For years, the Inland Revenue Authority of Singapore allowed companies to freely claim industrial building allowances (IBAS) on their capital expenditure. However, that ultimately changed, and now companies can’t proceed to file for the deductions, unless under specific circumstances.
This guide comprehensively reveals those special scenarios, what industrial building allowances entail, how you can qualify for IBA, as well the procedure for calculating your applicable IBA.
Industrial Building Allowances (IBA), as the name suggests, are basically tax deductions that companies can claim on the capital they’ve spent on acquiring industrial buildings and structures. This covers both construction and purchase costs, and the industrial buildings themselves should have been acquired for the sake of facilitating business activities or trades.
Unfortunately, however, IBA benefits were phased out, stopping companies from claiming the deductions on industrial building costs incurred from the 23rd of February 2010. Not entirely, though, as there are specific scenarios that allow you to file for allowances on such capital expenditure.
Generally, you can only apply for capital expenditure allowances under IBA if the industrial buildings you’ve acquired or purchased are:
Now, for sake of clarity, “qualifying trades” in this case refers to the following activities - as described in Section 18 of Singapore’s Income Tax Act:
The IRAS allows you to proceed and apply for IBA tax deductions if the following rules apply to your existing industrial building:
You can claim IBA on capital expenditure spent on purchasing an existing industrial building if:
In that case, the qualifying capital expenditure should cover the purchase costs - including all the stamp duties and legal fees that were applied during purchase.
If you happen to construct an adjoined or a separate extension to an existing industrial building, you can apply for IBA provided:
The capital expenditure here applies to the construction costs you incurred until:
For companies that constructed an extension to an existing building, the IRAS allows you to file for IBA if:
In that case, the capital expenditure covers the construction costs you incurred until:
Companies that end up renovating existing industrial buildings can proceed to apply for IBA if:
The capital expenditure taken into consideration here are the renovation costs incurred till:
When it comes to new industrial buildings, the IRAS applies different rules on:
Let’s look into each of them separately.
Companies that construct new industrial buildings can go ahead and claim IBA tax deductions if:
What’s more, the development application should have been forwarded to the URA on or before the 31st of December 2010.
If you happen to qualify, you should expect the IRAS to work out your allowances from the following forms of capital expenditure:
If your company acquired a new industrial building through purchase, you can file for IBA provided:
As such, the qualifying capital expenditure should cover all the purchase costs - including all the stamp duties and legal fees that were applied during purchase.
All in all, qualifying expenditure under IBA covers the costs that your company incurred during the construction or purchase of the industrial building.
Please note, however, that the cost of the land is not considered part of the qualifying expenditure.
As it turns out, the IRAS also disqualifies the costs incurred in constructing ancillary spaces. That means areas like offices, residential units, cafeterias, showrooms, retail shops are not considered part of the industrial building or structure. They are just support elements.
On the flip side, though, you’re allowed to include them in your capital expenditure if the costs incurred are a tenth or less of the total costs of constructing the entire industrial building.
While there are many rules in the computation of industrial building allowance claims, we can summarize them as follows;
All these claims should be submitted alongside your company’s tax computation.
For the best possible outcome, we invite you to work closely with the real experts. Our consultations are completely free of charge. We’ll then advise you on your IBA status, plus help you with the whole computation, filing, and claiming process.