Fixed Expense Deduction Ratio (FEDR) for self-employed persons
Fixed Expense Deduction Ratio (FEDR)
Instead of claiming tax deductions based on the actual amount of allowable business expenses incurred, qualifying self-employed persons (SEPs) can enjoy a simplified tax filing experience by claiming a deemed amount of business expenses based on a prescribed percentage of the gross income earned, known as the Fixed Expense Deduction Ratio (FEDR).
FEDR was first introduced in the Year of Assessment (YA) 2019 for PHC/ taxi drivers. In YA 2020, it was extended to self-employed commission agents with annual gross commission income of $50,000 or less.
NEW!
From YA 2024, FEDR is further extended to self-employed delivery workers with annual gross income of $50,000 or less earned from delivery services based on prescribed delivery modes.
Commission agents
From YA 2020 (i.e. for income earned in 2019 and onwards), qualifying commission agents can claim a deemed expense based on 25% of the total gross commission income earned (i.e. 25% FEDR). The amount of business expense is deemed to be the sum of all allowable business expenses incurred (including expenses on entertainment, public transport, gifts and telecommunications) in earning the commission income.
Qualifying for FEDR
In order to claim FEDR, the commission agents must fulfil ALL of the qualifying conditions below:
- Carry on a trade, business, profession or vocation;
- Incurred allowable business expenses on the commission income earned; and
- The total annual gross income including commission, referral fees, training fees, retail profits, allowances, incentives etc. from all sources does not exceed $50,000
If the total annual gross commission income is more than $50,000, commission agents should claim tax deductions based on the actual amount of allowable business expenses incurred in earning the commission income.
Example 1: Commission agents who incur business expenses
The example below illustrates the application of the FEDR for commission income:
| Agent A | Agent B | |
|---|---|---|
| Annual gross commission income | $40,000 | $15,000 (As an insurance agent)
$40,000 (As a real estate agent)
Total: $55,000 |
| 25% FEDR | $10,000 (i.e. 25% x $40,000) | Agent B does not qualify for FEDR as the total annual gross commission income in the calendar year exceeds $50,000.
However, Agent B can claim the actual allowable business expenses incurred against both sources of income. |
Example 2: Commission agents who did not incur any business expenses
Andrew derived a gross commission income of $400 as a Multi-Level Marketing (MLM) distributor and he did not incur any allowable business expenses.
The 25% FEDR would not be applicable to Andrew as he did not incur any allowable business expenses on the commission earned.
If qualifying commission agents derive commission income from more than one source in the same year, they must exercise the same option in the same year for all their commission income sources. They cannot claim the 25% FEDR against one commission income source and actual allowable business expenses against another commission income source earned in the same year.
Example 3: Commission agents with more than one source of commission income
Ben was an insurance agent for the first 6 months in year 2023 and switched to become a real estate agent subsequently. His total gross commission income in 2023 did not exceed $50,000. Ben wished to claim actual allowable business
expenses incurred against his gross commission income as an insurance agent and the 25% FEDR against his gross commission income as a real estate agent.
Ben is not allowed to use different basis of tax deductions against the different sources of commission income earned in the same year. Instead, he has to use the same basis of tax deductions consistently against all his commission income earned in the same year, i.e. claim either:
- The actual allowable business expenses; or
- 25% FEDR
For more information, you may refer to the following:
[NEW!] Delivery workers
With effect from YA 2024 (i.e. for income earned in 2023 and onwards), qualifying delivery workers can choose to claim tax deductions on business expenses based on a fixed proportion of their annual gross income earned from delivery services (including both food and goods delivery).
Qualifying for FEDR
In order to claim FEDR, the delivery worker must fulfil ALL of the qualifying conditions below:
- The delivery worker is a self-employed individual;
- The delivery worker only uses the prescribed delivery mode(s) to perform the delivery service(s), as highlighted in the table below.
- The delivery worker’s total annual gross income from delivery services does not exceed $50,000, regardless of the delivery mode(s) used;
If the total annual gross income from delivery services is more than $50,000, the delivery worker is not allowed to claim tax deductions based on FEDR. Instead, tax deductions based on the actual amount of allowable business expenses incurred should be claimed.
FEDR for prescribed delivery mode(s)
The prescribed FEDR that delivery workers can claim depends on the delivery mode(s) used.
| Prescribed delivery modes | FEDR on annual gross income from delivery services |
|---|---|
| On foot, by public transportation, or by non-power-assisted bicycles | 20% |
| By motorised personal mobility devices (PMDs), power-assisted bicycles (PABs) or motorcycles | 35% |
| By vans | 60% |
The amount of business expense is deemed to be the sum of all allowable business expenses incurred (including rental/ public transport costs, fuel/ charging costs, repairs and maintenance costs, parking, service fees paid to operators, mobile phone subscription plans, road tax and commercial vehicle insurances, etc.) in earning the delivery income.
Example 1: Eligibility and computation of FEDR
The example below illustrates the application of the FEDR, as well as how FEDR is computed.
| Charles | Daniel | Ethan | |
|---|---|---|---|
| Annual gross income from delivery services | $40,000 (using motorcycle) | $10,000 (as a walker)
$60,000 (using van)
Total: $70,000 | $55,000 (using lorry) |
| FEDR | $14,000 (i.e. 35% x $40,000) | Daniel does not qualify for FEDR as his total annual gross income from delivery services is more than $50,000.
However, he can claim the actual allowable business expenses incurred. | Ethan does not qualify for FEDR as the delivery mode that he uses (i.e. lorry) is not a prescribed delivery mode.
However, he can claim the actual allowable business expenses incurred. |
Claiming FEDRs for multiple delivery modes used in the same year
If you use multiple delivery modes in the same year and would like to claim FEDR(s), you should apply the respective FEDRs to the corresponding income earned under each delivery mode.
Example 2: Claiming FEDRs for multiple delivery modes
Felix worked as a self-employed delivery worker and earned $5,000 in the first half of the year using his bicycle to perform the delivery services. In the second half of the year, Felix used a motorised PMD to perform the delivery services and earned $20,000.
The FEDR/ deemed business expenses that Felix can claim and the adjusted profit that he will declare in his Income Tax Return are as follows:
| Bicycle | Motorised PMD | Total | |
|---|---|---|---|
| Gross income from delivery services | $5,000 | $20,000 | $25,000 |
| Less: FEDR | $1,000 (i.e. 20% x $5,000) | $7,000 (i.e. 35% x $20,000) | $8,000 |
| Adjusted Profit/ Net Trade Income | $4,000 | $13,000 | $17,000
|
The FEDR must be applied consistently to either all delivery modes used or none at all. This means that you cannot claim the FEDR against income earned from one delivery mode and actual allowable business expenses against income from another delivery
mode. Similarly, if you earn delivery services income from more than one delivery mode, and if any of the delivery mode does not have an FEDR (e.g. car), you will have to claim the actual allowable business expenses for all delivery modes instead.
This is to ease tax compliance and avoid the situation where tax deductions on the same business expenses (e.g. mobile phone subscription plans) are claimed twice: once as actual business expenses incurred under one delivery mode, and FEDR
under another delivery mode.
Example 3: Claiming FEDRs for multiple group of delivery modes, including delivery mode that does not have FEDR
Ethan earned $20,000 and $30,000 from delivering parcels using his motorised personal mobility devices (PMDs) and car respectively in 2023. He would like to claim 35% FEDR solely on his motorised PMDs, and actual allowable business expenses on his car.
Even though his total income from delivery services did not exceed $50,000 and his motorised PMDs fall within the list of prescribed delivery modes, Ethan is not allowed to claim FEDR solely on the income earned using his motorised PMDs. This is in view that the car that he uses for his delivery services does not fall within the list of prescribed delivery mode.
Instead, Ethan can claim tax deductions based on the actual allowable business expenses incurred by him on income earned from both delivery modes.
NOTE:
When Ethan is claiming his actual allowable business expenses, he must ensure that he does not claim any expenses incurred on his private hire car or private car (E, Q or S-plate car), even if these private cars are solely incurred for business purposes. This is in view that private car/ private hire car expenses are generally disallowed under Section 15 of the Income Tax Act 1947. For more details, please refer to Motor car expenses.
For more information, you may refer to the FAQ on the Fixed Expense Deduction Ratio (FEDR) for delivery workers (PDF, 230KB)
Private hire car (PHC)/ taxi drivers
IRAS regularly reviews the FEDR for PHC and taxi drivers in consultation with stakeholders such as the Land Transport Authority. The review takes into account changes in the environment such as fluctuations in fuel prices and trip fares.
The example below illustrates the application of the FEDR for a PHC/ taxi driver:
| $ | |
|---|---|
| Gross Passenger Fares | 35,000 |
| Incentives/ Rebates/ Promotion/ Miscellaneous Payments | 5,000 |
| Revenue | 40,000 |
| Less: 60% FEDR (i.e. 60% x $40,000) | (24,000) |
| Adjusted Profit/ Net Trade Income | 16,000 |
Both PHC and taxi drivers with allowable business expenses that are more than 60% of their gross driving income can still choose to claim their actual amount of such expenses. Drivers who wish to claim the actual allowable business expenses are subject
to the following conditions:
- If the expenses are incurred partly for earning the driving income and partly for private or other purposes, please ensure that the amount you claim is apportioned accordingly either by usage or mileage. You can only claim the portion of expense that is incurred in earning your driving income.
- PHC drivers are not allowed to deduct the purchase cost of the private car against their income.
- If the amount of actual allowable business expenses claimed is more than your driving income, you can carry forward the losses to offset against future years’ driving income. However, these losses cannot be claimed against your other sources of income in the same or future YAs.
- If you derive income as both a PHC and taxi driver in the same year, you will need to exercise the same option for all your driving income. You cannot claim the 60% FEDR against your PHC driving income and actual allowable business expenses against your taxi driving income, or vice versa.
For more information, you may refer to the following:
- 60% Fixed Expense Deduction Ratio for chauffeured PHC/ Taxi Drivers (PDF, 183KB)
- Infographic on Simplifying Tax Filing for Taxi and Private Hire Car Drivers (PDF, 5.5MB)
You may also refer to the Tax Treatment of Government Assistance Schemes and Payouts for Private Hire Car (PHC)/ Taxi Drivers (PDF, 114KB) announced by the Government during the years 2020 to 2022.
Claiming FEDR during tax filing
Qualifying SEPs whose income has been pre-filled under the pre-filling of income initiative will automatically be allowed the FEDR against their pre-filled income.
Qualifying SEPs whose income has not been pre-filled can still claim their expenses using the FEDR during e-Filing.
Qualifying SEPs can exercise the option each year whether to claim tax deductions based on the FEDR or the actual allowable business expenses incurred.