If you thought that capital allowance and industrial building allowance is as good as it gets for factories in Singapore, here’s yet another tax benefit that’ll knock your socks off. Land Intensification Allowance is the official name, but you could simply call it “LIA”.
This comprehensive guide goes beyond the basics to explain what LIA really entails, how to qualify for the tax benefits, how to work out the amounts you’re entitled to, as well as how to apply and claim the benefits.
Land Intensification Allowance (LIA), for starters, was introduced by the 2010 budget as a means of encouraging industrial plants to boost their overall land productivity. It offers tax benefits on the capital that various businesses in the manufacturing and logistics sectors spend on generating value from their land.
You can, for instance, make a claim for LIA after spending money on constructing or renovating a qualifying industrial building or structure. If it’s granted, you get to reduce your company’s assessable income amount based on the total capital expenditure incurred.
All in all, such tax incentives are particularly tailored for industrial sectors with low Gross Plot Ratio (GPR) and huge land takes.
But, the government of Singapore doesn’t stop there. In 2016, it slightly amended LIA rules to further promote the co-location of activities, as well as establish a more efficient value supply chain. Then in 2017, the provision was changed yet again to accommodate the development of Integrated Construction and Prefabricated Hubs. (ICPHs).
If you’re seeking to leverage LIA to reduce your company’s tax bill, you’ll be required to meet the following qualifying conditions at the application level.
Although corporate income taxes in Singapore are regulated by the Inland Revenue Authority of Singapore (IRAS), management of the land intensification scheme is a completely different thing altogether.
So, in case you’re wondering, the answer is no. You won’t be sending your application to the IRAS. Instead, you’ll be expected to forward the application to Singapore’s Economic Development Board (EDB) and the Building and Construction Authority (BCA).
These are the two bodies mandated to administer the entire scheme plus approve applications. And to be specific, BCA deals with ICPHs approvals, while EDB handles applicants in the manufacturing and logistics fields.
Generally, you can make claims on the capital expenditure you’ve spent since the 23rd of February 2010, when LIA was first introduced. As for ICPHs, though, the period begins on the 8th of March 2017.
All in all, the funds should have been used up in the construction, extension, or renovation of a qualifying LIA building or structure to the point of meeting or surpassing the prescribed minimum GPR.
That said, some of the expenditure you can include in your LIA claims for the building or structure include:
Once your LIA application is approved, you can go ahead and work out your claims as follows:
The best thing about claiming LIA in Singapore is, you don’t have to attach any supporting documents to your company’s income tax returns. Yes, that’s right - the IRAS allows you to make claims without the submissions.
But, don’t get us wrong. You won’t be let off entirely scot-free. The IRAS, instead, requires companies to prepare and retain the following documents for the long haul;
The Comptroller of Income Tax might, at some point, request you to submit these documents. But, not necessarily within the initial YA. Rather, you’re expected to retain the documents for up to five years, as the request could come in at any moment.
For a tax scheme with the capacity to pay you back the capital that you spend on developing your industrial premises, LIA is certainly something you might not want to miss out on.
So, tell you what. We’re willing to show you all the ropes, as well as help you with your entire tax filing. Just book a free consultation with us, and we’ll be happy to walk you through everything.