Capital allowances are one of the most valuable tax deductions available to Singapore companies, yet they are frequently misunderstood or under-claimed. Unlike revenue expenses — which are deducted in the year they are incurred — capital expenditure on qualifying assets cannot be expensed immediately for tax purposes. Instead, companies can claim capital allowances over time, reducing their taxable income in each year of the claim. Getting this right can make a material difference to your company’s effective tax rate, particularly if you have invested significantly in plant, machinery, or information technology assets.

This guide explains how capital allowances work in Singapore, what assets qualify, how to calculate the deduction, and the practical steps required to claim them in your corporate income tax return.

What Are Capital Allowances?

Capital allowances are tax deductions that allow companies to recover the cost of qualifying capital expenditure over time. They are the tax equivalent of accounting depreciation, but the rates and methods prescribed by the Income Tax Act 1947 differ from what companies use in their financial statements under accounting standards such as SFRS.

The key statutory provisions are Sections 19 and 19A of the Income Tax Act 1947. Section 19 provides for writing-down allowances over the asset’s prescribed working life (1 to 16 years, depending on the asset type). Section 19A provides for accelerated allowances — allowing the full cost to be written off over just one or three years. The accelerated rates are generally available for most plant and machinery and are the most commonly used option by Singapore companies.

What Assets Qualify for Capital Allowances?

Capital allowances are available on expenditure incurred on the provision of plant and machinery that is used in the production of income. The term “plant and machinery” is not exhaustively defined in the Income Tax Act, but IRAS’s guidance and case law have established a broad working definition.

Assets that commonly qualify include: production machinery and equipment; computers, servers, and IT hardware; office equipment (printers, copiers, scanners); motor vehicles (with restrictions — see below); furniture and fittings used in production; and specialised tools and equipment. Software costs may also qualify under certain conditions, particularly when they form an integral part of a qualifying asset.

Assets that do not qualify for capital allowances include: land and buildings (though renovation and refurbishment costs may be deductible under Section 14N or 14Q instead); goodwill and intellectual property acquired for a lump sum (though there are specific provisions under Section 19B for approved writing-down allowances on IP); and assets that are not used in the production of income.

Motor Vehicles: A Special Case

Capital allowances on motor vehicles are subject to significant restrictions. Passenger cars (commonly referred to as S-plates) do not qualify for capital allowances at all — Section 15(1)(b) of the Income Tax Act specifically disallows deductions on passenger cars. However, commercial vehicles (lorries, vans, buses) and goods vehicles do qualify. Motorcycles used for business purposes also qualify. The cost of the Certificate of Entitlement (COE) is included as part of the vehicle’s capital cost for the purpose of computing allowances on qualifying vehicles.

Section 19A: Accelerated Capital Allowances (1-Year and 3-Year Write-Off)

Section 19A is the most commonly used provision for claiming capital allowances in Singapore, and for good reason — it allows companies to write off the full cost of qualifying plant and machinery over just one year or three years, rather than over the asset’s full prescribed working life.

One-Year Write-Off (Section 19A(1))

Under Section 19A(1), companies can elect to write off the full cost of qualifying plant and machinery in the year of purchase. This provides an immediate full deduction, maximising the tax benefit in the year the expenditure is incurred. This option is available for most types of plant and machinery, and is the default choice for most Singapore companies claiming capital allowances.

Three-Year Write-Off (Section 19A(2))

Alternatively, a company may elect to write off the cost over three years at 33.33% per year. This is sometimes preferred by companies that expect to have higher taxable income in future years and wish to spread the tax benefit over a longer period, or by companies that are currently in a loss position and wish to defer the deductions to years when they will have chargeable income.

Section 19: Writing-Down Allowances Over Prescribed Working Life

Section 19 provides the standard writing-down allowance based on the asset’s prescribed working life as determined by IRAS. The working life varies by asset type — for example, computers are typically assigned a working life of three to five years, while heavy industrial machinery may have a working life of 10 to 16 years.

The allowance is calculated on a straight-line basis: if the asset costs S$100,000 and has a prescribed working life of five years, the annual Section 19 allowance is S$20,000 per year for five years. Section 19 is the fallback provision for assets that do not qualify for Section 19A acceleration.

Start-Up Capital Expenditure: Section 14C and 14D

Companies that incur capital expenditure before commencing business — for example, during a pre-trading set-up period — can claim capital allowances on this expenditure under Sections 14C and 14D of the Income Tax Act. The pre-commencement expenditure is treated as if it were incurred on the first day of trading, allowing the company to begin claiming allowances from its first year of assessment.

Renovation and Refurbishment Costs: Section 14Q

Although renovation costs (on buildings and fixed fittings) do not qualify as capital allowances on plant and machinery, Singapore provides a separate deduction under Section 14Q for qualifying renovation and refurbishment expenditure. This deduction is available at one-third of the qualifying cost per year over three years, up to a cap of S$300,000 per three-year qualifying period.

Qualifying renovation costs under Section 14Q include general renovation works, fitting out, painting, and electrical installations. Specific exclusions apply — for example, private office equipment and costs for aesthetic purposes only. Many companies mistakenly classify renovation costs as capital allowances; your tax adviser should confirm the correct categorisation.

Unutilised Capital Allowances: Carry Forward and Carry Back

If a company’s capital allowances exceed its taxable income in a given year of assessment, the unused capital allowances are not lost. Under Section 23 of the Income Tax Act, unutilised capital allowances can be carried forward indefinitely to be deducted against future chargeable income — provided the company continues to carry on the same trade or business, and there is no substantial change in shareholders.

Alternatively, under Section 37E, companies may apply to carry back unutilised capital allowances to the immediately preceding year of assessment, generating a tax refund for that prior year. The carry-back is capped at S$100,000 per year and is subject to IRAS approval. This provision is particularly useful for companies that had profitable prior years but are incurring heavy capital expenditure in the current year.

How to Claim Capital Allowances in Your Tax Return

Capital allowances are claimed in the company’s income tax return — Form C or Form C-S — filed with IRAS annually. The return requires disclosure of the capital allowances claimed, broken down by section (19, 19A, 14Q, etc.) and by asset category. IRAS may request supporting schedules showing the assets purchased, their cost, the date of purchase, and the allowance calculation.

It is important to maintain an asset register — a schedule that tracks every qualifying asset, its cost, the date of acquisition, the section under which the allowance is claimed, the annual allowance claimed, the cumulative allowance to date, and the written-down value. A well-maintained asset register is the foundation of any capital allowance claim and is the document IRAS will request in the event of a tax audit.

For a full overview of Singapore’s corporate tax rates, exemptions, and filing obligations, our Singapore Corporate Tax 2026 guide is a useful starting point. Our article on allowable business expenses under the Income Tax Act also covers the boundary between capital and revenue expenditure in more detail.

Capital Allowances vs Accounting Depreciation

A common source of confusion is the difference between capital allowances (for tax purposes) and depreciation (for accounting purposes). Your company’s financial statements will include a depreciation charge based on the asset’s useful economic life under accounting standards. This depreciation charge is not deductible for tax purposes — it is added back in the tax computation. Instead, capital allowances (at the rates prescribed by the Income Tax Act) are substituted as the tax deduction. The two figures will rarely be identical, and your tax computation must show the reconciliation clearly.

For the latest guidance on capital allowance rates and prescribed working lives, the IRAS website on Capital Allowances is the authoritative source. The Income Tax Act 1947 on Singapore Statutes Online contains the full statutory text of Sections 19, 19A, 14Q, and related provisions.

Sound financial planning and investment decisions for Singapore companies include understanding the full tax cost of capital acquisitions — capital allowances are a key part of that picture. For the latest Singapore financial news and tax updates, there are useful resources for business owners staying current.

To speak with the team at Raffles Corporate Services, you can email [email protected] or call, SMS, or WhatsApp +65 8501 7133. We are happy to assist with any queries about corporate tax planning, capital allowance claims, and financial statements preparation.

— The Editorial Team, Raffles Corporate Services