Capital allowance claims are allowed only on private cars that are registered as:
- Private hire cars; or
- Cars for instructional purposes and are hired out or used for providing driving instruction in the course of the company’s business.
Private cars are deemed as S-plated cars, RU-plated cars and company cars (Q-plated or S-plated cars).
Here is the relevant section in the Income Tax Act.
Section 19(5) of the Income Tax Act states the following:
No allowance under this section or section 19A may be made in respect of a motor car which is constructed or adapted for the carriage of not more than 7 passengers (exclusive of the driver) and the weight of which unladen does not exceed 3,000 kilograms except —
(a) a taxi, and then only to the following:
(i) a person that is not an individual and that holds a street‑hail service licence granted (on renewal or otherwise) or deemed granted under the Point‑to‑Point Passenger Transport Industry Act 2019 (called in this paragraph a street‑hail service licence);
(ii) an individual who is a partner of the partnership that acquired the taxi and holds a street‑hail service licence;
(iii) an individual who —
(A) acquired the taxi as a replacement or a subsequent replacement of a taxi acquired by him or her any time before 1 January 1975; and
(B) holds a vocational licence granted under section 110 of the Road Traffic Act 1961 authorising him or her to drive a taxi;
(b) a motor car registered outside Singapore and used exclusively outside Singapore;
(c) a private hire car acquired by a person who carries on the business of hiring out cars and which is used by the person principally for hiring;
(d) a motor car which was registered before 1 April 1998 as a business service passenger vehicle for the purposes of the Road Traffic Act 1961;
(e) a motor car registered on or after 1 April 1998 which is used principally for instructional purposes and acquired by a person who carries on the business of providing driving instruction and who holds a driving school licence or driving instructor’s licence issued under the Road Traffic Act 1961; and
(f) a chauffeured private hire car as defined in section 14ZA(8) —
(i) that is acquired in the basis period for the year of assessment 2021 or a subsequent year of assessment by a person that carries on the business of providing chauffeur services, and used by the person principally for such business; or
(ii) that was initially acquired by a person carrying on the business of hiring out cars and used by the person principally for such business, and is then used in the basis period for the year of assessment 2021 or a subsequent year of assessment by the same person principally for the business of providing chauffeur services carried on by the person.
Costs of other motor vehicles like vans, lorries, and motor cycles which are acquired for business purposes would qualify for capital allowances under section 19 of the Income Tax Act and consequently, section 19A pertaining to the method of writing off would apply.
For clarity, expenditure on the Certificate of Entitlement (COE) to acquire the motor vehicle is considered part of the motor vehicle and hence may be included when claiming capital allowance on the motor vehicle. Additionally, the amount paid by the registered owner to renew the COE will also be regarded as additional cost of the vehicle for the purposes of claiming allowances under section 19 or 19A of the Income Tax Act. Expenditure incurred to obtain a COE which is not subsequently used to acquire a vehicle will not be granted capital allowance. The COE must be used for capital allowance to be granted.
If you have any tax-related queries, you may email us at [email protected]. When in doubt, seek legal advice or consult an experienced ACRA Filing Agent.
Yours Sincerely,
The editorial team at Singapore Secretary Services
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[…] Capital allowance pertains to the sum that a business is eligible to deduct annually from its revenue through depreciation, representing its capital investment expenses aimed at fostering long-term corporate growth. These deductions are alternatively known as depreciation allowances. […]