Raffles Consulting Services
Singapore capital allowances replace accounting depreciation for qualifying plant and machinery, using the claim method and evidence that fit each asset.
Singapore capital allowances give tax relief for qualifying plant and machinery used in a trade or business. Accounting depreciation is not deductible. The company claims an allowance under the tax rules instead, using a one-year, three-year or prescribed-working-life method where the asset and conditions permit.
The claim should start from an asset-by-asset schedule. Classify the item, establish when legal liability for the cost arose, deduct applicable government funding and record the method chosen before the corporate tax return is filed.
Decide whether the item is plant or machinery
The current IRAS capital allowances guide says qualifying fixed assets must be plant and machinery used in the company’s trade, business or profession. The asset is generally not trading stock, functions as apparatus used in the business and is not merely part of the setting or premises.
For this reason, Describe what the asset does in the business. A production machine, computer or van used for operations may have a clear function. Building finishes, premises and decorative items may need a different analysis, including whether renovation or refurbishment rules apply.
Private passenger cars are generally prohibited. Vans, lorries and motorcycles acquired for business use can qualify, and eligible motor-vehicle cost can include the Certificate of Entitlement. Record the registration class and actual business use rather than relying on the account name.
The asset must be used for the trade. An item bought solely for donation does not qualify on that basis. Where an asset has mixed use or is held before use begins, document the dates and facts carefully.
Establish the claimable cost
In practice, IRAS states that the expense is incurred when the legal liability to pay arises, regardless of the cash-payment date. Keep the purchase order, contract, supplier invoice, acceptance evidence and commissioning record so the company can support the relevant basis period.
Separate the asset price from interest, maintenance, consumables, training and other services. Installation may need its own analysis. Do not transfer every project cost into the capital-allowance base without checking its character.
Capital allowances are no longer given on expenditure funded by government or statutory-board capital grants approved on or after 1 January 2021. Deduct the approved grant from the qualifying expenditure and reconcile the net amount to the support records.
At the same time, For hire purchase, the timing follows principal amounts and deposits paid under the applicable method. Separate principal from interest in the repayment schedule.
Choose among the available methods
All qualifying plant and machinery can generally use the three-year write-off under section 19A(1), giving one-third of cost as annual allowance. The prescribed-working-life method under section 19 uses initial allowance and annual allowance over the selected working life.
For assets acquired in basis periods relating to YA 2023 and later, the prescribed working lives are streamlined. An asset with a prescribed life of 12 years or less may use an irrevocable election of six or 12 years. An asset with a prescribed life of 16 years may use six, 12 or 16 years.
As a result, Computers and prescribed automation equipment can qualify for a 100 per cent one-year write-off. Low-value plant and machinery costing no more than S$5,000 per item can also qualify for one-year write-off, subject to a total S$30,000 claim cap for the YA.
The two-year method was limited to assets acquired during the basis periods for YAs 2021, 2022 and 2024. Do not select it for a current asset merely because an old schedule or software menu still displays the option.
Record the method before filing
| Method | Typical availability | Record to retain |
|---|---|---|
| One year | Computers, prescribed automation equipment and qualifying low-value assets | Asset category and low-value cap schedule |
| Three years | Qualifying plant and machinery | One-third annual calculation by asset |
| Working life | Qualifying plant and machinery | Prescribed life and irrevocable election |
| Hire purchase | Qualifying asset acquired under instalments | Deposit, principal and interest split |
| Deferred claim | Where permitted under the selected method | Tax written down value and reason |
Claiming or deferring can affect losses, exemptions and future deductions. A three-year or one-year allowance can generally be deferred under the conditions described by IRAS, while the historical two-year option did not allow deferment.
For example, Where the working-life method is used, initial allowance is 20 per cent of cost and annual allowance covers the remaining 80 per cent over the selected life. The election is irrevocable, so the return file should show who approved it and why.
Work through a current purchase
Suppose a company with a 31 December 2026 year end buys ten laptops at S$3,000 each and a production machine at S$120,000. The laptops are computers and may qualify for 100 per cent write-off. The production machine can be tested for the three-year or prescribed-working-life methods.
If an approved capital grant funds S$30,000 of the machine, the company should not claim allowances on that funded amount. It should document the S$90,000 net qualifying base, then model the available methods.
In addition, do not treat the laptops as low-value assets merely because each costs less than S$5,000 if the computer category already gives a specific one-year route. Classify first, then apply the most accurate provision and disclose the method clearly.
The commercial decision and tax method are related but not identical. The company should buy assets because they support the business, then choose the permitted claim method with an understanding of its cash-tax effect.
Prepare the return schedules
IRAS requires schedules for fixed-asset additions, disposals and capital allowances. Additions should show a brief description and cost. Disposals should show cost, sale proceeds and accounting profit or loss. The capital-allowance schedule should show cost or tax written down value brought forward, allowance claimed and tax written down value carried forward.
For this reason, the YA 2026 Form C explanatory notes identify the relevant section 19 and section 19A categories. A Form C filer submits the tax computation, while a Form C-S or Form C-S Lite filer retains it for production when IRAS requests it.
Reconcile the schedule to the fixed-asset register, general ledger, grant records and financial statements. Review disposals for balancing allowance or balancing charge consequences. Confirm that assets transferred within a group or converted to another use are treated correctly.
Preserve a repeatable asset history
The Singapore transfer pricing compliance workflow is the pillar cornerstone. The tax-loss carry-forward guide covers the effect of unutilised allowances, while the Tax Consulting hub connects the wider library.
In practice, a sound Singapore capital allowances claim lets a reviewer trace each deduction to a qualifying asset, net cost, selected method and filed schedule. That trace is more valuable than choosing the fastest write-off without a defensible classification.