Fixed Expense Deduction Ratio for Self-Employed Persons

If you derived business income from carrying on a trade, business, profession, or a vocation, this income is taxable in your name (as a sole-proprietor, partner, or self-employed person). You have to report this income in your individual Income Tax Return (Form B/B1) that has to be filed to IRAS 18 Apr each year. 

 

In order to increase the tax filing and compliance rate, IRAS has introduced Fixed Expense Deduction Ratio (FEDR) for self-employed persons. It works by claiming a deemed amount of business expenses based on a prescribed percentage of the gross income earned, instead of claiming tax deductions based on the actual amount of allowable business expenses incurred. 

 

Qualifying self-employed persons such as private hire car drivers, taxi drivers, commission agents and delivery workers can use this method when filing their annual individual tax returns. 

 

However, if the actual amount of allowable business expenses is more than the FEDR, you can choose to claim tax deductions based on the actual allowable business expenses incurred in earning the income. Self-employed persons can exercise this option each year whether to claim tax deductions based on the FEDR or the actual allowable business expenses incurred. 

 

You should also keep proper records and accounts for 5 years so that the income earned and business expenses claimed can be readily determined. You must be able to support your records and accounts with invoices, receipts, vouchers and other supporting documents.

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