This is a spin-off from the spiritual stories that I often write.
Beside being a Yin practitioner, I am also an Accountant.
Recently I have been asked by clients, friends, etc that if person A bought a car (S-plated) and it is used for commercial purposes such as Grab and Uber, what are the expenses that are tax deductible?
Below debate is my opinion and no reliance should be based on this article.
Expenses such as monthly repayment of the vehicle, parking, petrol, etc. – Are they tax deductible.
Let me debate on this issue in ccfong.com
General rule is that we have to refer to section 14 of the Singapore Income Tax Act (“SITA”) to ascertain if the expense is allowable for tax deductible; and section 15 of the SITA on which expenses are not allowed for tax deductible.
Whether or not the expense can be allowed as tax deductible, the expense must be incurred wholly and exclusively during the period by the person in the production of income.
Please also refer to section 15(k) of the SITA in respect for motor vehicles.
Unless Uber and Grab cars are considered to be taxi, it will be exempted under section 15(k) as stated in section 15(k)(i) of the SITA. However, there is no basis and relevance for me to deem that Uber and Grab falls under the taxi category.
Let’s give a scenario.
A businessman bought a car to solely do Uber and Grab business.
Normal layman business calculation to see if the business is profitable (per month) will be
Income from driving Uber & Grab $5,000
Monthly loan repayment $1,000
To the businessman, his profit from driving is $1,000 and of course he would think that the profit of $1,000 is subjected to tax.
Question here is if profit $1,000 or Gross Income of $5,000 is subjected to tax?
Well, if Uber and Grab motor vehicles (S-plated) fall under s15 of SITA, then gross income of $5,000 is all subjected to tax as all expenses related to the motor vehicles are not allowed.
However, he can argue unfair and some of his expenses can be tax deductible and let us look at individual expense:
Monthly loan repayment
This loan repayment is very subjective – if A buys the vehicle and only take up 1 year loan vs if B buys the vehicle and takes up 10 years loan, the loan repayment of A is much higher than B in the first year.
However, I may advise that business owner may try to gauge what is the average market rental price of the similar vehicle and submit it to claim for expense under “deemed rental expense” of the vehicle with argument that they cannot be penalized for purchasing the vehicle instead of renting the vehicle.
See ah… Only when there he is fetching a passenger in the car, this is business. And when there is no business, it may seem that the vehicle is for private usage e.g. to drive ccfong crazy, etc.
Hence, in this instance, I may advise that business owner to keep track of the mileage they drove passengers and calculate the petrol expense attributed to the mileage and claim for tax deductible.
I am unable to see Parking as an expense wholly and exclusively in production of the income in Uber and Grab. As such, the tax deductibility of parking may be disallowed for tax purposes.
Hmmmm…… Maybe mileage for business percentage over total mileage incurred multiply the maintenance expense for tax purpose. The argument is the same as per Petrol written above.
In conclusion, as I am not aware of any written exception or provisions made for Uber and Grab in SITA (please let me know if there is), I may feel that s15 of SITA still prevails and expenses for the S-plated vehicle (even though it is not privately owned) may be disallowed for tax purpose.
There was once a company owned vehicle known as Q-plated vehicle and there were provisions in SITA for the expenses allowable for tax purpose.
I am also interested to find out whether what are the expenses allowable for Uber and Grab business.
You all may find this article as “write = never write”. Hehe. Anyway, it is just a debate.
As at for now, this is Fong Chun Cheong, preparing for his class / talk in this coming Good Friday, signing off…