Tax Guide: Singapore Capital Allowances - Paul Wan & Co

Capital allowances are deductions claimable for the wear and tear of qualifying fixed assets such as industrial machinery and office ... Skiptocontent TaxGuide:SingaporeCapitalAllowances Home/Posts/Guides/TaxGuide:SingaporeCapitalAllowances TaxGuide:SingaporeCapitalAllowances Bylaw,allSingaporeCompaniesarerequiredtofileannualincometaxreturnstotheInlandRevenueAuthorityofSingapore(IRAS)andpayincometaxattheprevailinglocalcorporatetaxratechargedonchargeableincome.TohelpSingaporecompaniesandbusinessesremaincompetitivebyglobalstandards,thelocalgovernmentoffersvarioustaxrelief,deductionsandschemeseveryyear.Amongthesecorporatetax-savingopportunitiesistheoptiontoclaimcapitalallowances. SingaporeCorporateTaxFilingYA2020Deadline Singaporecompaniesarerequiredtoe-filetheirCorporateIncomeTaxReturnsforYA2020before15December2020.Thisisthelastyearcompaniesmaye-filebeforetheextendeddeadlineasthee-filingdeadlineforYA2021hasbeenadjustedto30November2021.AllcompaniesarerequiredtosubmitFormCorFormC-Sviamytaxportal. CapitalAllowances:Briefoverview Capitalallowancesaredeductionsclaimableforthewearandtearofqualifyingfixedassetssuchasindustrialmachineryandofficeequipment.Theamountincurredwhichmaybequalifiedascapitalallowancescanbedeductedagainstchargeablebusinessincome,ultimatelyloweringcorporatetaxespayable.Anypersonengaginginatradeorcorporateentityderivingbusinessincomecanclaimcapitalallowancesasadeductionagainstincomeearned. HowtoCalculateCapitalAllowances Section19AoftheIncomeTaxActspecifiesthemethodsforcomputingtheexactamountofcapitalallowancestobeclaimedforeachYA.Thisisdependentonthetypeofassetpurchased.Belowarethekeymethodsprescribed: 100%writeoffinoneyear–Computers,low-valueassets(lessthanSGD5,000invalue)andprescribedautomationequipmentsuchasprintersmaybeclaimedinfullintheyearofpurchase.Forexample:ifyouhadboughtSGD50,000worthoflaptopsforyouremployeesin2019,thefullamountcanbeusedtodeductchargeableincomeforYA2020.Notethatthetotalclaimforalow-valueassetcannotexceedSGD30,000foranyYA. Writeoffoverthreeyears–Theamountincurredforallassetsthatqualifyforcapitalallowancecanbeclaimedasdeductionover3YAs.Thesameamountisclaimedeachyear.Forexample,ifacompanypurchasedqualifiedequipmentforSGD90,000in2019,ThecapitalallowancetobeclaimedisSGD30,000foreachrespectiveYA2020,YA2021andYA2020.  Writeoffovertwoyears–aspartoftheSingaporeBudget2020announcement,thelocalgovernmentprovidesbusinesseswiththeoptiontoclaimcapitalallowanceover2yearsinsteadof3years.75%ofthecostisclaimedonthefirstyearofpurchase,whiletheremaining25%ofthecostisclaimedonthe2ndyearofpurchase.Forinstance,ifacompanypurchasedqualifiedequipmentforSGD100,000in2020,SGD75,000canbeclaimedascapitalallowanceinYA2021whileSGD25,000isclaimedinYA2022.  Section19oftheIncomeTaxActprescribesclaimingcapitalallowanceovertheworkinglifeofassets,whichisfixedatastandard6,12and16years.Forinstance,businessesmayelecttoclaimcapitalallowanceover6or12yearsiftheequipmentisdeemedtohaveaworkinglifeof12yearsorless.Businessesmayelecttoclaimcapitalallowanceover6,12or16yearsiftheequipmentisdeemedtohaveaworkinglifeof16yearsorless.Thechoicelieswithbusinessesbutonceadecisionismadeontheworkinglife,itisirreversible.Onthefirstyearofpurchase,20%ofcostofassetisclaimedwhiletheremaining80%isspreadoutovertheremaininglifeofassets.  Generally,Privatecars(S-platedcars),RU-platedcarsandcompanycars(Q-platedorS-platedcars)arenotqualifiedforcapitalallowance.Costsofothermotorvehiclessuchasvans,lorriesandmotorcyclesacquiredforbusinessusewouldqualifyforcapitalallowancesunderSection19or19AoftheIncomeTaxAct.CapitalexpenditureincurredonacarregisteredoutsideSingaporeandusedexclusivelyoutsideSingaporeforbusinesspurposeswillbegrantedcapitalallowance. PWCOisaqualifiedtaxprofessionalservicesfirmwithover30yearsofexperienceintheindustry.ThefirmkeepsuptodatewiththelatestIRASlegislativechangesandcaneaseyourcorporatetaxfilingprocedures.SeekingadvicefromourtaxexpertscanensureSingaporecompaniesenjoythemaximumbenefitsofIRAStaxincentivesandremaininfullcompliancewiththelocaltaxlegislation.  Aqualifiedtaxprofessionalwithin-depthknowledgeofavailabletaxincentives,rebates,reliefsandschemescanguidebusinessesandcompaniestomaximisetaxsavingsandimprovetheircashflowthisCorporateTaxseason2020. AuthorDetails EstherMok TaxPrincipal , PaulWan&Co. EstherMokisaFellowmemberofTheAssociationofInternationalAccountants,UKandanApprovedAccreditedTaxAdvisorspecializinginbothIncomeTaxandGSTwithSingaporeInstituteofAccreditedTaxProfessionals(SIATP).Shehasbehindhermorethan20yearsoftaxexperiencedealingwithinternationalandlocalclients. [email protected] [email protected] × EstherMok TaxPrincipal , PaulWan&Co. EstherMokisaFellowmemberofTheAssociationofInternationalAccountants,UKandanApprovedAccreditedTaxAdvisorspecializinginbothIncomeTaxandGSTwithSingaporeInstituteofAccreditedTaxProfessionals(SIATP).Shehasbehindhermorethan20yearsoftaxexperiencedealingwithinternationalandlocalclients. [email protected] [email protected] LatestPosts Boostyourtaxsavingsandensurecompliance. RequestaConsultationToday  FINDATAXPARTNER GetintouchwithourlicensedSingaporeexperts. ByEstherMok|2020-07-29T14:10:34+08:00July29th,2020|Guides|0Comments ShareThisStory,ChooseYourPlatform! 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EstherMokisaFellowmemberofTheAssociationofInternationalAccountants,UKandanApprovedAccreditedTaxAdvisorspecializinginbothIncomeTaxandGSTwithSingaporeInstituteofAccreditedTaxProfessionals(SIATP).Shehasbehindhermorethan20yearsoftaxexperiencedealingwithinternationalandlocalclients. TheProfessional. Ournewsletteronemergingtrends,news,andrelatedinsights  byourteamofaccountantsandtaxpractioners. Email SUBSCRIBE  RelevantLinksTheSingaporeEnhancedCarry-BackReliefSystem TaxGuide:SingaporeCapitalAllowances QuickGuide:SingaporeCorporateTaxFormCandC-S CorporateIncomeTaxYA2020:KeyChanges SingaporeGuide:ISCAFRB5–AccountingforPropertyTaxRebate Boostyourtaxsavingsandensurecompliance. RequestaConsultationToday  FINDATAXPARTNER GetintouchwithourlicensedSingaporeexperts. TheProfessional. Ournewsletteronemergingtrends,news,andrelatedinsights  byourteamofaccountantsandtaxpractioners. Email SUBSCRIBE  Thiswebsiteusescookiesandthirdpartyservices. 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