Legal and professional fees are tax deductible for a Singapore company when they are incurred to earn trading income and are revenue in nature. Examples include debt recovery, routine contract work, employment matters and lease renewals. Fees linked to capital or non-trade matters are not deductible: buying property or a business, raising share capital, an IPO, incorporation, striking off or liquidation. Accounting, audit, tax and secretarial fees are specifically deductible as statutory and regulatory expenses. The test is what the fee was for, not what the invoice calls it.
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.
This guide is for business owners, directors and finance staff reviewing professional fees before the company’s tax computation is prepared.
What test does IRAS apply to professional fees?
IRAS’s general rule is that an expense is deductible only if it is wholly and exclusively incurred in producing income, has actually been incurred, is revenue rather than capital, and is not specifically prohibited by the Income Tax Act 1947. On its business expenses page, IRAS lists “legal and professional fees (trade and revenue transactions)” as deductible and “legal and professional fees (non-trade or capital transactions)” as non-deductible.
In plain terms:
- Revenue costs are part of running the business day to day: collecting debts, drafting customer terms, handling staff issues.
- Capital costs create or protect a lasting asset or change the company’s structure: buying an office, acquiring a subsidiary, issuing new shares.
- Non-trade costs have nothing to do with earning the company’s business income, such as a shareholder’s personal matter paid by the company.
Some fees also have their own rules in the Act, which can make a fee deductible even though it looks capital, or restrict one that looks like a normal running cost.
Which professional fees are specifically deductible?
Section 14V of the Income Tax Act 1947 allows a deduction for qualifying statutory and regulatory expenses: costs of complying with written law, or with codes and rules issued by a government body or securities exchange. IRAS’s examples of deductible fees include:
- Accounting fees
- Audit fees, including where the company is eligible for audit exemption
- Income tax service fees, such as preparing the tax computation or lodging an objection to a Notice of Assessment
- Secretarial fees
- Annual listing fees
IRAS also gives examples of statutory costs that stay non-deductible because they are capital: incorporation fees, striking-off fees, liquidation fees, IPO fees and property valuation fees where the property is held on capital account. These are on IRAS’s page on the tax treatment of statutory and regulatory expenses.
IP registration has its own deduction too. Under section 14A, official and professional fees for registering patents, trademarks, designs and plant varieties are deductible, including fees paid to an agent for the application or for advice on validity or infringement. Under the Enterprise Innovation Scheme, qualifying IP registration costs can attract an additional 300% deduction on up to S$400,000 a year for YA 2024 to YA 2028, subject to conditions. Our guide to trademark registration with IPOS covers the filing itself.
Common fee types: deductible or not?
| Fee | Usual treatment | Conditions and notes |
|---|---|---|
| Audit, accounting and bookkeeping | Deductible | Statutory and regulatory expense |
| Tax computation, tax filing, objection to an assessment | Deductible | IRAS lists income tax service fees as deductible |
| Company secretarial retainer, AGM and annual return filing | Deductible | Statutory and regulatory expense |
| Incorporating the company | Not deductible | Capital, per IRAS |
| Legal fees to recover trade debts, letters of demand to customers | Generally deductible | Linked to collecting trading income |
| Drafting or reviewing customer and supplier contracts | Generally deductible | Ordinary trading contracts |
| Employment advice, contracts and staff disputes | Generally deductible | Part of managing the workforce |
| Defending a commercial claim arising from trading | Generally deductible | Fines and penalties themselves are not deductible |
| Renewing a business premises lease | Generally deductible | IRAS lists lease renewal legal fees as allowable for businesses |
| Taking up a new lease (legal fees, stamp duty, agent commission) | Depends | Deductible only if the conditions of section 14ZE are met |
| Buying an office, factory or other property | Not deductible | Capital; part of the asset’s cost |
| Due diligence and legal fees to buy shares or a business | Not deductible | Capital |
| Share issues, fundraising documents, shareholders’ agreements | Generally not deductible | Relates to the capital structure |
| IPO fees | Not deductible | Capital, per IRAS |
| Loan arrangement and similar borrowing costs | Depends | Only prescribed borrowing costs incurred as a substitute for interest, on loans for income-producing purposes |
| Trademark and patent registration fees | Deductible | Section 14A; possible enhanced deduction under the Enterprise Innovation Scheme |
| Striking off or liquidation | Not deductible | Capital, per IRAS |
| A director’s or shareholder’s personal legal matter | Not deductible | Not incurred in producing the company’s income |
“Generally deductible” means the usual answer for a trading company, not a guarantee. The facts can change the result. For fines and the costs of defending a regulatory charge, see our separate article on the tax treatment of fines, penalties and legal costs.
What about fees paid before the business started?
IRAS treats a company as having started business on the first day of the basis period in which it earns its first dollar of business receipt. Revenue expenses incurred from that deemed start date, and in the one year before it, are deductible. So a contract review or accounting fee incurred a few months before the first sale can be claimed, but the incorporation fee itself stays capital.
How to review professional fees before the tax computation
- Pull the ledger for every legal, professional, consultancy and advisory account, not just the one labelled “legal fees”.
- Match each line to an invoice and engagement letter, and note in one sentence what the work was for.
- Split mixed invoices. A law firm bill covering both a debt claim and a share issue needs to be apportioned, ideally using a breakdown from the firm.
- Classify each item as deductible, capital, non-trade or subject to a specific section (14V, 14A, 14ZE or borrowing costs).
- Capitalise asset-related fees into the cost of the asset in the accounts where accounting rules require it, and check whether capital allowances are available for that asset.
- Add back the non-deductible items in the tax computation and keep the working with the file.
- Keep the GST position separate. Whether input tax on a fee can be claimed is a different question from income tax deductibility.
Documents to keep
- Engagement letters and fee notes showing the matter description
- Fee breakdowns for invoices covering more than one matter
- Board minutes for acquisitions, fundraising and disputes
- Lease agreements, for leases that may fall under section 14ZE
- Loan documents, for borrowing costs
- The add-back schedule used in the tax computation
IRAS can ask for the breakdown and the basis for treating a fee as revenue. If a query arrives, our guide on responding to an IRAS query or review letter explains how to reply.
Example: adjusting professional fees in a tax computation
Example (hypothetical): A Singapore distribution company with a 31 December year-end records S$51,500 under “legal and professional fees”. The breakdown is:
| Item | Amount (S$) | Treatment | Add back (S$) |
|---|---|---|---|
| Statutory audit | 9,000 | Deductible (section 14V) | 0 |
| Tax computation and Form C-S filing | 3,500 | Deductible (section 14V) | 0 |
| Corporate secretarial retainer | 2,400 | Deductible (section 14V) | 0 |
| Recovering an unpaid customer invoice | 6,000 | Revenue, deductible | 0 |
| Employment contract templates | 2,600 | Revenue, deductible | 0 |
| Trademark registration through an agent | 3,000 | Deductible (section 14A) | 0 |
| Conveyancing on purchase of an office unit | 12,000 | Capital, part of asset cost | 12,000 |
| Share subscription agreement with a new investor | 8,000 | Capital | 8,000 |
| Legal advice on a director’s personal property dispute | 5,000 | Non-trade | 5,000 |
| Total | 51,500 | 25,000 |
The company adds back S$25,000 in its tax computation. The S$5,000 personal matter should also be dealt with in the accounts, for example as an amount due from the director, with board approval. The trademark cost may also qualify for an enhanced deduction, which is claimed separately and needs its own supporting records. For which return to file, see our comparison of Form C-S, C-S (Lite) and Form C.
Frequently asked questions
Are legal fees for suing a customer deductible?
Generally yes, where the claim is to recover trade debts or protect trading income. IRAS lists legal fees incurred in recovering trade debts as an allowable expense for businesses. Our guide to recovering unpaid debts from another company explains the recovery process itself.
Can we deduct the cost of incorporating the company?
No. IRAS treats incorporation fees as capital and non-deductible. Revenue expenses incurred within the year before the deemed start of business are a separate matter and can be deductible.
Are fees for a shareholders’ agreement deductible?
Usually not. A shareholders’ agreement deals with ownership and control, not with earning trading income, so the fee is normally treated as capital or non-trade. Keep it separate from commercial contract work on the invoice.
Is our company secretarial fee deductible if we are dormant?
Secretarial fees are on IRAS’s list of deductible statutory and regulatory expenses. Whether a deduction is of any use depends on whether the company has income to set it against, so check the position with your tax preparer.
Does it matter if the professional is overseas?
Deductibility follows the same test. Separately, payments to non-resident professionals can trigger Singapore withholding tax if the services are performed in Singapore, so check that before paying the invoice.
Need help with your tax computation?
Raffles Corporate Services can review your professional fee ledger, split mixed invoices, prepare the add-back schedule and tax computation, and file Form C-S or Form C for your company. Contact us at [email protected] or on WhatsApp at +65 8501 7133. This article is general information, not tax advice.
Kevin Yeo, Raffles Corporate Services