Capital allowances are deductions claimable for the wear and tear of qualifying fixed assets. They are generally granted in place of depreciation, which is not deductible.
On this page:
What Qualifies for Capital Allowances
Fixed assets suffer 'wear and tear' and depreciate over time. Depreciation accounted for in financial statements is not tax-deductible.
Your company can instead claim capital allowances for the wear and tear of qualifying fixed assets bought and used in its trade or business.
Claiming capital allowances over a period of time is also known as 'writing off the asset'.
Your company can claim capital allowances when the expense is incurred. An expense is incurred when the legal liability to pay arises, regardless of the date of actual payment of the money.
Capital allowances are no longer given on expenditure funded by capital grants from the Government or Statutory Boards that are approved on or after 1 Jan 2021, as announced in Budget 2020.
Example
A company bought a qualifying fixed asset for $400,000 for use in its business. This expenditure is partially funded by a government capital grant of $100,000 approved on 1 Jan 2021. Capital allowances are given on the net expenditure of $300,000.
Learn more through our e-Learning video on Capital Allowances.
Qualifying fixed assets must be 'plant and machinery' used in your company’s trade, business or profession. For example, a company making glass bottles may claim capital allowances on the cost of a machine that packs these bottles into boxes.
Capital allowances cannot be claimed on the costs of assets bought solely for donation purposes as they are not used in the trade or business.
Capital allowances also cannot be claimed on the costs of assets specifically prohibited under the Income Tax Act 1947 (e.g. S-plated private passenger car).
'Plant and machinery' generally refers to a fixed asset that has the following characteristics:
- Is not a trading stock of your company (not for resale purposes);
- Functions as an apparatus used for carrying out the business or trade activities of your company; and
- Is not part of the setting or part of the premises where your business is conducted. Expenses incurred on items that are part of the setting or part of the premises may be included as renovation or refurbishment expenses to be claimed instead.
Learn more on what is considered to be plant and machinery under Section 19/19A of the Income Tax Act 1947(PDF, 154KB).
Examples of Assets Qualifying as Plant or Machinery
- Carpet
- Containers used for carriage of goods by any mode of transportation
- Electrical and electronic equipment (e.g. air-conditioning system, security/ alarm system, sprinkler system and electrical appliances)
- Furniture and fixtures
- Industrial plant and machinery
- Motorcycle and bicycle
- Motor vehicle (e.g. goods/ commercial vehicle such as pick up, van, truck, lorry and bus)
- Movable partitions
- Office equipment (e.g. computer, printer, photocopier, fax machine and telecommunication equipment)
- Showcase or display lightings
- Signboard and other signage
- Venetian blind and curtain
Examples of Assets which do not Qualify as Plant or Machinery
- Awning*
- Container office
- Designer's fees on renovation
- Doors, roller shutters and gates*
- Electrical fittings* (except cabling for identifiable plant, switchboard and transformer)
- False ceiling, ceiling boards and other ceiling work*
- Fixed partitions, walls, wall tiles and other wall finishes*
- Floor tiles, raised floors or other flooring work*
- Lightings and light fittings*
- Motor vehicle (e.g. S-plated private passenger car)
- Water and gas pipings*
Assets Purchased for Use by Subcontractors and Other Parties
Your company may also claim capital allowances on the costs of plant and machinery used by its subcontractors in outsourcing arrangements. However, there must be commercial justifications for allowing your subcontractors to use the plant and machinery purchased by your company. Your company must also show that this was done for its business.
An example is where your company derives cost savings from outsourcing the manufacturing of its products and provides plant and machinery to the subcontractor for the exclusive use of manufacturing its products.
The following documents should be prepared and retained by your company and submitted upon IRAS’ request:
- The business arrangement with your company’s subcontractor (e.g. a contract)
- The connection between the expenditure incurred on the plant and machinery and your company's trade (i.e. how providing the plant and machinery to the sub-contractor benefits your company)
- The level of control your company has over the plant and machinery
- Compliance with the arm's length principle for subcontractors who are related parties
Capital Allowance Claim for Motor Vehicles
Capital allowances cannot be claimed on the costs of private cars (e.g. S-plated cars) and business cars (e.g. Q-plated and RU-plated cars), unless the cars are registered as 'private hire cars'/ 'cars for instructional purpose' and are hired out or used for providing driving instruction in the course of the company's business.
Capital allowances can be claimed on the costs of other motor vehicles such as vans, lorries and motor cycles acquired for business use, as well as on capital expenditure incurred on a foreign registered car used exclusively outside Singapore for business purposes, under Section 19 or 19A of the Income Tax Act 1947.
Expenditure incurred on obtaining a Certificate of Entitlement (COE) to acquire a motor vehicle is part of the cost of the motor vehicle. If the motor vehicle qualifies for capital allowances, the expenditure incurred on obtaining the COE may be included when claiming capital allowances on the cost of the motor vehicle. The amount paid by a registered owner of an existing vehicle upon renewal of the COE to enable the continued operation of the vehicle is also regarded as an additional cost of the vehicle.
However, capital allowances cannot be claimed on expenditure incurred to obtain a COE that is not subsequently used to acquire a motor vehicle.
How to Calculate Capital Allowances
There are a few methods for calculating capital allowances. Your company may write off the cost of an asset over 1 year, 3 years or the prescribed working life of the asset. For assets acquired during the basis periods for the Years of Assessment (YAs) 2021 and 2022, your company has an additional option to write-off the cost over 2 years.
Indicate clearly in your capital allowance schedule the assets being claimed and the method(s) adopted and submit the capital allowance claims in your Corporate Income Tax Returns.
- 100% Write-Off in 1 Year
- Write-Off Over 2 Years
- Write-Off Over 3 Years
- Write-Off Over the Prescribed Working Life of the Asset
100% Write-Off in 1 Year [Sections 19A(2) and 19A(10A)]
Under Section 19A of the Income Tax Act 1947, assets that qualify for 100% write-off are:
- Computers [Section 19A(2)]
- Prescribed automation equipment [Section 19A(2)]
- Low-value assets [Section 19A(10A)]
Computers and Prescribed Automation Equipment
Commonly claimed prescribed automation equipment include computers, laptops, printers and computer software. View the full list of prescribed automation equipment (PDF, 25KB).
Under the 100% write-off, capital allowance is given in the form of annual allowance (AA) where:
- For assets purchased with cash:
AA = 100% of the cost of the asset
- For assets purchased under hire purchase:
AA = 100% of the principal payment (and deposit paid where applicable)
Example 1: Asset Purchased with Cash
Your company purchased a computer for $2,000 and a printer for $200 with cash in the financial year 2020.
AA for computer = 100% x $2,000 = $2,000
AA for printer = 100% x $200 = $200
Your company’s capital allowance schedule is as follows:
| Description | Computer ($) | Printer ($) |
|---|---|---|
| Cost | 2,000 | 200 |
| YA 2021 AA | 2,000 | 200 |
| Tax written down value (TWDV) c/f | 0 | 0 |
Example 2: Asset Purchased under Hire Purchase
Your company purchased a computer for $2,000 under hire purchase in the financial year 2020.
The details of the hire purchase agreement are as follows:
| Purchase Price | $2,000 |
| Deposit | $100 |
| Hire purchase interest | $50 |
| Number of instalments | 5 |
| Amount payable per instalment | $390 |
| Hire purchase interest per instalment | $50/ 5 = $10 |
| Principal payment per instalment | $390 - $10 = $380 |
A deposit of $100 and 2 instalments were paid in the financial year 2020 and the remaining 3 instalments were paid in the financial year 2021.
Deposit and principal payments in the year 2020 = $100 + (2 x $380) = $860
Principal payments in the year 2021 = 3 x $380 = $1,140
YA 2021 AA = 100% x $860 = $860
YA 2022 AA = 100% x $1,140 = $1,140
Your company’s capital allowance schedule is as follows:
| Description | Computer ($) |
|---|---|
| Cost | 2,000 |
| YA 2021 AA | 860 |
| TWDV c/f | 1,140 |
| YA 2022 AA | 1,140 |
| TWDV c/f | 0 |
Low-Value Assets
Your company may choose to write off low-value assets in 1 year. The total claim for a 1-year write-off of all low-value assets must not exceed $30,000 per YA.
A low-value asset is one that does not cost more than $5,000. An asset acquired under hire purchase terms also qualifies for the 1-year write-off on the instalments paid in any YA if its original cost does not exceed $5,000.
If your company does not wish to use the 1-year write-off, you may write off the cost of the asset over 2 years (for YAs 2021 and 2022 as announced in Budget 2020 and 2021), 3 years or its prescribed working life.
In any YA, the low-value assets that can be written off in 1 year, subject to a total claim of $30,000, are:
- Low-value assets acquired in the YA
- Low-value assets acquired before the YA where:
- No claim for capital allowance has been made before (i.e. claim for capital allowance was deferred previously)
- A claim for capital allowance was previously made under Sections 19, 19A(1) or 19A(1E) and there is a tax written down value brought forward to the current YA
If the amount of all the low-value assets exceeds $30,000, you can still claim capital allowances over 2 years (for YAs 2021 and 2022), 3 years or the prescribed working life for the low-value assets exceeding the cap for the YA.
Example: 1-Year Write-Off of Low-Value Assets
Company A purchased 7 pieces of Asset X at $4,400 each in the financial year 2020.
In the financial year 2019, Company A also purchased:
- Asset Y at $1,500, for which the capital allowance claim was deferred
- Asset Z at $3,000, for which a capital allowance claim of $1,000 was made in YA 2020 under Section 19A(1) (i.e. 3-year write-off), and the tax written down value carried forward to YA 2021 is $2,000
All 9 pieces of assets qualify for capital allowances.
Company A can claim a 1-year write-off on the cost of the following assets in YA 2021:
| Cost of 6 pieces of new Asset X ($4,400 x 6) | $26,400 |
| Add: Cost of Asset Y purchased in the year 2019 | $1,500 |
| Add: TWDV of Asset Z brought forward from YA 2020 | $2,000 |
| Total claim under 1-year write-off | $29,900* |
Company A cannot claim the 7th piece of Asset X under Section 19A(10A) in YA 2021 as the additional cost of $4,400 will exceed the $30,000 cap (i.e. $4,400 x 7 = $30,800).
Company A can claim capital allowances on the 7th piece of Asset X over 2 years, 3 years or over its working life instead. Assuming that capital allowances are claimed over 3 years, the capital allowance for YA 2021 for this asset is $1,467 ($4,400/ 3 years).
In total, the capital allowance claim for YA 2021 is $31,367 ($29,900 + $1,467).
Write-Off Over 2 Years [Section 19A(1E)]
As announced in Budget 2020 and 2021, your company may accelerate the write-off over 2 years, instead of 3 years or the prescribed working life of the asset, on the cost incurred in acquiring the asset during the basis periods for YAs 2021 and 2022. This is to support businesses that intend to invest in new assets and ease the cash flow of businesses.
The rates of accelerated capital allowances are as follows:
- 75% of the cost incurred to be written off in the first year (i.e. YA 2021 or YA 2022); and
- 25% of the cost incurred to be written off in the second year (i.e. YA 2022 or YA 2023).
No deferment of capital allowance claim is allowed under this option.
The write-off over 2 years is optional and your company can continue to claim capital allowances over 1 year, 3 years or the prescribed working life.
For new assets acquired under a hire purchase agreement during the basis periods for YAs 2021 and 2022, the accelerated rates of 75% and 25% apply to all the instalments (principal component) paid on such hire purchase assets, notwithstanding that the instalments may be paid in a basis period after the basis periods for YAs 2021 and 2022.
Example 1: Asset Purchased with Cash
Your company purchased office equipment for $3,000 with cash in the financial year 2020.
Your company’s capital allowance schedule is as follows:
| Description | Office Equipment ($) |
|---|---|
| Cost | 3,000 |
| YA 2021 AA (75% of cost) | 2,250 |
| TWDV c/f | 750 |
| YA 2022 AA (25% of cost) | 750 |
| TWDV c/f | 0 |
Example 2: Asset Purchased under Hire Purchase
Your company acquired an office equipment for $2,000 under hire purchase in the financial year 2020.
The details of the hire purchase agreement are as follows:
| Purchase Price | $2,000 |
| Deposit | $100 |
| Hire purchase interest | $50 |
| Number of instalments | 5 |
| Amount payable per instalment | $390 |
| Hire purchase interest per instalment | $50/ 5 = $10 |
| Principal payment per instalment | $390 - $10 = $380 |
A deposit of $100 and 2 instalments were paid in the financial year 2020 and the remaining 3 instalments were paid in the financial year 2021.
Deposit and principal payments in the year 2020 = $100 + (2 x $380) = $860
Principal payments in the year 2021 = 3 x $380 = $1,140
AA for each YA is computed as follows:
| Year of Payment | Deposit and Principal Amount Paid ($) | YA 2021 AA ($) | YA 2022 AA ($) | YA 2023 AA ($) |
|---|---|---|---|---|
| 2020 | 860 | 645 | 215 | |
| 2021 | 1,140 | 855 | 285 | |
| Total | 645 | 1,070 | 285 |
Your company’s capital allowance schedule is as follows:
| Description | Office Equipment ($) |
|---|---|
| Cost | 2,000 |
| YA 2021 AA | 645 |
| TWDV c/f | 1,355 |
| YA 2022 AA | 1,070 |
| TWDV c/f | 285 |
| YA 2023 AA | 285 |
| TWDV c/f | 0 |
Write-Off Over 3 Years [Section 19A(1)]
Your company may choose to write-off all assets that qualify for capital allowances over 3 years.
Under the 3-year write-off, capital allowance is given in the form of annual allowance (AA) where:
- For assets purchased with cash:
AA for each year = 1/3 of the cost of asset
- For assets purchased under hire purchase:
AA = 1/3 of the principal payment (and deposit paid where applicable)
Example 1: Asset Purchased with Cash
Your company purchased office equipment for $3,000 with cash in the financial year 2020.
AA for each YA = 1/3 x $3,000 = $1,000
Your company’s capital allowance schedule is as follows:
| Description | Office Equipment ($) |
|---|---|
| Cost | 3,000 |
| YA 2021 AA | 1,000 |
| TWDV c/f | 2,000 |
| YA 2022 AA | 1,000 |
| TWDV c/f | 1,000 |
| YA 2023 AA | 1,000 |
| TWDV c/f | 0 |
Example 2: Asset Purchased under Hire Purchase
Your company acquired office equipment for $2,000 under hire purchase in the financial year 2020.
The details of the hire purchase agreement are as follows:
| Purchase Price | $2,000 |
| Deposit | $100 |
| Hire purchase interest | $50 |
| Number of instalments | 5 |
| Amount payable per instalment | $390 |
| Hire purchase interest per instalment | $50/ 5 = $10 |
| Principal payment per instalment | $390 - $10 = $380 |
A deposit of $100 and 2 instalments were paid in the financial year 2020 and the remaining 3 instalments were paid in the financial year 2021.
Deposit and principal payments in the year 2020 = $100 + (2 x $380) = $860
Principal payments in the year 2021 = 3 x $380 = $1,140
AA for each YA is computed as follows:
| Year of Payment | Deposit and Principal Amount Paid ($) | YA 2021 AA ($) | YA 2022 AA ($) | YA 2023 AA ($) | YA 2024 AA ($) |
|---|---|---|---|---|---|
| 2020 | 860 | 287 | 287 | 286 | |
| 2021 | 1,140 | 380 | 380 | 380 | |
| Total | 287 | 667 | 666 | 380 |
Your company’s capital allowance schedule is as follows:
| Description | Office Equipment ($) |
|---|---|
| Cost | 2,000 |
| YA 2021 AA | 287 |
| TWDV c/f | 1,713 |
| YA 2022 AA | 667 |
| TWDV c/f | 1,046 |
| YA 2023 AA | 666 |
| TWDV c/f | 380 |
| YA 2024 AA | 380 |
| TWDV c/f | 0 |
Write-Off Over the Prescribed Working Life of the Asset (Section 19)
Under this method, capital allowances are given over an asset's prescribed working life based on the Sixth Schedule of the Income Tax Act 1947.
To simplify capital allowance claims under Section 19, the prescribed working life of assets in the Sixth Schedule has been streamlined to 6, 12 and 16 years:
- If the prescribed working life of the asset in the Sixth Schedule is 12 years or less, your company may make an irrevocable election to claim capital allowances over either 6 or 12 years
- If the prescribed working life of the asset in the Sixth Schedule is 16 years, your company may make an irrevocable election to claim capital allowances over 6, 12 or 16 years
The above change applies to assets acquired in the basis periods relating to YA 2023 and subsequent YAs. It also applies to assets acquired in the basis periods relating to YA 2022 and prior YAs, if your company had deferred and is yet to start its capital allowance claims for the assets.
Your company must make the irrevocable election for the number of years of working life for the asset at the time of its tax filing for the YA relating to the basis period in which the asset is acquired. For assets acquired in basis periods prior to the basis period for YA 2023, your company must make the election at the time of the tax filing for YA 2023.
The initial allowance (IA) and annual allowance (AA) are computed as follows:
- For assets purchased with cash:
In the first YA relating to the year in which the fixed asset is purchased:
- IA = 20% x the cost of asset
- AA = (80% x the cost of asset)/ number of years of working life*
In the second and subsequent YAs:
- IA is not applicable
- AA = (80% x the cost of asset)/ number of years of working life* (same as the first YA)
- For assets purchased under hire purchase:
In the YA where there is a deposit paid and/or instalment payments:
- IA = 20% of the principal amount (and deposit paid where applicable)
- AA = (80% x the cost of asset)/ number of years of working life*
In the YA where there is no payment made:
- IA is not applicable
- AA = (80% x the cost of asset)/ number of years of working life*
Summary of the Different Methods to Claim Capital Allowances
| How to Calculate | Qualifying Assets | Initial Allowance (IA)/ Annual Allowance (AA) |
|---|---|---|
| Over working life of asset [Section 19] |
| IA = 20% of cost AA = (80% of cost)/ No. of years of working life |
| 3-year write-off [Section 19A(1)] |
| AA = 1/3 of cost |
| 2-year write-off [Section 19A(1E)] |
| YA 2021 or YA 2022 AA = 75% of cost YA 2022 or YA 2023 AA = 25% of cost |
| 1-year write-off (for specific assets) [Section 19A(2)] |
| AA = 100% of cost |
| 1-year write-off (only for low-value assets) [Section 19A(10A)] |
| AA = 100% of cost |
Generally, companies defer capital allowances when:
- The company is in a loss position; or
- The company qualifies for the tax exemption for new start-up companies.
Companies in a loss position may still claim capital allowances instead of deferring the claim. Any unutilised capital allowance can be carried forward for set-off against the income for subsequent YAs, subject to the shareholding test and business continuity test.
| Method of Calculation | Deferment |
|---|---|
| Over working life of asset [Section 19] | Initial allowance (IA) must be claimed in the YA the capital expenditure is incurred. In the event that IA is not claimed, annual allowance (AA) is computed based on the full cost (i.e. 100% of the cost over the prescribed working life). AA can be deferred and it does not need to be claimed consecutively over the prescribed working life of the asset. |
| 3-year write-off [Section 19A(1)] | A capital allowance claim made under Section 19A(1) can be deferred and does not need to be claimed consecutively over 3 YAs. |
| 2-year write-off [Section 19A(1E)] | No deferment of capital allowance claim is allowed under this option. |
| 1-year write-off (for specific assets) [Section 19A(2)] | You can choose to defer the capital allowance claim to subsequent YAs. |
| 1-year write-off (only for low-value assets) [Section 19A(10A)] | You can choose to defer the capital allowance claim to subsequent YAs. |
Example 1: Asset Purchased with Cash
Your company purchased a machine for $120,000 with cash in the basis period relating to YA 2017. It defers its claim for capital allowances in YAs 2017 and 2019, and only makes a claim in YAs 2018, 2020 and 2021.
Your company’s capital allowance schedule is as follows:
| Description | Machine ($) |
|---|---|
| Cost | 120,000 |
| YA 2017 AA | Deferred |
| Tax written down value (TWDV) c/f | 120,000 |
| YA 2018 AA (1/3 of cost) | 40,000 |
| TWDV c/f | 80,000 |
| YA 2019 AA | Deferred |
| TWDV c/f | 80,000 |
| YA 2020 AA (1/3 of cost) | 40,000 |
| TWDV c/f | 40,000 |
| YA 2021 AA (1/3 of cost) | 40,000 |
| TWDV c/f | 0 |
Example 2: Asset Purchased under Hire Purchase
Your company purchased office equipment for $12,000 under hire purchase in YA 2019.
The details of the hire purchase agreement are as follows:
| Purchase Price | $12,000 |
| Deposit | $600 |
| Hire purchase interest | $300 |
| Number of instalments | 6 |
| Amount payable per instalment | $1,950 |
| Hire purchase interest per instalment | $300/ 6 = $50 |
| Principal payment per instalment | $1,950 - $50 = $1,900 |
The deposit of $600 and 3 instalments were paid in the basis period relating to YA 2019 and the remaining 3 instalments were paid in the basis period relating to YA 2020.
Deposit and principal payments in YA 2019 = $600 + (3 x $1,900) = $6,300
Principal payments in YA 2020 = 3 x $1,900 = $5,700
Scenario A: Your company makes a claim for capital allowances in YAs 2019, 2021, 2022 and 2023 but defers its claim in YA 2020.
AA for each YA is computed as follows:
| Year of Payment | Deposit and Principal Amount Paid ($) | YA 2019 AA ($) | YA 2020 AA ($) | YA 2021 AA ($) | YA 2022 AA ($) | YA 2023 AA ($) |
|---|---|---|---|---|---|---|
| 2018 | 6,300 | 2,100 | Deferred | 2,100 | 2,100 | |
| 2019 | 5,700 | Deferred | 1,900 | 1,900 | 1,900 | |
| Total | 2,100 | Deferred | 4,000 | 4,000 | 1,900 |
Your company’s capital allowance schedule is as follows:
| Description | Office Equipment ($) |
|---|---|
| Cost | 12,000 |
| YA 2019 AA | 2,100 |
| TWDV c/f | 9,900 |
| YA 2020 AA | Deferred |
| TWDV c/f | 9,900 |
| YA 2021 AA | 4,000 |
| TWDV c/f | 5,900 |
| YA 2022 AA | 4,000 |
| TWDV c/f | 1,900 |
| YA 2023 AA | 1,900 |
| TWDV c/f | 0 |
Scenario B: Your company makes a claim for capital allowances as follows:
- On the YA 2019 deposit and principal payments - claims capital allowances in YAs 2019, 2020 and 2021
- On the YA 2020 principal payments - defers its claim for capital allowances in YA 2020 and claims in YAs 2021, 2022 and 2023
AA for each YA is computed as follows:
| Year of Payment | Deposit and Principal Amount Paid ($) | YA 2019 AA ($) | YA 2020 AA ($) | YA 2021 AA ($) | YA 2022 AA ($) | YA 2023 AA ($) |
|---|---|---|---|---|---|---|
| 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 |
Your company’s capital allowance schedule is as follows:
| Description | Office Equipment ($) |
|---|---|
| Cost | 12,000 |
| YA 2019 AA | 2,100 |
| TWDV c/f | 9,900 |
| YA 2020 AA | 2,100 |
| TWDV c/f | 7,800 |
| YA 2021 AA | 4,000 |
| TWDV c/f | 3,800 |
| YA 2022 AA | 1,900 |
| TWDV c/f | 1,900 |
| YA 2023 AA | 1,900 |
| TWDV c/f | 0 |
Deferment of Capital Allowances under the Productivity & Innovation Credit (PIC) Scheme
The PIC scheme has expired after YA 2018 and your company is not allowed to claim PIC benefits on expenditure incurred after the basis period of YA 2018.
If your company incurred qualifying PIC expenditure on equipment while the scheme was available, and the equipment has a tax written down value brought forward to the current YA, your company may choose to defer its capital allowance claims. However, your company needs to defer both the base capital allowances (100%) and enhanced capital allowances (300%) at the same time. It cannot choose to defer only the base allowances or only the enhanced allowances.
Example
Your company purchased a computer for $5,000 with cash in YA 2018. It wishes to defer its claim for capital allowance in YA 2018 as the company is in a loss position.
The capital allowance to be deferred is as follows:
| Description | Computer ($) |
|---|---|
| Cost | 5,000 |
| Base allowance (100%) | 5,000 |
| Enhanced allowance (300%) | 15,000 |
| Total capital allowance deferred | 20,000 |
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Can my company claim 100% of the cost of energy efficient equipment and technology in 1 year?
Yes, your company may claim the full cost of such equipment as capital allowance in 1 year, if the equipment is certified by a company approved by the National Environmental Agency (NEA) and is installed at any time from 1 Jan 1996 to 31 Dec 2017 (both dates inclusive).
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Can my company claim 100% of the cost of equipment purchased for chemical hazard control or noise control in 1 year?
Yes, your company may claim the full cost of such equipment as capital allowance in 1 year, if the equipment is certified by a company approved by the Ministry of Manpower (MOM).
Find out more about the details of accelerated capital allowance for equipment used for Chemical Hazard Control or Noise Control at MOM’s website.
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Can my company claim 100% of the cost of purchasing or developing a website?
Yes. A website qualifies as plant or machinery under Section 19A(10) and your company may claim capital allowance on the development cost or purchase cost of a website in 1 year.
From YAs 2014 to 2018, the website development cost, including costs incurred for the one-time registration of a domain name for the website, also qualifies for PIC benefits.
How to Claim Capital Allowances
Your company must make the capital allowance claims in its Corporate Income Tax Return for the relevant Year of Assessment (YA) and prepare the following supporting schedules in its tax computation. The tax computation must be filed with Form C. If you are filing Form C-S/ Form C-S (Lite), retain the tax computation and submit it only upon IRAS’ request.
| 1 | Fixed assets additions | Give a brief description and cost of the new assets purchased during the accounting year. |
| 2 | Fixed assets disposals | Give a brief description, cost, sale proceeds and profit/ loss on disposal in respect of fixed assets sold/ written off during the accounting year. |
| 3 | Capital allowances | Show your basis of calculating the total capital allowance claimed, giving a breakdown of the cost/ tax written down value brought forward, capital allowance amount and tax written down value carried forward for each category of assets. |
If you need help in preparing the capital allowance schedule, you may use our Basic Corporate Income Tax Calculator.
Sale/ Disposal/ Conversion/ Transfer of Fixed Assets
When a fixed asset is sold, converted to trading stock or written off, you need to calculate balancing allowance (BA) or balancing charge (BC) if capital allowances have been claimed on the cost of the asset previously. BA is tax-deductible and BC is taxable as income.
Calculating BA/ BC
BA or BC is derived by calculating the difference between the sale proceeds and the tax written down value (TWDV) of the asset disposed. TWDV is the cost of the asset less the amount of capital allowances allowed previously.
Sale Proceeds - TWDV = BA or BC
Where the sale proceeds are lower than the TWDV, the difference is known as BA. BA is tax-deductible.
Where the sale proceeds are higher than the TWDV, the difference is known as BC. BC is taxable as income. The amount of BC taxable is restricted to the total amount of capital allowances allowed previously in respect of the asset disposed.
When a fixed asset is converted to trading stock, BA or BC is computed based on the difference between the TWDV of the asset and its open market value (OMV) as at the date of conversion. The BC, if applicable, is capped at the amount of capital allowance previously granted in respect of that fixed asset.
OMV - TWDV = BA or BC
Example
| Description | Furniture ($) | Computer ($) | Van ($) |
|---|---|---|---|
| Cost | 3,000 | 2,000 | 20,000 |
| Sale proceeds | 200 | 200 | 21,000 |
| Less: TWDV | 1,000 | 0 | 13,333 |
| BA | 800 | ||
| BC | 200 | 6,667* |
Donation of Computers Before 21 Feb 2017
Donors are granted tax deduction for the donation of computers to prescribed educational, research or other institutions and all IPCs before 21 Feb 2017. The Infocomm Media Development Authority (IMDA) is required to perform a valuation of the computers to be donated.
A company may have incurred capital expenditure on a computer bought for its own trade and claimed capital allowance on the computer in full over 1 year. If the computer was subsequently donated to an IPC, a BC equal to the value of the donated items (as assessed by IMDA) will be taxed.
FAQs
Do I have to claim capital allowances? ›
Do I have to claim capital allowances? In short, no. AIA, FYA and the normal writing down allowances (WDAs) are optional. Capital allowances reduce profits but you don't have to claim them.
What does 100 capital allowance mean? ›Rules for cars
Cars are plant and machinery but have some special rules. Low emission cars can attract a 100% first-year allowance. That means that you can write off the whole cost against your taxable profits in the year of acquisition.
The level of capital allowance available depends on the CO2 emissions of the car. From April 2021 a first-year capital allowance of 100% of the cost can be claimed on all new and unused cars with zero emissions.
What qualifies as capital allowances? ›The general rule is that the asset must be owned by the company/individual claiming capital allowances. Expenditure on the installation of plant and machinery and demolition costs of a property which is held as a fixed asset (not trading stock) will qualify for capital allowances.
Can I claim capital allowance on my car? ›You can claim capital allowances on cars you buy and use in your business. This means you can deduct part of the value from your profits before you pay tax. Use writing down allowances to work out what you can claim - cars do not qualify for annual investment allowance.
What is a first year allowance? ›The first-year allowance is a UK tax allowance permitting British corporations to deduct between 6% and 100% of the cost of qualifying capital expenditures made during the year the equipment was first purchased. 1 This serves as an incentive for British companies to invest in emerging and eco-friendly products.
What is the 50% first year allowance? ›The SR allowance gives relief at 50% of the qualifying cost in the first year with the balance going into the normal special rate pool to be written down at the usual 6% rate in future years.
What are the 2 types of capital allowances and explain? ›Types of capital allowance
Initial allowance: One-off relief in the first year of purchasing a QCE. This means initial allowance is calculated only once over the useful life of an asset. It is not recurring. Annual allowance: It is a tax relief based on the cost of the asset less initial allowance.
Under the super-deduction, for two years from 1 April 2021 any investments your business makes in main rate plant and machinery will qualify for a 130% capital allowance deduction. The super-deduction allowance is the most attractive tax incentive for business investment ever offered by a British government.
Can I claim 100 capital allowance on a van? ›Annual Investment Allowance
It is effectively a 100% allowance that applies to most qualifying expenditure up to the annual cap, with expenditure on cars being the most important exception. Commercial vehicles, such as vans, should qualify for the annual investment allowance.
Do electric cars qualify for 130% super deduction? ›
The 130% Super-deduction available for companies between April 2021 and March 2023 does not apply to electric cars but does apply to commercial vehicles which would be eligible for plant and machinery allowances such as vans, lorries, tractors and taxis.
Can I claim for buying a van on my tax return? ›So, can I claim a van on my tax return? Yes, you can.
Why do taxpayers need capital allowances? ›Capital allowances. An asset qualifying for a capital allowance may be used for the purposes of a trade carried on outside the Republic. Under the source basis of taxation it would not have produced income taxable under the Act.
What is annual allowance? ›What is the annual allowance? It is the limit on how much money you can build up tax-free in your pension in any one tax year while still benefiting from tax relief. It's not the maximum pension contributions you can make. You could still make more.
Is capital allowance an income? ›4.1 Capital Allowance (CA)
This is a standardised deductible allowance in place of Financial Accounting depreciation. It is granted in respect of depreciable assets owned and used in the production of income of a person from business.
Depending on the facts and circumstances, you may be able to go back four years to amend your tax return to include the allowances that you should have claimed.
What are capital allowances self employed? ›Fortunately, when you buy them to keep hold of and use within your business, they're considered capital assets for which you can claim capital allowances. That means you can take away all or some of their value from your profits to help reduce your tax bill.
Is a car an allowable expense? ›An expense is allowable as a deduction only if it is incurred "wholly and exclusively" for business purposes. Motor expenses are therefore classed as an "allowable expense" if the mileage is wholly and exclusively for business purposes.
What is initial allowance and annual allowance? ›Initial allowance is granted in the year the expenditure is incurred and the asset is in use for the purpose of the business. Annual allowance at the prescribed rates calculated on cost is given for every year during which the asset is in use at the end of the basis year for the purposes of the business.
What is the difference between first year allowance and annual investment allowance? ›Similar to the AIA, First Year Allowances (FYA) enable you to claim the full 100% of the cost of eligible assets in the same accounting period. FYA do not count toward the annual AIA limit. FYA apply to specific types of expenditure such as: New zero-emission goods vehicles.
How does annual investment allowance work? ›
Definition of the Annual Investment Allowance
It's a kind of capital allowance. If your business buys a piece of equipment that qualifies for the Annual Investment Allowance, you can deduct 100% of the cost of that asset from your business's profit before you work out how much tax is due on that profit.
How do I claim capital allowances? They must be claimed in your Self Assessment tax return and they must normally be claimed by 12 months after the 31 January filing deadline for the return.
Do sole traders get capital allowances? ›The Annual Investment Allowance
You can claim a new allowance for each accounting period, but you can only claim AIA in the period in which you bought the item. You cannot claim the full value of items you also use outside your business for personal reasons, if you're a sole trader or partner.
For the most part, use the declining balance method to calculate your CCA , as it is the most common one. This means that you apply the CCA rate to the capital cost. Over the life of the property, the rate is applied against the remaining balance. The remaining balance declines each year that you claim CCA .
How do I claim capital cost allowance? ›- Use the CRA's chart of classes and list of capital property to determine which classes your purchases fall into.
- Group your expenses together by class, and add them together.
- Then, multiply the total in each class by its rate.
- The result is the CCA you can claim for the year.
The SR allowance gives relief at 50% of the qualifying cost in the first year with the balance going into the normal special rate pool to be written down at the usual 6% rate in future years.
Why do taxpayers need capital allowances? ›Capital allowances. An asset qualifying for a capital allowance may be used for the purposes of a trade carried on outside the Republic. Under the source basis of taxation it would not have produced income taxable under the Act.
Can I claim capital allowances on cash basis? ›Most capital equipment can be treated as an expense under the cash basis, but this does not include land, buildings and cars (capital allowances can usually be claimed on cars). This means that capital allowances on eligible capital equipment (that is capital equipment other than cars) do not need to be calculated.
Can I buy a car through my business as a sole trader? ›Another way to buy a car through your business as a sole trader is to pay up front and own it outright. If you choose this option, you can expense the cost of the business use element of your car. And you will get tax relief by using Capital Allowances.
Can I claim 100 capital allowance on a van? ›Annual Investment Allowance
It is effectively a 100% allowance that applies to most qualifying expenditure up to the annual cap, with expenditure on cars being the most important exception. Commercial vehicles, such as vans, should qualify for the annual investment allowance.
Is a car a capital expense? ›
If a company buys a new vehicle for the company fleet, the vehicle is considered a capital expenditure. Operating expenditures are smaller, usually more frequent purchases that support the operations of the company by secure value in the short-term.
What is capital cost allowance example? ›For example, let's calculate the CCA on a business vehicle in its first three years of use. It belongs in CCA class 10, giving it a CCA rate of 30%. In the first year, you can only claim half of this, or 15%. In the first year, the CCA deduction would be $30,000 x 15% = $4,500.
Is a fridge a capital cost? ›For example, the cost of buying a refrigerator to use in your rental operation is a capital expense. This is the case because a refrigerator is a separate asset and is not a part of the building. The cost of repairing a property by replacing one of its parts is usually a current expense.
What is a cost allowance? ›An allowance is an amount established in the contract documents for inclusion in the contract sum to cover the cost of prescribed items not specified in detail.
Should I claim capital cost allowance on my rental property? ›You can take the CCA for depreciable rental property. This means you can write off the capital cost of the property including the purchase price, legal fees associated with the purchase of the property, and cost of equipment and furniture that comes with renting a building.
Is capital cost allowance the same as depreciation? ›Capital Cost Allowance (“CCA”) is the depreciation mechanism used for tax purposes. Unlike accounting depreciation, CCA can be deducted from income for tax purposes. Capital assets require depreciation because the capital assets wear out over time.
What is accelerated capital cost allowance? ›The accelerated investment incentive is just a temporary change to the Capital cost allowance (CCA). CCA works as a tax deduction representing a capital asset's depreciation. The main benefit of the AII is that it allows for a larger CCA deduction within the first year of acquiring an eligible depreciable asset.