When a Singapore company buys a fixed asset — machinery, computers, office furniture, or specialised equipment — the cost is not immediately deductible as a business expense. Instead, the Income Tax Act 1947 provides a structured alternative: capital allowances. These are tax deductions spread over the asset’s useful life (or accelerated into one or three years, depending on the election) that effectively substitute for the depreciation deduction that accounting practice would otherwise apply.

Understanding capital allowances is essential for any Singapore business owner or financial controller managing the company’s effective tax rate. This guide explains which assets qualify, how the three main write-off methods work, what does not qualify, and how to claim correctly in your tax return.

Why Capital Allowances Matter for Singapore Companies

Singapore’s corporate income tax rate is a flat 17% on chargeable income. Capital allowances directly reduce chargeable income — a well-managed capital allowance position can meaningfully reduce your YA 2026 tax bill. Unlike accounting depreciation (which appears in your financial statements but is added back in the tax computation), capital allowances are a genuine cash tax saving.

For context, a Singapore company that buys S$200,000 of qualifying plant and machinery and elects the one-year write-off under Section 19A can reduce its chargeable income by S$200,000 in the year of purchase — producing a tax saving of up to S$34,000 at the 17% rate, before any exemptions or rebates. See our Singapore Corporate Tax 2026 guide for the full picture of rates, exemptions, and the YA 2026 CIT Rebate.

What Qualifies: Plant and Machinery

Capital allowances apply to plant and machinery used in your trade, business, or profession. The distinction between “plant” and “premises” is critical:

  • Plant is the apparatus with which a person carries on a trade — the tools of the business. It includes machinery, equipment, computers, motor vehicles (with conditions), air conditioning units, and purpose-built installations that form part of the operational process.
  • Premises are where the trade is carried on, not how. Buildings, land, and permanent structures generally do not qualify as plant.

The IRAS Capital Allowances guide and the Sixth Schedule to the Income Tax Act 1947 (available at Singapore Statutes Online) set out the prescribed working lives for different asset classes. Common categories include:

  • Computers and IT equipment: 1 year (one-year write-off available)
  • Office furniture and fittings: 10 years (Section 19) or 3 years (Section 19A election)
  • Motor vehicles: 5 years (Section 19) or 3 years (Section 19A election) — but note the restriction on private cars (S-plated)
  • General manufacturing machinery: 5–10 years depending on classification
  • Air conditioning equipment: 10 years

The Three Write-Off Methods

Method 1: Section 19 — Working Life Write-Off

Under Section 19, the company claims an initial allowance of 20% of the cost in the year of purchase, plus an annual allowance spread over the asset’s prescribed working life. The annual allowance rate is the residual cost divided by the working life in years. For an asset with a 10-year working life costing S$100,000:

  • Year 1: 20% initial allowance = S$20,000; plus 1/10 of S$80,000 = S$8,000. Total: S$28,000
  • Years 2–10: S$8,000 per year

Section 19 is used when the company does not want to claim accelerated write-off — for instance, where the company is currently in a loss position and does not benefit from current-year deductions, and wants to carry forward the allowances to profitable years.

Method 2: Section 19A — Three-Year Write-Off

Under Section 19A, the company elects to write off the full cost of qualifying plant and machinery in equal instalments over three years (one-third per year, with no initial allowance). For the same S$100,000 asset:

  • Years 1, 2, 3: S$33,333 per year

This is the most commonly used method for general plant and machinery in Singapore. The three-year write-off is faster than most Section 19 working lives and provides a meaningful tax deferral benefit.

Method 3: Section 19A — One-Year Write-Off

For two specific categories, companies may write off the full cost in a single year:

  • Computers and prescribed automation equipment: The full cost is deductible in Year 1 under the accelerated one-year write-off. This has been a core incentive for Singapore’s Smart Nation and digitalisation agenda.
  • Low-value assets: Assets costing S$5,000 or less individually may be written off in the year of purchase. However, the total low-value asset write-off claim is capped at S$30,000 per year of assessment. If you have many low-value items (furniture, small tools, phones), you can only claim S$30,000 in one-year write-offs per YA — the rest must go through the three-year method.

What Does Not Qualify

Not every business purchase attracts capital allowances. Common exclusions include:

  • Buildings and structures: The cost of constructing or buying a building (other than industrial buildings, which have their own allowances under Section 16) does not qualify as plant and machinery.
  • Private motor cars (S-plates): Capital allowances on private cars are specifically disallowed under the Income Tax Act. Commercial vehicles (vans, lorries, goods vehicles) qualify; private passenger cars do not — regardless of how much you use the car for business.
  • Intangible assets: Goodwill, customer lists, licences, and intellectual property generally do not qualify for capital allowances under Sections 19/19A, though some IP expenditure may qualify for deductions under other provisions.
  • Assets not used in the trade: If an asset is used partly for business and partly for non-business purposes, IRAS may restrict the capital allowance claim proportionately. Full capital allowance requires that the asset is used wholly and exclusively for the business.
  • Leased assets: If your company leases (rather than purchases) an asset under an operating lease, no capital allowance is available to the lessee — it is the lessor who owns the asset and may claim the allowances.

How to Claim Capital Allowances in Your Tax Return

Capital allowances are claimed in your company’s corporate income tax return (Form C, Form C-S, or Form C-S (Lite)) for the relevant Year of Assessment. The key steps are:

Step 1: Maintain a Fixed Asset Register

Before you can claim capital allowances, you need a clear record of every qualifying asset: purchase date, cost, asset category, working life, write-off method elected, and cumulative allowances claimed to date. IRAS does not prescribe the format, but your auditors and tax agents will expect this register to be maintained and available.

Step 2: Prepare the Capital Allowance Schedule

Your tax agent or accountant will prepare a capital allowance schedule for each YA, reconciling the opening balance of uncllaimed allowances, additions in the year, disposals (which trigger balancing allowances or charges), and the current year’s claim. This schedule is submitted as a supporting document with the tax return.

Step 3: Deduct from Chargeable Income

The total capital allowance for the YA is deducted from the company’s adjusted profit (after adding back non-deductible items and deducting allowable business expenses). The resulting figure, after further deductions for donations, is the company’s chargeable income on which tax is computed at 17%.

Step 4: Carry Forward Unutilised Allowances

If your company has a loss year and the capital allowances exceed your assessable income, the unutilised capital allowances can be carried forward to future years — but only if the company continues in the same trade. A change in the nature of the trade, or a change in shareholding of more than 50% (combined with a change in the principal activities), can restrict the carry-forward of unutilised allowances. See our guide on unutilised items and carry-forward rules.

Capital Allowances and XBRL Filing

For companies required to file financial statements with ACRA in XBRL format, note that the capital allowance schedule in your tax return is separate from the depreciation figure in your financial statements. The depreciation shown in your XBRL financial statements is accounting depreciation (typically straight-line over useful life); the capital allowance claimed in your tax return follows the statutory write-off schedules under the Income Tax Act. These two numbers will almost always differ, which is why a deferred tax asset or liability often arises in audited financial statements. See our XBRL filing guide for more on financial statement requirements.

For investment decisions and financial planning around capital expenditure in your business, it is worth considering both the capital allowance benefit and the cashflow implications of major asset purchases. For the latest Singapore financial and tax updates, staying current with IRAS announcements is important as rates and eligible assets can change with each Budget.

Conclusion

Capital allowances are one of the most straightforward yet underutilised tax planning tools for Singapore companies. The rules are clear, IRAS guidance is comprehensive, and the potential tax savings from correct and timely claims are material — particularly for capital-intensive businesses, manufacturers, and technology companies making significant equipment investments.

If your company needs help preparing a capital allowance schedule, reviewing your fixed asset register for unclaimed allowances, or filing your YA 2026 corporate income tax return, the team at Raffles Corporate Services provides corporate tax and accounting services for Singapore SMEs. If you need legal advice on tax disputes or IRAS audit matters related to your capital allowance claims, we can point you in the right direction.

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.

— The Editorial Team, Raffles Corporate Services