Taking an interest in your own borrowing costs

WHEN businesses take interest-bearing loans – whether for working capital, business expansion or investment – they inevitably incur interest and borrowing costs. What should companies look out for, from an income tax perspective?

In the past months, Singapore has seen a decrease in interest rates based on the three-month Singapore overnight rate average (Sora). On Jan 29, the US Federal Reserve held the target federal funds rate, in a pause that breaks its successive cuts since September 2024.

With interest rates peaking in recent years, this Fed pause could finally be an opportune time for businesses to resume projects and expansion plans that have been on hold. But if borrowing for such a purpose, companies should consider these tax aspects.