder paid before incorporation, IRAS treats it as the company’s input tax only if the founder became a member, officer or employee of the company, was reimbursed or promised reimbursement in full, was not GST-registered at the time, and the purchase was acquired for the company’s business. The company must write in to IRAS for approval, and may then claim in its first GST return. See our wider guide to input tax claims under Singapore GST.

What records should a new company keep for pre-commencement expenses?

Keep evidence of the amount, date, business purpose and who bore the cost. IRAS requires records to be kept for at least 5 years from the relevant YA.

• Invoices, receipts and proof of payment.
• The directors’ resolution ratifying pre-incorporation contracts and approving reimbursement, and the director’s loan schedule.
• A dated schedule of section 14R expenses, split into revenue and capital.
• Evidence of the first business receipt, which fixes the deemed date of commencement.
• For GST, the IRAS pre-registration checklist, stock account and list of services.

Our free tools can help you plan these deadlines.

What are the common mistakes with pre-commencement expenses in Singapore?

Most lost deductions come from timing and paperwork, not from the type of expense.

• Claiming section 14R expenses in the first YA instead of the YA of the first receipt.
• Letting more than a year pass between set-up spending and the start of the financial year of the first invoice.
• Expensing laptops or fit-out instead of claiming capital allowances or the section 14N deduction.
• Claiming incorporation fees as a deduction.
• Leaving founder-paid costs unrecorded.
• Claiming pre-registration GST on staff meals or on stock sold before registration.

Our sister site Singapore Secretary Services covers company secretarial support, and our checklist for a company’s first year of compliance sets out the filings that follow.

Frequently asked questions

Is section 14R the same as section 14U?

Yes. The rule was numbered section 14U before the Income Tax Act was revised in 2020. In the Income Tax Act 1947 (2020 Revised Edition) it is section 14R, and IRAS guidance uses the new number.

When do I claim pre-commencement expenses?

Expenses within the 12-month window are deemed incurred on the first day of the basis period in which the first dollar of receipts arises, so they are claimed in the YA for that basis period.

Are incorporation fees tax deductible in Singapore?

No. IRAS treats incorporation fees as capital in nature, so they are not deductible as a business expense.

Can I claim GST on my lawyer’s fees for setting up the company?

Possibly. IRAS uses incorporation legal fees as its own example. If the founder who paid meets IRAS’s conditions and the company is reimbursing the cost, the company can write in to IRAS for approval to claim it in its first GST return, provided the pre-registration conditions are also met.

Last reviewed: 22 October 2026. The Editorial Team, Raffles Corporate Services.