TAX

Capital Allowances Singapore

The tax version of depreciation for business assets

Last updated: September 2026

Capital allowances are the tax equivalent of depreciation in Singapore, letting businesses write off the cost of qualifying fixed assets, such as machinery, equipment, and computers, against their taxable income over a set period, since ordinary accounting depreciation itself is not tax-deductible.

Not financial advice. All figures for educational reference only. Data as at September 2026.

Key Takeaways

• Capital allowances let a business deduct the cost of qualifying plant and machinery from taxable income, replacing non-deductible accounting depreciation.
• The standard write-off runs over an asset’s prescribed working life under Section 19, but most businesses elect the faster 3-year straight-line write-off under Section 19A instead.
• Low-value assets costing S$5,000 or less per item can be written off in full in one year, capped at S$30,000 total per Year of Assessment.
• Unutilised capital allowances can be carried forward indefinitely, subject to a shareholding test, or transferred to another group company via Group Relief.
• Capital allowances only apply to assets used for the purposes of a trade or business; personal-use assets and most buildings do not qualify.

Table of Contents

What Is Capital Allowances?

Capital allowances exist because Singapore’s tax system does not accept a company’s own accounting depreciation policy as the basis for tax relief. Accounting depreciation is an estimate a company makes for its own financial reporting purposes, and it is explicitly disallowed, added back, when computing tax. Capital allowances are the government-prescribed replacement, based on fixed schedules set out in the Income Tax Act, not on how conservatively or aggressively any individual company chooses to depreciate its assets.

What qualifies is broadly termed ‘plant and machinery’, which in practice covers general business equipment, computers, certain renovation-related fixtures under a separate specific scheme, office equipment, and motor vehicles, though private passenger cars face specific restrictions. Buildings and structures are generally excluded from capital allowances, though a separate Industrial Building Allowance historically existed in a more limited form.

The purpose is fairness and consistency: two companies that each buy an identical S$100,000 machine receive the same prescribed tax deduction schedule, regardless of how each happens to depreciate that machine in its own financial statements.

How Does It Work in Singapore?

There are three main routes available. Section 19 allows a business to write off an asset over its prescribed working life, which varies by asset type and can run anywhere from around 5 to 16 years. Section 19A offers an accelerated 3-year straight-line write-off for most plant and machinery, and is the option most businesses elect wherever eligible, since it brings forward the tax relief considerably. A third option allows a 100% one-year write-off for low-value assets, defined as items costing S$5,000 or less each, capped at S$30,000 claimed in total under this rule per Year of Assessment.

Capital allowances are claimed in the company’s annual tax computation, filed alongside Form C or Form C-S, based on the qualifying cost of assets acquired and put into use during the relevant basis period. Once a write-off method, such as Section 19A, is elected for a specific asset, it generally cannot be switched to a different method later.

To carry forward unutilised capital allowances to a later Year of Assessment, a company must pass a shareholding continuity test, broadly requiring no substantial change in the underlying shareholders as at the relevant comparison dates. If this test fails, following events such as a fundraising round or a change in majority ownership, the carried-forward allowances can be forfeited, subject to limited relief under a separate same-business test in some cases.

Businesses renovating their premises should also be aware of a separate provision, commonly used alongside capital allowances, that allows certain qualifying renovation and refurbishment costs, subject to a cap over a rolling multi-year period, to be written off over three years, since general capital allowances under Section 19 or 19A do not typically extend to most renovation works themselves.

Capital Allowances Example

A logistics company buys a S$180,000 forklift and warehouse racking system in the 2026 financial year. Electing the Section 19A accelerated write-off, it can deduct S$60,000 a year from its taxable income across three consecutive Years of Assessment, rather than spreading the same cost over the equipment’s actual eight-to-ten-year working life under the standard Section 19 method. If the company also buys ten laptops at S$1,200 each, S$12,000 in total, in the same year, it can write off the full S$12,000 immediately under the low-value asset rule, since each individual item falls under the S$5,000 threshold and the total stays within the S$30,000 annual cap.

Advantages of Capital Allowances

• The 3-year accelerated write-off under Section 19A significantly speeds up tax relief compared to spreading a deduction across an asset’s full working life.
• The low-value asset rule, a 100% write-off capped at S$30,000 per Year of Assessment, removes the administrative burden of tracking depreciation schedules for small, high-turnover items like laptops and office furniture.
• Unutilised capital allowances can be carried forward indefinitely, so a loss-making year doesn’t waste the deduction, provided the shareholding continuity test is met.
• Capital allowances can be surrendered to another company through Group Relief, giving corporate groups flexibility in how excess deductions are ultimately used.

Risks and Limitations

• Buildings, most renovation costs outside a specific dedicated scheme, and personal-use assets generally do not qualify, so businesses sometimes overestimate what they are entitled to claim.
• Once an asset’s write-off method is elected, it typically cannot be changed later, so choosing the wrong option upfront can lock in a less favourable tax timing for years.
• The shareholding continuity test can unexpectedly forfeit carried-forward capital allowances after a fundraising round, an M&A transaction, or any significant change in a company’s major shareholders.
• Motor vehicles, particularly private passenger cars, are subject to specific restrictions and caps, which can catch business owners off guard when they assume the full purchase cost is deductible.

Section 19 vs Section 19A vs Low-Value Asset Write-Off

Choosing the right write-off method affects how quickly a business can bring forward its tax relief on qualifying assets.

Source: IRAS Capital Allowances guidance, Income Tax Act Sections 19 and 19A, 2026.

The Bottom Line

Capital allowances exist because Singapore’s tax system doesn’t trust a company’s own depreciation policy to decide how much tax relief it deserves. By electing Section 19A’s 3-year write-off wherever eligible and using the low-value asset rule for smaller purchases, most businesses can bring forward tax relief that would otherwise be spread out over many years.

Frequently Asked Questions

Related Terms

• Group Relief (Tax) Singapore
• Singapore Income Tax Rates 2026
• IR8A Form Singapore
• QDMTT (Pillar Two Minimum Tax) Singapore

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