In Singapore’s tax framework, depreciation is a standard accounting entry, but it is not tax-deductible. To account for the “wear and tear” of assets, the Inland Revenue Authority of Singapore (IRAS) allows businesses to claim Capital Allowances (CA) instead.
As we navigate 2026, the introduction of the Enterprise Innovation Scheme (EIS) and enhanced automation incentives has made capital allowances a cornerstone of tax planning. At Hallmark Corporate Services, we help you transform your equipment investments into significant tax savings.
1. What Qualifies as “Plant and Machinery”?
To claim capital allowances, an asset must qualify as “plant or machinery” used for the purpose of your trade.
- Qualifying Assets: Office equipment (laptops, printers), furniture and fixtures, industrial machinery, and commercial vehicles (vans, lorries).
- Non-Qualifying Assets: Intangible assets (unless under specific IP schemes), land, and S-plated private cars.
2. Choosing Your Claim Method: Section 19 vs. 19A
Singapore offers flexibility in how quickly you “write off” an asset against your taxable income.
- Section 19 (Working Life): You spread the claim over the asset’s “working life” (usually 6, 12, or 16 years). You receive an Initial Allowance (20%) in the first year and an Annual Allowance thereafter.
- Section 19A (Accelerated): This is the preferred choice for most SMEs in 2026.
- 3-Year Write-off: Claim 1/3 of the cost every year for three years.
- 1-Year Write-off: Available for computers, prescribed automation equipment, and low-value assets (costing $\leq$ S$5,000$, with a total cap of S$30,000$ per Year of Assessment).
3. The 2026 “Game Changer”: Enterprise Innovation Scheme (EIS)
Under the EIS, which is active through YA 2028, the government has supercharged allowances for innovation-led growth.
- 400% Tax Deduction: For the first S$400,000 spent on qualifying activities like IP registration or IP acquisition, companies can claim a massive 400% tax relief.
- Cash Payout Option: For startups not yet in a tax-paying position, you can opt to convert up to S$100,000 of these allowances into a **non-taxable cash payout** (at a 20% conversion rate), capped at S$20,000 annually.
4. Balancing Charges and Allowances
What happens when you sell an asset?
- Balancing Charge: If you sell an asset for more than its remaining tax value (Tax Written Down Value), the “excess” is treated as taxable income.
- Balancing Allowance: If you sell it for less, you can claim the difference as an additional tax deduction in the year of disposal.
5. Why Timing Matters in 2026
With the 2026 tax season approaching, timing your capital expenditure is vital. If your company is currently utilizing the Start-Up Tax Exemption (SUTE), you may want to defer your capital allowance claims to future years when your tax rate is higher, maximizing the value of the deduction.
Conclusion: Optimizing Your Tax Position
Capital allowances are more than just a compliance requirement; they are a strategic tool for cash flow management. Whether you are investing in AI-driven automation or simple office upgrades, choosing the right “write-off” period can save your company thousands.At Hallmark Corporate Services, we specialize in corporate tax computation and incentive optimization. We ensure your fixed asset register is audit-ready and that you are extracting every dollar of relief allowed under the 2026 tax code.