Enhanced tax treatment on capital expenditure
To provide temporary support to businesses in their restructuring amidst rising costs, the following enhanced claims on expenditure on qualifying plant and machinery and renovation and refurbishment costs will be available in the Year of Assessment (YA) 2024.
a. Capital allowances
In addition to the existing options to claim capital allowances (CA) under section 19 (i.e. over the working life of the assets specified in the Sixth Schedule) or section 19A (i.e. over one or three years), taxpayers will now have the option of accelerating the CA claim over two years for capital expenditure incurred in the YA 2024 in the following proportions:
- 75% of the cost incurred in the first YA (YA 2024); and
- 25% of the cost incurred in the second YA (YA 2025).
No deferral of CA claims will be allowed if the claims are made under this option.
b. Renovation & refurbishment
Instead of a 3-year writing down period, taxpayers will have an irrevocable option to claim accelerated deduction on qualifying renovation & refurbishment (R&R) costs incurred in the YA 2024. However, the cap on the qualifying expenditure of $300,000 for every relevant period of three years continues to apply.
The above measures should not be unfamiliar to taxpayers as they were also implemented in recent years to support businesses in tiding over the COVID-19 pandemic.
Companies should carry out scenario analyses and consider a number of factors to determine whether to opt for the accelerated claims. For example, a company in a tax loss position may not be able to benefit from the accelerated deductions.
Tax deduction for approved expenditure on building modifications for disabled employees
The above deduction scheme will be withdrawn from 15 February 2023. Since it was first introduced in 1989, it has become less relevant in view of the other support schemes introduced subsequently which serve similar or broader purposes assisting employers to recruit and retain disabled employees and make adjustments to business premises to facilitate their work or mobility.
Tax measures relating to submarine cable systems
The existing measures include:
- A withholding tax exemption on payments to non-residents for the use of international telecommunications submarine cable capacity under an indefeasible right of use (IRU) agreement;
- Writing down allowance (WDA) for the acquisition of an indefeasible right to use (IRU) any international telecommunications submarine cable system over its useful life; and
- Investment allowance for the construction and operation of submarine cable systems in Singapore.
The proposed extension to 31 December 2028 of these tax measures does not come as a surprise in view of the impending launch of 5G mobile services, which gives rise to a number of infrastructure investment considerations for telecommunications carriers.
The extension should continue to encourage telecommunication carriers and other industry players to hub their networks in Singapore. However, we would have preferred the WDA on acquisition of IRU to be a permanent feature in the tax legislation given the strategic importance of the telecommunications sector.
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