Capital Allowances - IRAS

Capital allowances are deductions claimable for the wear and tear of qualifying fixed assets. They are generally granted in place of ... Home Taxes CorporateIncomeTax Income&DeductionsforCompanies ClaimingAllowances CapitalAllowances CapitalAllowances Writing-DownAllowancesforIntellectualPropertyRights(IPRs) Mergers&Acquisitions(M&A)Allowance LandIntensificationAllowance(LIA) IndustrialBuildingAllowance(IBA) Capitalallowancesaredeductionsclaimableforthewearandtearofqualifyingfixedassets.Theyaregenerallygrantedinplaceofdepreciation,whichisnotdeductible. Onthispage: WhatQualifiesforCapitalAllowances HowtoCalculateCapitalAllowances HowtoClaimCapitalAllowances Sale/Disposal/Conversion/TransferofFixedAssets RelatedContent WhatQualifiesforCapitalAllowances Fixedassetssuffer'wearandtear'anddepreciateovertime.Depreciationaccountedforinfinancialstatementsisnottax-deductible.Yourcompanycaninsteadclaimcapitalallowancesforthewearandtearofqualifyingfixedassetsboughtandusedinitstradeorbusiness.Claimingcapitalallowancesoveraperiodoftimeisalsoknownas'writingofftheasset'.Yourcompanycanclaimcapitalallowanceswhentheexpenseisincurred.Anexpenseisincurredwhenthelegalliabilitytopayarises,regardlessofthedateofactualpaymentofthemoney.CapitalallowancesarenolongergivenonexpenditurefundedbycapitalgrantsfromtheGovernmentorStatutoryBoardsthatareapprovedonorafter1Jan2021,asannouncedinBudget2020.ExampleAcompanyboughtaqualifyingfixedassetfor$400,000foruseinitsbusiness.Thisexpenditureispartiallyfundedbyagovernmentcapitalgrantof$100,000approvedon1Jan2021.Capitalallowancesaregivenonthenetexpenditureof$300,000.Learnmorethroughoure-LearningvideoonCapitalAllowances. QualifyingFixedAssets Qualifyingfixedassetsmustbe'plantandmachinery'usedinyourcompany’strade,businessorprofession.Forexample,acompanymakingglassbottlesmayclaimcapitalallowancesonthecostofamachinethatpacksthesebottlesintoboxes. Capitalallowancescannotbeclaimedonthecostsofassetsboughtsolelyfordonationpurposesastheyarenotusedinthetradeorbusiness. CapitalallowancesalsocannotbeclaimedonthecostsofassetsspecificallyprohibitedundertheIncomeTaxAct1947(e.g.S-platedprivatepassengercar). 'Plantandmachinery'generallyreferstoafixedassetthathasthefollowingcharacteristics: Isnotatradingstockofyourcompany(notforresalepurposes); Functionsasanapparatususedforcarryingoutthebusinessortradeactivitiesofyourcompany;and Isnotpartofthesettingorpartofthepremiseswhereyourbusinessisconducted.Expensesincurredonitemsthatarepartofthesettingorpartofthepremisesmaybeincludedas renovationorrefurbishmentexpensestobeclaimedinstead. LearnmoreonwhatisconsideredtobeplantandmachineryunderSection19/19AoftheIncomeTaxAct1947 (PDF, 154KB). ExamplesofAssetsQualifyingasPlantorMachinery Carpet Containersusedforcarriageofgoodsbyanymodeoftransportation Electricalandelectronicequipment(e.g.air-conditioningsystem,security/alarmsystem,sprinklersystemandelectricalappliances) Furnitureandfixtures Industrialplantandmachinery Motorcycleandbicycle Motorvehicle(e.g.goods/commercialvehiclesuchaspickup,van,truck,lorryandbus) Movablepartitions Officeequipment(e.g.computer,printer,photocopier,faxmachineandtelecommunicationequipment) Showcaseordisplaylightings Signboardandothersignage Venetianblindandcurtain ExamplesofAssetswhichdonotQualifyasPlantorMachinery Awning* Containeroffice Designer'sfeesonrenovation Doors,rollershuttersandgates* Electricalfittings*(exceptcablingforidentifiableplant,switchboardandtransformer) Falseceiling,ceilingboardsandotherceilingwork* Fixedpartitions,walls,walltilesandotherwallfinishes* Floortiles,raisedfloorsorotherflooringwork* Lightingsandlightfittings* Motorvehicle(e.g.S-platedprivatepassengercar) Waterandgaspipings* *RefertoSection14Ndeductionforthetaxtreatmentofsuchrenovationcosts. AssetsPurchasedforUsebySubcontractorsandOtherParties Yourcompanymayalsoclaimcapitalallowancesonthecostsofplantandmachineryusedbyitssubcontractorsinoutsourcingarrangements.However,theremustbecommercialjustificationsforallowingyoursubcontractorstousetheplantandmachinery purchasedbyyourcompany.Yourcompanymustalsoshowthatthiswasdoneforitsbusiness. Anexampleiswhereyourcompanyderivescostsavingsfromoutsourcingthemanufacturingofitsproductsandprovidesplantandmachinerytothesubcontractorfortheexclusiveuseofmanufacturingitsproducts. ThefollowingdocumentsshouldbepreparedandretainedbyyourcompanyandsubmitteduponIRAS’request: Thebusinessarrangementwithyourcompany’ssubcontractor(e.g.acontract) Theconnectionbetweentheexpenditureincurredontheplantandmachineryandyourcompany'strade(i.e.howprovidingtheplantandmachinerytothesub-contractorbenefitsyourcompany) Thelevelofcontrolyourcompanyhasovertheplantandmachinery Compliancewiththearm'slengthprincipleforsubcontractorswhoarerelatedparties CapitalAllowanceClaimforMotorVehicles Capitalallowancescannotbeclaimedonthecostsofprivatecars(e.g.S-platedcars)andbusinesscars(e.g.Q-platedandRU-platedcars),unlessthecarsareregisteredas'privatehirecars'/'carsforinstructionalpurpose'andare hiredoutorusedforprovidingdrivinginstructioninthecourseofthecompany'sbusiness. Capitalallowancescanbeclaimedonthecostsofothermotorvehiclessuchasvans,lorriesandmotorcyclesacquiredforbusinessuse,aswellasoncapitalexpenditureincurredonaforeignregisteredcarusedexclusivelyoutsideSingapore forbusinesspurposes,underSection19or19AoftheIncomeTaxAct1947. ExpenditureincurredonobtainingaCertificateofEntitlement(COE)toacquireamotorvehicleispartofthecostofthemotorvehicle.Ifthemotorvehiclequalifiesforcapitalallowances,theexpenditureincurredonobtainingtheCOEmay beincludedwhenclaimingcapitalallowancesonthecostofthemotorvehicle.TheamountpaidbyaregisteredownerofanexistingvehicleuponrenewaloftheCOEtoenablethecontinuedoperationofthevehicleisalsoregardedasanadditional costofthevehicle. However,capitalallowancescannotbeclaimedonexpenditureincurredtoobtainaCOEthatisnotsubsequentlyusedtoacquireamotorvehicle. HowtoCalculateCapitalAllowancesThereareafewmethodsforcalculatingcapitalallowances.Yourcompanymaywriteoffthecostofanassetover1year,3yearsortheprescribedworkinglifeoftheasset.ForassetsacquiredduringthebasisperiodsfortheYearsofAssessment(YAs) 2021and2022,yourcompanyhasanadditionaloptiontowrite-offthecostover2years.Indicateclearlyinyourcapitalallowancescheduletheassetsbeingclaimedandthemethod(s)adoptedandsubmitthecapitalallowanceclaimsinyourCorporateIncomeTaxReturns. MethodsforCalculatingCapitalAllowances 100%Write-Offin1YearWrite-OffOver2YearsWrite-OffOver3YearsWrite-OffOverthePrescribedWorkingLifeoftheAsset100%Write-Offin1Year[Sections19A(2)and19A(10A)]UnderSection19AoftheIncomeTaxAct1947,assetsthatqualifyfor100%write-offare:Computers[Section19A(2)]Prescribedautomationequipment[Section19A(2)]Low-valueassets[Section19A(10A)]ComputersandPrescribedAutomationEquipmentCommonlyclaimedprescribedautomationequipmentincludecomputers,laptops,printersandcomputersoftware.Viewthefulllistofprescribedautomationequipment(PDF,25KB).Underthe100%write-off,capitalallowanceisgivenintheformofannualallowance(AA)where:Forassetspurchasedwithcash:AA=100%ofthecostoftheassetForassetspurchasedunderhirepurchase:AA=100%oftheprincipalpayment(anddepositpaidwhereapplicable)Example1:AssetPurchasedwithCashYourcompanypurchasedacomputerfor$2,000andaprinterfor$200withcashinthefinancialyear2020.AAforcomputer=100%x$2,000=$2,000AAforprinter=100%x$200=$200Yourcompany’scapitalallowancescheduleisasfollows: DescriptionComputer($)Printer($)Cost2,000200YA2021AA2,000200Taxwrittendownvalue(TWDV)c/f00Example2:AssetPurchasedunderHirePurchaseYourcompanypurchasedacomputerfor$2,000underhirepurchaseinthefinancialyear2020.Thedetailsofthehirepurchaseagreementareasfollows: PurchasePrice$2,000Deposit$100Hirepurchaseinterest$50Numberofinstalments5Amountpayableperinstalment$390Hirepurchaseinterestperinstalment$50/5=$10Principalpaymentperinstalment$390-$10=$380Adepositof$100and2instalmentswerepaidinthefinancialyear2020andtheremaining3instalmentswerepaidinthefinancialyear2021.Depositandprincipalpaymentsintheyear2020=$100+(2x$380)=$860Principalpaymentsintheyear2021=3x$380=$1,140YA2021AA=100%x$860=$860YA2022AA=100%x$1,140=$1,140Yourcompany’scapitalallowancescheduleisasfollows: DescriptionComputer($)Cost2,000YA2021AA860TWDVc/f1,140YA2022AA1,140TWDVc/f0Low-ValueAssetsYourcompanymaychoosetowriteofflow-valueassetsin1year.Thetotalclaimfora1-yearwrite-offofalllow-valueassetsmustnotexceed$30,000perYA.Alow-valueassetisonethatdoesnotcostmorethan$5,000.Anassetacquiredunderhirepurchasetermsalsoqualifiesforthe1-yearwrite-offontheinstalmentspaidinanyYAifitsoriginalcostdoesnotexceed$5,000.Ifyourcompanydoesnotwishtousethe1-yearwrite-off,youmaywriteoffthecostoftheassetover2years(forYAs2021and2022asannouncedinBudget2020and2021),3yearsoritsprescribedworkinglife.InanyYA,thelow-valueassetsthatcanbewrittenoffin1year,subjecttoatotalclaimof$30,000,are:Low-valueassetsacquiredintheYALow-valueassetsacquiredbeforetheYAwhere: Noclaimforcapitalallowancehasbeenmadebefore(i.e.claimforcapitalallowancewasdeferredpreviously)AclaimforcapitalallowancewaspreviouslymadeunderSections19,19A(1)or19A(1E)andthereisataxwrittendownvaluebroughtforwardtothecurrentYAIftheamountofallthelow-valueassetsexceeds$30,000,youcanstillclaimcapitalallowancesover2years(forYAs2021and2022),3yearsortheprescribedworkinglifeforthelow-valueassetsexceedingthecapfortheYA.Example:1-YearWrite-OffofLow-ValueAssetsCompanyApurchased7piecesofAssetXat$4,400eachinthefinancialyear2020.Inthefinancialyear2019,CompanyAalsopurchased:AssetYat$1,500,forwhichthecapitalallowanceclaimwasdeferredAssetZat$3,000,forwhichacapitalallowanceclaimof$1,000wasmadeinYA2020underSection19A(1)(i.e.3-yearwrite-off),andthetaxwrittendownvaluecarriedforwardtoYA2021is$2,000All9piecesofassetsqualifyforcapitalallowances.CompanyAcanclaima1-yearwrite-offonthecostofthefollowingassetsinYA2021: Costof6piecesofnewAssetX($4,400x6)$26,400Add:CostofAssetYpurchasedintheyear2019$1,500Add:TWDVofAssetZbroughtforwardfromYA2020$2,000Totalclaimunder1-yearwrite-off$29,900**Withinthetotalcapof$30,000perYA. CompanyAcannotclaimthe7thpieceofAssetXunderSection19A(10A)inYA2021astheadditionalcostof$4,400willexceedthe$30,000cap(i.e.$4,400x7=$30,800).CompanyAcanclaimcapitalallowancesonthe7thpieceofAssetXover2years,3yearsoroveritsworkinglifeinstead.Assumingthatcapitalallowancesareclaimedover3years,thecapitalallowanceforYA2021forthisassetis$1,467 ($4,400/3years).Intotal,thecapitalallowanceclaimforYA2021is$31,367($29,900+$1,467).Write-OffOver2Years[Section19A(1E)]AsannouncedinBudget2020and2021,yourcompanymayacceleratethewrite-offover2years,insteadof3yearsortheprescribedworkinglifeoftheasset,onthecostincurredinacquiringtheassetduringthebasisperiodsforYAs2021and2022.This istosupportbusinessesthatintendtoinvestinnewassetsandeasethecashflowofbusinesses.Theratesofacceleratedcapitalallowancesareasfollows:75%ofthecostincurredtobewrittenoffinthefirstyear(i.e.YA2021orYA2022);and25%ofthecostincurredtobewrittenoffinthesecondyear(i.e.YA2022orYA2023).Nodefermentofcapitalallowanceclaimisallowedunderthisoption.Thewrite-offover2yearsisoptionalandyourcompanycancontinuetoclaimcapitalallowancesover1year,3yearsortheprescribedworkinglife.FornewassetsacquiredunderahirepurchaseagreementduringthebasisperiodsforYAs2021and2022,theacceleratedratesof75%and25%applytoalltheinstalments(principalcomponent)paidonsuchhirepurchaseassets,notwithstandingthatthe instalmentsmaybepaidinabasisperiodafterthebasisperiodsforYAs2021and2022.Example1:AssetPurchasedwithCashYourcompanypurchasedofficeequipmentfor$3,000withcashinthefinancialyear2020.Yourcompany’scapitalallowancescheduleisasfollows: DescriptionOfficeEquipment($)Cost3,000YA2021AA(75%ofcost)2,250TWDVc/f750YA2022AA(25%ofcost)750TWDVc/f0Example2:AssetPurchasedunderHirePurchaseYourcompanyacquiredanofficeequipmentfor$2,000underhirepurchaseinthefinancialyear2020.Thedetailsofthehirepurchaseagreementareasfollows: PurchasePrice$2,000Deposit$100Hirepurchaseinterest$50Numberofinstalments5Amountpayableperinstalment$390Hirepurchaseinterestperinstalment$50/5=$10Principalpaymentperinstalment$390-$10=$380Adepositof$100and2instalmentswerepaidinthefinancialyear2020andtheremaining3instalmentswerepaidinthefinancialyear2021.Depositandprincipalpaymentsintheyear2020=$100+(2x$380)=$860Principalpaymentsintheyear2021=3x$380=$1,140AAforeachYAiscomputedasfollows: YearofPaymentDepositandPrincipalAmountPaid($)YA2021AA($)YA2022AA($)YA2023AA($)2020860645215 20211,140 855285Total 6451,070285Yourcompany’scapitalallowancescheduleisasfollows: DescriptionOfficeEquipment($)Cost2,000YA2021AA645TWDVc/f1,355YA2022AA1,070TWDVc/f285YA2023AA285TWDVc/f0Write-OffOver3Years[Section19A(1)]Yourcompanymaychoosetowrite-offallassetsthatqualifyforcapitalallowancesover3years.Underthe3-yearwrite-off,capitalallowanceisgivenintheformofannualallowance(AA)where:Forassetspurchasedwithcash:AAforeachyear=1/3ofthecostofassetForassetspurchasedunderhirepurchase:AA=1/3oftheprincipalpayment(anddepositpaidwhereapplicable)Example1:AssetPurchasedwithCashYourcompanypurchasedofficeequipmentfor$3,000withcashinthefinancialyear2020.AAforeachYA=1/3x$3,000=$1,000Yourcompany’scapitalallowancescheduleisasfollows: DescriptionOfficeEquipment($)Cost3,000YA2021AA1,000TWDVc/f2,000YA2022AA1,000TWDVc/f1,000YA2023AA1,000TWDVc/f0Example2:AssetPurchasedunderHirePurchaseYourcompanyacquiredofficeequipmentfor$2,000underhirepurchaseinthefinancialyear2020.Thedetailsofthehirepurchaseagreementareasfollows: PurchasePrice$2,000Deposit$100Hirepurchaseinterest$50Numberofinstalments5Amountpayableperinstalment$390Hirepurchaseinterestperinstalment$50/5=$10Principalpaymentperinstalment$390-$10=$380Adepositof$100and2instalmentswerepaidinthefinancialyear2020andtheremaining3instalmentswerepaidinthefinancialyear2021.Depositandprincipalpaymentsintheyear2020=$100+(2x$380)=$860Principalpaymentsintheyear2021=3x$380=$1,140AAforeachYAiscomputedasfollows: YearofPaymentDepositandPrincipalAmountPaid($)YA2021AA($)YA2022AA($)YA2023AA($)YA2024AA($)2020860287287286 20211,140 380380380Total 287667666380Yourcompany’scapitalallowancescheduleisasfollows: DescriptionOfficeEquipment($)Cost2,000YA2021AA287TWDVc/f1,713YA2022AA667TWDVc/f1,046YA2023AA666TWDVc/f380YA2024AA380TWDVc/f0Write-OffOverthePrescribedWorkingLifeoftheAsset(Section19)Underthismethod,capitalallowancesaregivenoveranasset'sprescribedworkinglifebasedontheSixthScheduleoftheIncomeTaxAct1947.TosimplifycapitalallowanceclaimsunderSection19,theprescribedworkinglifeofassetsintheSixthSchedulehasbeenstreamlinedto6,12and16years:IftheprescribedworkinglifeoftheassetintheSixthScheduleis12yearsorless,yourcompanymaymakeanirrevocableelectiontoclaimcapitalallowancesovereither6or12yearsIftheprescribedworkinglifeoftheassetintheSixthScheduleis16years,yourcompanymaymakeanirrevocableelectiontoclaimcapitalallowancesover6,12or16yearsTheabovechangeappliestoassetsacquiredinthebasisperiodsrelatingtoYA2023andsubsequentYAs.ItalsoappliestoassetsacquiredinthebasisperiodsrelatingtoYA2022andpriorYAs,ifyourcompanyhaddeferredandisyettostartitscapital allowanceclaimsfortheassets.YourcompanymustmaketheirrevocableelectionforthenumberofyearsofworkinglifefortheassetatthetimeofitstaxfilingfortheYArelatingtothebasisperiodinwhichtheassetisacquired.Forassetsacquiredinbasisperiodspriortothe basisperiodforYA2023,yourcompanymustmaketheelectionatthetimeofthetaxfilingforYA2023.Theinitialallowance(IA)andannualallowance(AA)arecomputedasfollows:Forassetspurchasedwithcash:InthefirstYArelatingtotheyearinwhichthefixedassetispurchased:IA=20%xthecostofassetAA=(80%xthecostofasset)/numberofyearsofworkinglife*InthesecondandsubsequentYAs:IAisnotapplicableAA=(80%xthecostofasset)/numberofyearsofworkinglife*(sameasthefirstYA)Forassetspurchasedunderhirepurchase:IntheYAwherethereisadepositpaidand/orinstalmentpayments:IA=20%oftheprincipalamount(anddepositpaidwhereapplicable)AA=(80%xthecostofasset)/numberofyearsofworkinglife*IntheYAwherethereisnopaymentmade:IAisnotapplicableAA=(80%xthecostofasset)/numberofyearsofworkinglife**ThenumberofyearsofworkinglifeisbasedontheSixthScheduleoftheIncomeTaxAct1947(e.g.theworkinglifeformotorvehicleis6years).SummaryoftheDifferentMethodstoClaimCapitalAllowances HowtoCalculateQualifyingAssetsInitialAllowance(IA)/AnnualAllowance(AA)Overworkinglifeofasset[Section19]AppliestoallqualifyingassetsRefertoSixthScheduleoftheIncomeTaxAct1947forworkinglifeFromYA2023,optiontoclaim:6or12yearsforprescribedworkinglifeof12yearsorless6,12or16yearsforprescribedworkinglifeof16yearsIA=20%ofcost AA=(80%ofcost)/No.ofyearsofworkinglife3-yearwrite-off[Section19A(1)]AppliestoallqualifyingassetsAA=1/3ofcost2-yearwrite-off[Section19A(1E)]AppliestoallqualifyingassetsacquiredduringthebasisperiodsrelatingtoYAs2021and2022YA2021orYA2022AA=75%ofcost YA2022orYA2023AA=25%ofcost1-yearwrite-off(forspecificassets)[Section19A(2)]ComputersPrescribedautomationequipmentlistedinIncomeTax(AutomationEquipment)Rules2004;andAmendmentRules2010(effectivefrom15Dec2010) AA=100%ofcost1-yearwrite-off(onlyforlow-valueassets)[Section19A(10A)]Costofeachlow-valueassetnotmorethan$5,000Totalclaimfor1-yearwrite-offofallsuchassetscappedat$30,000perYAAA=100%ofcost DeferringCapitalAllowanceClaims Generally,companiesdefercapitalallowanceswhen: Thecompanyisinalossposition;or Thecompanyqualifiesforthetaxexemptionfornewstart-upcompanies. Companiesinalosspositionmaystillclaimcapitalallowancesinsteadofdeferringtheclaim.Anyunutilisedcapitalallowancecanbecarriedforwardforset-offagainsttheincomeforsubsequentYAs,subjecttotheshareholdingtestandbusinesscontinuitytest. MethodofCalculation Deferment Overworkinglifeofasset[Section19] Initialallowance(IA)mustbeclaimedintheYAthecapitalexpenditureisincurred.IntheeventthatIAisnotclaimed,annualallowance(AA)iscomputedbasedonthefullcost(i.e.100%ofthecostovertheprescribedworkinglife). AAcanbedeferredanditdoesnotneedtobeclaimedconsecutivelyovertheprescribedworkinglifeoftheasset. 3-yearwrite-off[Section19A(1)] AcapitalallowanceclaimmadeunderSection19A(1)canbedeferredanddoesnotneedtobeclaimedconsecutivelyover3YAs. 2-yearwrite-off[Section19A(1E)] Nodefermentofcapitalallowanceclaimisallowedunderthisoption. 1-yearwrite-off(forspecificassets)[Section19A(2)] YoucanchoosetodeferthecapitalallowanceclaimtosubsequentYAs. 1-yearwrite-off(onlyforlow-valueassets)[Section19A(10A)] YoucanchoosetodeferthecapitalallowanceclaimtosubsequentYAs. Example1:AssetPurchasedwithCash Yourcompanypurchasedamachinefor$120,000withcashinthebasisperiodrelatingtoYA2017.ItdefersitsclaimforcapitalallowancesinYAs2017and2019,andonlymakesaclaiminYAs2018,2020and2021. Yourcompany’scapitalallowancescheduleisasfollows: Description Machine($) Cost 120,000 YA2017AA Deferred Taxwrittendownvalue(TWDV)c/f 120,000 YA2018AA(1/3ofcost) 40,000 TWDVc/f 80,000 YA2019AA Deferred TWDVc/f 80,000 YA2020AA(1/3ofcost) 40,000 TWDVc/f 40,000 YA2021AA(1/3ofcost) 40,000 TWDVc/f 0 Example2:AssetPurchasedunderHirePurchase Yourcompanypurchasedofficeequipmentfor$12,000underhirepurchaseinYA2019. Thedetailsofthehirepurchaseagreementareasfollows: PurchasePrice $12,000 Deposit $600 Hirepurchaseinterest $300 Numberofinstalments 6 Amountpayableperinstalment $1,950 Hirepurchaseinterestperinstalment $300/6=$50 Principalpaymentperinstalment $1,950-$50=$1,900 Thedepositof$600and3instalmentswerepaidinthebasisperiodrelatingtoYA2019andtheremaining3instalmentswerepaidinthebasisperiodrelatingtoYA2020. DepositandprincipalpaymentsinYA2019=$600+(3x$1,900)=$6,300PrincipalpaymentsinYA2020=3x$1,900=$5,700 ScenarioA:YourcompanymakesaclaimforcapitalallowancesinYAs2019,2021,2022and2023butdefersitsclaiminYA2020. AAforeachYAiscomputedasfollows: YearofPayment DepositandPrincipalAmountPaid($) YA2019AA($) YA2020AA($) YA2021AA($) YA2022AA($) YA2023AA($) 2018 6,300 2,100 Deferred 2,100 2,100   2019 5,700   Deferred 1,900 1,900 1,900 Total   2,100 Deferred 4,000 4,000 1,900 Yourcompany’scapitalallowancescheduleisasfollows: Description OfficeEquipment($) Cost 120,000 YA2019AA 2,100 TWDVc/f 9,900 YA2020AA Deferred TWDVc/f 9,900 YA2021AA 4,000 TWDVc/f 5,900 YA2022AA 4,000 TWDVc/f 1,900 YA2023AA 1,900 TWDVc/f 0 ScenarioB:Yourcompanymakesaclaimforcapitalallowancesasfollows: OntheYA2019depositandprincipalpayments-claimscapitalallowancesinYAs2019,2020and2021 OntheYA2020principalpayments-defersitsclaimforcapitalallowancesinYA2020andclaimsinYAs2021,2022and2023 AAforeachYAiscomputedasfollows: YearofPayment DepositandPrincipalAmountPaid($) YA2019AA($) YA2020AA($) YA2021AA($) YA2022AA($) YA2023AA($) 2018 6,300 2,100 2,100 2,100     2019 5,700   Deferred 1,900 1,900 1,900 Total   2,100 2,100 4,000 1,900 1,900 Yourcompany’scapitalallowancescheduleisasfollows: Description OfficeEquipment($) Cost 120,000 YA2019AA 2,100 TWDVc/f 9,900 YA2020AA 2,100 TWDVc/f 7,800 YA2021AA 4,000 TWDVc/f 3,800 YA2022AA 1,900 TWDVc/f 1,900 YA2023AA 1,900 TWDVc/f 0 DefermentofCapitalAllowancesundertheProductivity&InnovationCredit(PIC)Scheme ThePICschemehasexpiredafterYA2018andyourcompanyisnotallowedtoclaimPICbenefitsonexpenditureincurredafterthebasisperiodofYA2018. IfyourcompanyincurredqualifyingPICexpenditureonequipmentwhiletheschemewasavailable,andtheequipmenthasataxwrittendownvaluebroughtforwardtothecurrentYA,yourcompanymaychoosetodeferitscapitalallowanceclaims.However, yourcompanyneedstodeferboththebasecapitalallowances(100%)andenhancedcapitalallowances(300%)atthesametime.Itcannotchoosetodeferonlythebaseallowancesoronlytheenhancedallowances. Example Yourcompanypurchasedacomputerfor$5,000withcashinYA2018.ItwishestodeferitsclaimforcapitalallowanceinYA2018asthecompanyisinalossposition. Thecapitalallowancetobedeferredisasfollows: Description Computer($) Cost 5,000 Baseallowance(100%) 5,000 Enhancedallowance(300%) 15,000 Totalcapitalallowancedeferred 20,000 FAQs Canmycompanyclaim100%ofthecostofenergyefficientequipmentandtechnologyin1year? Yes,yourcompanymayclaimthefullcostofsuchequipmentascapitalallowancein1year,iftheequipmentiscertifiedbyacompanyapprovedbytheNationalEnvironmentalAgency(NEA)andisinstalledatanytimefrom1Jan1996to31Dec2017 (bothdatesinclusive). Canmycompanyclaim100%ofthecostofequipmentpurchasedforchemicalhazardcontrolornoisecontrolin1year? Yes,yourcompanymayclaimthefullcostofsuchequipmentascapitalallowancein1year,iftheequipmentiscertifiedbyacompanyapprovedbytheMinistryofManpower(MOM). FindoutmoreaboutthedetailsofacceleratedcapitalallowanceforequipmentusedforChemicalHazardControlorNoiseControlatMOM’swebsite. Canmycompanyclaim100%ofthecostofpurchasingordevelopingawebsite? Yes.AwebsitequalifiesasplantormachineryunderSection19A(10)andyourcompanymayclaimcapitalallowanceonthedevelopmentcostorpurchasecostofawebsitein1year. FromYAs2014to2018,thewebsitedevelopmentcost,includingcostsincurredfortheone-timeregistrationofadomainnameforthewebsite,alsoqualifiesforPICbenefits. HowtoClaimCapitalAllowancesYourcompanymustmakethecapitalallowanceclaimsinitsCorporateIncomeTaxReturnfortherelevantYearofAssessment(YA)andpreparethefollowingsupportingschedulesinitstaxcomputation.ThetaxcomputationmustbefiledwithFormC.Ifyou arefilingFormC-S/FormC-S(Lite),retainthetaxcomputationandsubmititonlyuponIRAS’request. 1FixedassetsadditionsGiveabriefdescriptionandcostofthenewassetspurchasedduringtheaccountingyear.2FixedassetsdisposalsGiveabriefdescription,cost,saleproceedsandprofit/lossondisposalinrespectoffixedassetssold/writtenoffduringtheaccountingyear.3CapitalallowancesShowyourbasisofcalculatingthetotalcapitalallowanceclaimed,givingabreakdownofthecost/taxwrittendownvaluebroughtforward,capitalallowanceamountandtaxwrittendownvaluecarriedforwardforeachcategoryofassets.Ifyouneedhelpinpreparingthecapitalallowanceschedule,youmayuseourBasicCorporateIncomeTaxCalculator. Sale/Disposal/Conversion/TransferofFixedAssets Selling,ConvertingorScrappingFixedAssets Whenafixedassetissold,convertedtotradingstockorwrittenoff,youneedtocalculatebalancingallowance(BA)orbalancingcharge(BC)ifcapitalallowanceshavebeenclaimedonthecostoftheassetpreviously. BAistax-deductibleandBCistaxableasincome.CalculatingBA/BCBAorBCisderivedbycalculatingthedifferencebetweenthesaleproceedsandthetaxwrittendownvalue(TWDV)oftheassetdisposed.TWDVisthecostoftheassetlesstheamountofcapitalallowancesallowedpreviously.SaleProceeds-TWDV=BAorBCWherethesaleproceedsarelowerthantheTWDV,thedifferenceisknownasBA.BAistax-deductible.WherethesaleproceedsarehigherthantheTWDV,thedifferenceisknownasBC.BCistaxableasincome.TheamountofBCtaxableisrestrictedtothetotalamountofcapitalallowancesallowedpreviouslyinrespectoftheassetdisposed.Whenafixedassetisconvertedtotradingstock,BAorBCiscomputedbasedonthedifferencebetweentheTWDVoftheassetanditsopenmarketvalue(OMV)asatthedateofconversion.TheBC,ifapplicable,iscappedattheamountofcapitalallowance previouslygrantedinrespectofthatfixedasset.OMV-TWDV=BAorBCExampleDescriptionFurniture($)Computer($)Van($)Cost3,0002,00020,000Saleproceeds20020021,000Less:TWDV1,000013,333BA800  BC 2006,667**AmountofBCtaxableisrestrictedto$6,667($20,000-$13,333),whichisthetotalamountofcapitalallowancesallowedpreviously,insteadof$7,667($21,000-$13,333). DonationofComputersBefore21Feb2017Donorsaregrantedtaxdeductionforthedonationofcomputerstoprescribededucational,researchor otherinstitutionsandallIPCsbefore21Feb2017.TheInfocommMediaDevelopmentAuthority(IMDA)isrequiredtoperformavaluationofthecomputerstobedonated.Acompanymayhaveincurredcapitalexpenditureonacomputerboughtforitsowntradeandclaimedcapitalallowanceonthecomputerinfullover1year.IfthecomputerwassubsequentlydonatedtoanIPC,aBCequaltothevalueofthedonateditems (asassessedbyIMDA)willbetaxed. TransferringFixedAssetstoRelatedCompanies Whenacompanytakesoverorbuysfixedassetsfromarelatedcompanywherethereare50%ormorecommonshareholders,bothcompaniesmay'elect'totransfertheassetsunderSection24oftheIncomeTaxAct1947.TheeffectofelectingforSection24istodisregardthesale,exceptforthechangeinpersonentitledtotheallowances.Inotherwords,thetransactionisnotconsideredasalebutatransferoftheassetsanditsallowances.ImplicationsofaSection24ElectionTheimplicationsofelectingforSection24are:Theassetistreatedassoldforasumequaltothetaxwrittendownvalue(TWDV)oftheassetimmediatelybeforethesaleItisnotnecessarytocalculatebalancingallowance(BA)orbalancingcharge(BC)forthesellerNoinitialallowance(IA)isgiventothebuyerThebuyerwillclaimannualallowance(AA)based ontheTWDVoftheassetovertheremainingworkinglife Ifthebuyersubsequentlysellstheasset,thebuyerwillbesubjecttotheBC/BArulesExampleIn2018,CompanyAboughtamachinefor$30,000withcash.In2020,themachinewassoldtoCompanyB(asubsidiaryofCompanyA)for$25,000.Bothcompanieshavea31Decyearend.CompanyAwasclaimingcapitalallowancesovera3-yearwrite-offunderSection19AbeforesellingthemachinetocompanyB.ScenarioA:Section24isElectedItisnotnecessarytocomputeBA/BCforCompanyAintheYearofAssessment(YA)2021.ThecapitalallowancescheduleforCompanyA(seller)isasfollows: DescriptionMachine($)Cost30,000YA2019AA10,000TWDVc/f20,000YA2020AA10,000TWDVc/f10,000CompanyBclaimsAAbasedontheTWDVoftheassetovertheremainingworkinglifeoftheasset.Inthiscase,theremainingworkinglifeis1year,soAA=$10,000/1=$10,000.ThecapitalallowancescheduleforCompanyB(buyer)isasfollows: DescriptionMachine($)Cost10,000YA2021AA10,000TWDVc/f0ScenarioB:Section24isNotElectedItisnecessarytocomputeBA/BCforCompanyAbasedonthesellingpriceof$25,000.Inthiscase,thereisaBCof$15,000whichistaxableasincome.ThecapitalallowancescheduleforCompanyA(seller)isasfollows: DescriptionMachine($)Cost30,000YA2019AA10,000TWDVc/f20,000YA2020AA10,000TWDVc/f10,000YA2021SaleProceeds25,000BC(SaleProceeds-TWDV)15,000CompanyBclaimscapitalallowancesbasedonthesellingpriceof$25,000.Itcandecideonthemethodofcapitalallowanceclaim.AssumingthatCompanyBdecidestowriteofftheassetover3yearsunderSection19A,theAAis1/3of$25,000,thatis,$8,333.ThecapitalallowancescheduleforCompanyB(buyer)isasfollows: DescriptionMachine($)Cost25,000YA2021AA8,333TWDVc/f16,667YA2022AA8,333TWDVc/f8,334YA2023AA8,334TWDVc/f0HowtoElectforSection24ToelectforSection24onthetransferoffixedassets,bothparties(buyerandseller)mustpreparea'Section24NoticeofElection'anddocumentdetailsofthefixedassetstransferred.CompaniesfilingFormCshouldfiletheNoticeanddetailsofthefixedassetstransferredwiththeFormCintheYArelatingtotheyearwherethesaletookplace.CompaniesfilingFormC-S/FormC-S(Lite)donotneedtofiletheNoticeanddetails ofthefixedassetstransferred.However,thedocumentsshouldbepreparedandretainedbythecompaniesandsubmittedonlyuponIRAS’request.Section24NoticeofElectionInthisNotice,youhavetostatethenamesofboththebuyerandtheseller,andconfirmthatSection24iselectedinrespectofthefixedassetstransferred.Bothpartiesmustsigntheletter.Inthecaseofasole-proprietorship/partnershipconvertedtoacompany,boththesole-proprietorship/partnership(i.e.thetransferor)andthecompany(i.e.thetransferee)havetoprepareandsignonthe'Section24NoticeofElection'.YoumayrefertotheBasicFormatofSection24NoticeofElection(forCompanies)(PDF,45KB)whenpreparingyourNotice.DetailsoftheFixedAssetsTransferredBoththebuyerandsellermustdocumentdetailsoffixedassetstransferred,includingthedescription,cost,taxwrittendownvaluecarriedforwardandtheremainingworkinglifeofeachcategoryofasset. Documents TaxTreatmentofSoftware(PDF,18KB) Documents Machineryandplant:Section19/19AoftheIncomeTaxAct1947(PDF,154KB)