Construction Accounting Singapore: Progress Claims, Retention, GST and Tax for Contractors
Construction accounting in Singapore means tracking each project's costs, claims, variations and retention, and recognising contract revenue as the work progresses rather than when you bill or get paid. IRAS accepts this percentage-of-completion basis for tax. For GST, a payment claim is not a tax invoice: GST becomes due when you invoice the certified amount or receive payment, whichever is earlier.
This guide, for main contractors, subcontractors and specialist trades, follows one progress claim through the Building and Construction Industry Security of Payment Act 2004 (SOPA) with the accounting and GST entries at each step, then covers retention, variations, manpower, equipment and BCA registration. Amounts are in Singapore dollars, as at November 2026.
Key takeaways
- SOPA: the payment response is due within 21 days of your claim (14 if the contract is silent). For a GST-registered claimant, payment is due within 35 days of the tax invoice (14 if silent).
- GST: a payment claim is not a tax invoice. GST is due at the earlier of invoice or payment, and on retention only when it is invoiced or paid.
- Tax: IRAS taxes contract revenue, retention included, as work progresses, and disallows provisions for foreseeable losses, defects and liquidated damages.
- Costs: construction levy is $250 to $900 per Work Permit holder a month, deductible net of rebates. Lorries, vans and machinery qualify for capital allowances; cars do not.
Table of Contents
- What Is a Payment Claim Under the SOP Act?
- Progress Claim to Payment: Accounting and GST at Each Step
- How Do Construction Companies Recognise Revenue?
- How Should Retention Sums Be Accounted For?
- When Is GST Due on Progress Payments?
- Construction Contractor Tax in Singapore: What Can You Deduct?
- Performance Bonds, Cash Flow and BCA Registration
- Common Construction Accounting Mistakes in Singapore
- Compliance Calendar for Construction Companies
- When Should a Contractor Get Professional Help?
- Frequently Asked Questions
- Official Sources
What Is a Payment Claim Under the SOP Act?
SOPA gives anyone who carries out construction work, or supplies related goods or services, under a written contract a statutory right to progress payments, even if the contract has no progress payment clause. 'Pay when paid' and 'pay if paid' clauses are void.
A payment claim is your written claim for a progress payment. It must identify the contract, state the amount claimed for the period and itemise the work, goods or services with supporting calculations; it can include authorised variations and interest on overdue amounts. The statutory time limits for a construction contract are:
| Step | If the contract is silent | Contract can set | Note |
|---|---|---|---|
| Payment claim | Last day of each month after the month the contract was made | Its own date | One a month, generally within 30 months of the work |
| Payment response | Within 14 days after the claim | Up to 21 days | Required even if paying in full, with reasons for any shortfall |
| Dispute settlement period | 7 days after the response due date | – | No adjudication yet |
| Payment due | 14 days after your tax invoice (GST-registered) or the response due date (others) | Up to 35 days | You may invoice any time after the response |
| Adjudication application | Within 7 days after the payment due date (if unpaid) or the end of the dispute settlement period | – | Notice of intention first; apply to the Singapore Mediation Centre |
| Determination | 7 or 14 days after adjudication starts | Longer if both agree | Pay within 7 days after it is served |
SOPA counts calendar days but excludes public holidays. Late payments carry interest at the higher of the contract rate and the court judgment-debt rate. If you miss the adjudication window, you can still roll the unpaid amount into your next claim. Fees are capped at $600 for the nominating body and, for the adjudicator, 10% of the claim (or $2,400 for claims of $24,000 or less).
SOPA does not cover HDB flat and other residential renovation that needs no Building Plan submission; see our renovation and interior design accounting guide.
Progress Claim to Payment: Accounting and GST at Each Step
Company A, a hypothetical GST-registered subcontractor, has a contract that is silent on SOPA timings and provides for 5% retention. It claims $100,000 this month, including $10,000 for extra work not yet instructed, and the main contractor certifies $90,000.
- Book the month's revenue: $90,000 of work done, leaving out the uninstructed $10,000 until the variation is approved.
- Serve the payment claim (Day 0). It is not a tax invoice: no sales entry, no GST.
- Check the payment response (by Day 14) and dispute any shortfall in writing.
- Issue a tax invoice the day you accept, net of retention. This starts a GST-registered claimant's SOPA payment clock.
- Collect payment by Day 28, or apply for adjudication within 7 days.
- Invoice the retention when it is released.
| Step and day | Entry in Company A's books | GST |
|---|---|---|
| Month end: work done | Dr Contract asset $90,000; Cr Contract revenue $90,000 | None |
| Day 0: payment claim served | No entry | None: not a tax invoice |
| Day 14: $90,000 certified, tax invoice for $85,500 | Dr Trade receivables $93,195; Cr Contract asset $85,500; Cr GST output tax $7,695 | $7,695 output tax in that period's F5 |
| Day 14: 5% retention withheld | Dr Retention receivable $4,500; Cr Contract asset $4,500 | None yet |
| Day 28: payment received | Dr Bank $93,195; Cr Trade receivables $93,195 | Already accounted for |
| Retention released: tax invoice | Dr Trade receivables $4,905; Cr Retention receivable $4,500; Cr GST output tax $405 | $405 output tax |
Total GST is $8,100, or 9% of the $90,000 certified. Invoicing the gross $90,000 on Day 14 would have made all of it due at once, long before the retention is paid.
The main contractor books the mirror entry: Dr Contract costs $90,000; Cr Trade payables $85,500; Cr Retention payable $4,500. It claims the $7,695 input tax only on Company A's tax invoice, because a letter of claim cannot support an input tax claim, and deducts the retention payable when incurred.
How Do Construction Companies Recognise Revenue?
On a typical contract the customer controls the work as it is built, so revenue is recognised as the work progresses, not when you bill or are paid. The SFRS for Small Entities, open to most private companies that meet two of three size tests (revenue and total assets each up to $10 million, 50 or fewer full-time employees), calls this the percentage-of-completion method. FRS 115 and SFRS(I) 15 reach a similar result, and the SFRS for Small Entities adopts the same 'over time' model for periods beginning on or after 1 January 2027 (earlier adoption is allowed).
Measure progress by costs to date over estimated total costs (excluding unused materials), by surveys of work performed, or by physical completion. Progress payments often do not reflect the work performed, so never just book claims as revenue.
| Company B, one contract at year end | Amount |
|---|---|
| Contract sum including approved variations | $1,050,000 |
| Estimated total contract costs | $840,000 |
| Costs incurred to date, excluding unused materials | $336,000 |
| Stage of completion ($336,000 ÷ $840,000) | 40% |
| Revenue to date (40% × $1,050,000) | $420,000 |
| Gross profit to date ($420,000 − $336,000) | $84,000 |
| Progress billings to date (certified, before retention) | $380,000 |
| Contract asset ($420,000 − $380,000) | $40,000 |
Billings ahead of revenue would create a contract liability instead. Add a variation order to the contract sum once it is approved, keep claims under negotiation out of revenue until recovery is highly probable, and re-estimate total costs monthly.
Loss-Making Contracts
When total costs are expected to exceed revenue, recognise the whole expected loss at once. Example: a $600,000 contract is now expected to cost $640,000, and $160,000 has been spent (25% complete). Book revenue of $150,000 against costs of $160,000, and provide for the remaining $30,000 of the $40,000 expected loss. For tax, add back the $30,000: IRAS does not allow provisions for foreseeable losses, and the costs are deducted as they are incurred.
How IRAS Taxes Contract Revenue
IRAS accepts revenue recognised over time, including under FRS 115 and SFRS(I) 15, unless the accounting treatment deviates significantly from tax principles. It rejects the completed contract method, which defers all profit to the year of completion. Holding back profit until a minimum stage of completion (commonly 20%) is accepted only with evidence that the threshold is reasonable, such as internal reviews or a professional engineer's or surveyor's view. Keep profit and loss records for each project; IRAS can ask for them.
How Should Retention Sums Be Accounted For?
A retention sum is the part of each progress payment that the customer withholds, usually until after completion, as security for the work: it is earned revenue held back.
| Stage | Accounts | Income tax | GST |
|---|---|---|---|
| Work certified, retention withheld | Revenue in full; retention held as a receivable or contract asset | Taxed now, as contract revenue | Not yet due if your invoice excludes it |
| Retention invoiced or paid | Trade receivable, then cash | Nothing further | Output tax at the earlier of invoice or payment |
| Customer defaults | Write off the amount you cannot collect | May be allowable as a bad debt | None on retention never invoiced or received |
| Retention withheld from your subcontractors | Contract cost, with a retention payable | Deductible when incurred | Input tax once you hold their tax invoice |
So retention is taxed before you receive it. Invoice net of retention unless the contract says otherwise, and keep a retention register per project (amounts, release conditions and dates) so each release invoice goes out on time.
On the payables side, section 19(12) of the GST Act makes you repay input tax claimed on a supplier's invoice that is still unpaid 12 months after its due date, so watch withheld and disputed amounts.
When Is GST Due on Progress Payments?
A GST-registered contractor charges 9% GST on construction services for residential and non-residential properties alike. Work on land outside Singapore is not subject to Singapore GST.
- Timing: the earlier of payment or invoice. If you are paid first, issue the invoice within 30 days.
- Certification: a letter of claim is not a tax invoice. Issue the tax invoice once work is certified, and keep the certificate of work done with it.
- Adjustments: reduce an invoiced amount with a credit note, or increase it with an additional tax invoice.
- Deposits: an advance payment to be offset against progress payments is taxable on receipt; a security deposit, such as a performance guarantee, attracts no GST.
Our GST F5 filing guide shows where each figure goes, and our GST filing service can file the return for you.
Back Charges and Contra Charges
If the main contractor supplies materials your subcontract required you to supply, there are two supplies, each taxed on its gross value. Example: your subcontract to supply and lay tiles is $50,000, and the main contractor provides $20,000 of tiles. It invoices you $20,000 plus $1,800 GST; you invoice $50,000 plus $4,500 GST. Invoicing a net $30,000 plus $2,700 GST is wrong, even though the cash is the same. A labour-only subcontract is a single supply.
Likewise, if your customer pays someone else to rectify your defects and deducts the cost from your retention, it charges you GST on the rectification, while you still account for GST on your full contract value.
Liquidated Damages and Other Receipts
Liquidated damages for late completion are compensatory, so no GST applies. Compensation for a suspension of work is outside GST if it covers lost income or costs, but taxable if it pays for work done before the suspension. Materials you buy in your own name and recover from a subcontractor are your supply, so charge GST even if you bought them without GST. Housing a subcontractor's workers in your dormitory is partly exempt (the bare rental) and partly taxable (furniture, fittings and services).
Registering for GST When You Win a Contract
A signed contract, accepted quotation or secured tender that will take your taxable turnover above $1 million in the next 12 months makes registration compulsory. Apply within 30 days of the forecast; registration takes effect two months after it. Late registrants owe GST from the effective date even if they never charged it and risk a fine of up to $10,000 plus a 10% penalty on the GST due, which IRAS generally waives if you disclose the lateness when applying.
Construction Contractor Tax in Singapore: What Can You Deduct?
Expenses charged to your accounts are generally deductible unless they are capital or specifically disallowed. Chargeable income is taxed at 17% after the partial tax exemption, with a 50% CIT Rebate for YA 2026 (total benefits capped at $40,000); our corporate tax calculator works it through. Revenue above $5 million means filing Form C rather than Form C-S.
Foreign Worker Levy, CPF and SDL
| Construction Work Permit holder (from 1 January 2024) | Higher-skilled | Basic-skilled |
|---|---|---|
| Malaysia, North Asian Sources or PRC | $300 | $700 |
| Non-Traditional Sources | $500 | $900 |
| Off-site construction facilities | $250 | $370 |
Monthly rates. Work Permits issued without the required certification attract $900 whatever the source. Each local employee earning at least the Local Qualifying Salary ($1,800 a month from 1 July 2026) supports up to 5 construction Work Permit holders.
- Levy: deductible only net of any levy rebate for the same period; the rebate is not taxable. Pay each month's levy by the 17th of the next month, by GIRO or PayNow QR: MOM revokes your Work Permits and S Passes if you miss two consecutive months.
- CPF: payable only for Singapore Citizens and PRs. Statutory contributions are deductible; voluntary extra contributions and late-payment interest are not.
- SDL: 0.25% of monthly wages for every employee, Work Permit holders included ($2 minimum, $11.25 maximum each), and deductible.
Charge levy, dormitory, transport and insurance to projects: leaving these contract costs in overheads distorts a cost-based stage of completion.
Machinery, Lorries and Vans
Excavators, cranes, generators, lorries, vans and motorcycles used in the business qualify for capital allowances, with a vehicle's COE counted in its cost. Cars (S-, Q- and RU-plated) do not, and private car running costs are not deductible even if the car goes to site.
- Options: one-third of the cost a year over 3 years (deferrable), or a 20% initial allowance plus annual allowances over the Sixth Schedule working life.
- Small items: assets costing up to $5,000 can be written off in one year, up to $30,000 per YA in total.
- Hire purchase: claim on the deposit and principal as they are paid; the interest is not part of the cost.
- Grants: no allowances on any part of the cost funded by a government or statutory board capital grant approved from 1 January 2021; claim only on the net cost.
Example: Company C buys an excavator for $150,000 and a lorry for $90,000 including COE in its year ended 31 December 2025. Under the 3-year write-off it claims $80,000 in each of YA 2026, YA 2027 and YA 2028. Our guide to SME deductible expenses covers other costs.
Performance Bonds, Cash Flow and BCA Registration
Performance Bonds
A performance bond is a bank's or insurer's guarantee that the employer can call if you fail to perform (IRAS's example is a banker's guarantee for 5% of the contract sum). It is not a liability unless called: disclose it as a contingent liability and show cash pledged as collateral as restricted. The bond fee is a contract cost and generally deductible.
Project Cash Flow Controls
- Run a monthly work-in-progress schedule per project: contract sum, approved variations, costs to date, cost to complete, billings, retention and margin.
- Keep a SOPA diary in both directions: your own claims, and the payment responses you owe your subcontractors.
- Until March 2027, the Government's risk share on Enterprise Financing Scheme Project Loans and SME Working Capital Loans is 70%, and Project Loans now cover local construction firms' domestic projects.
BCA Contractors Registration System
Since 1 June 2025, any firm hiring construction S Pass or Work Permit holders must be registered with BCA's Contractors Registration System (CRS); firms tendering for public sector construction work, or acting as first-level subcontractors on it, need it too. Management accounts signed by a director are accepted only for grades C3, L1 and Single Grade; every other grade needs audited accounts no more than 12 months old. For 1 July 2026 to 30 June 2027, CW01 and CW02 tendering limits run from $0.8 million (C3) to $105 million (A2), with no limit for A1.
So a contractor that qualifies for the small company audit exemption still needs an audit for any grade other than C3, L1 or Single Grade. Work Permit holders are full-time employees too, so a labour-heavy firm often fails the 50-employee test and must then pass both the revenue and total assets tests. Our audit preparation service gets your schedules and project files ready for the auditors.
Common Construction Accounting Mistakes in Singapore
- Booking claims, not work done, as revenue, instead of measuring progress and reconciling it to certificates monthly.
- Not issuing the tax invoice on certification, as IRAS expects; it also delays your SOPA payment date.
- GST slips: charging GST on the net amount after back charges, or invoicing retention gross by default and forgetting it on release.
- Deducting provisions for losses, defects or liquidated damages, or using the completed contract method.
- Pooling all projects in one cost centre, leaving no reliable stage of completion or project records.
- Missing SOPA deadlines, including payment responses on your own subcontractors' claims.
Compliance Calendar for Construction Companies
| When | What | Agency |
|---|---|---|
| Each claim cycle | Payment claims, and payment responses on subcontractors' claims | SOPA |
| Last day of each month | CPF and SDL due; pay by the 14th of the next month to avoid enforcement and interest | CPF Board |
| 17th of each month | Foreign worker levy for the previous month | MOM |
| One month after each quarter | GST F5 return and payment | IRAS |
| Within 3 months of year end | ECI, unless revenue is $5 million or less and ECI is nil | IRAS |
| 1 March | Employment income (IR8A or Auto-Inclusion Scheme) | IRAS |
| Within 5 or 6 months of year end | Financial statements to members (5 months, to skip the AGM) or AGM (6 months) | ACRA |
| Within 7 months of year end | Annual return | ACRA |
| 30 November | Form C-S, C-S (Lite) or C | IRAS |
| Each CRS application or renewal | Accounts no more than 12 months old | BCA |
When Should a Contractor Get Professional Help?
If you are a small subcontractor, not GST-registered, with a few short lump-sum jobs and no retention, tidy records and year-end accounts are enough.
Get help once you bill progressively with GST, run several projects, carry large retention balances, or face a loss-making contract, an adjudication, an IRAS query or a CRS grade that needs audited accounts. Good construction accounting in Singapore is a monthly routine, because errors in claims, retention and GST repeat across every project. Tax Filing SG is run by ex-Big 4 Singapore Chartered Accountants (ISCA), and we quote once we have reviewed your projects and records; see our accounting services.
Frequently Asked Questions
Is foreign worker levy tax deductible?
Yes, but only the levy your company actually bears: IRAS allows the levy incurred less any levy rebate for the same period, and the rebate is not taxable. Charge the levy to the projects where the workers are deployed. Late payment penalties are not deductible, so pay each month's levy by the 17th of the following month.
Does the SOP Act apply to HDB renovation work?
No. SOPA does not cover work or related supplies for residential properties that need no Building Plan submission under the Building Control Act. That excludes HDB flat renovation and private home renovation of the same kind, and the contractor's own subcontractors and suppliers cannot use SOPA for that work either. Disputes on those jobs go to CASE, the Singapore Mediation Centre, the Small Claims Tribunals or the courts.
Can a main contractor refuse to pay until the developer pays?
No. SOPA makes pay when paid and pay if paid clauses void, so a main contractor must value your work independently and pay by the due date. It may set off amounts only where the contract allows, and it must give its reasons in a payment response. Reasons it leaves out of the payment response are disregarded in adjudication.
Can I stop work if my progress claim is not paid?
Under SOPA, only after adjudication. You may suspend work or supply if the adjudicated amount is unpaid by its due date, you have notified the respondent, the principal (if known) and the owner of your intention, and at least 7 days have passed. You must resume within 3 days of full payment. Stopping at any other time depends on your contract, so take legal advice first.
Are liquidated damages subject to GST?
No. Liquidated damages for late completion are compensation, not payment for a supply, so no GST applies. For income tax, a provision for liquidated damages is not deductible; the damages are deductible when they become due and payable. In SOPA adjudication, liquidated damages are disregarded unless the amount has been agreed or certified under the contract.
Do subcontractors need to register with BCA?
Yes, if they want to hire construction S Pass or Work Permit holders. Since 1 June 2025, such firms must first register with BCA's Contractors Registration System, and MOM requires the registration before it approves or renews those passes. Registration is also needed to tender for public sector construction projects or to work on them as a first-level subcontractor.
Official Sources
- IRAS: Income tax treatment of construction companies
- IRAS: GST for the construction sector
- IRAS e-Tax Guide: GST: Construction Industry (PDF)
- BCA: Security of Payment Act Information Kit (PDF)
- Security of Payment Act 2004, section 8: when progress payments fall due
- IRAS: Capital allowances
- MOM: Construction sector levy and quota
- BCA: Contractors Registration System
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Last updated: 9 November 2026. This article is general information based on IRAS and ACRA guidance as at November 2026, not advice for your specific situation. Rules, rates and deadlines change, so check the official sources above or speak to us before acting.