Singapore explains green-credit deduction costs and retirement timing

The guidance concerns the existing section 14ZJ of the Income Tax Act 1947, not a new tax deduction enacted on 16 October. The section allows a person carrying on a trade or business to deduct qualifying expenditure on prescribed certificates or credits surrendered or retired by that person. The expenditure must have been incurred in a basis period relating to YA 2026 or a subsequent year. The deduction belongs to the YA relating to the surrender or retirement period, rather than automatically the purchase year.^[2][3]

Actual costs, not retirement value

IRAS describes a 100% deduction for qualifying expenditure, including costs incurred to meet voluntary sustainability commitments as well as statutory or regulatory requirements. The deduction uses actual costs, including ancillary fees, rather than the instrument’s market value when retired. The guidance identifies purchase costs, intermediary transaction fees, exchange and trading service fees, and professional costs related to acquisition.^[2]

Validation and verification costs incurred by project developers selling credits do not qualify under section 14ZJ where the developers do not themselves surrender or retire the instruments. IRAS distinguishes a business generating and registering qualifying credits for its own subsequent surrender or retirement: its qualifying validation and verification expenditure can be deductible.^[2]

Implications for group sustainability programmes

Section 14(7A) prevents another deduction under section 14(1) for the same expenditure already allowed under section 14ZJ. Section 15(2A) also disapplies section 15(1)(b)’s ordinary restriction on expenses not wholly and exclusively incurred to acquire income, where expenditure qualifies under section 14ZJ. These provisions do not turn every environmental purchase into deductible expenditure: the statutory prescription and qualifying conditions still matter.^[3][4][5]

Group tax teams should therefore connect acquisition costs and ancillary charges to the claiming business and the surrender or retirement record, and distinguish expenditure timing from deduction timing. A central sustainability purchase alone should not be treated as evidence that every group company can claim. This article addresses IRAS’s deduction guidance, not independent certification of an instrument’s eligibility under the separate prescription rules.^[2][3]