Tax deductions to tide you through Covid-19
As YA 2021 corporate tax season opens for filing, we thought it an opportune time to highlight three of the tax changes announced by Budget 2020 and 2021 that will support businesses who have invested in new assets and/or renovation and refurbishment of business premises and ease the cashflow of businesses.
1. Accelerate capital allowance claim over two years
Based on the Budget 2020 and 2021 announcements, businesses can opt to accelerate the write-off over two years, as opposed to three years or over the prescribed working life of the asset, for assets purchased during the basis period for YA 2021 and YA 2022.
The allowable rates of accelerated capital allowance are as follows:
75% of the cost incurred to be claimed the first year (i.e. YA 2021 or YA 2022); and
25% of the cost incurred to be claimed in the second year (i.e. YA 2022 or YA 2023).
If companies opt for acceleration, the capital allowance claim cannot be deferred.
As for new assets purchased under a hire-purchase arrangements in YA 2021 or YA 2022, the accelerated rates of 75% and 25% will apply to all the instalments (principal component) paid on such HP assets, even if the instalments were paid after YA 2021 or YA 2022.
2. Accelerate Renovation & Refurbishment (“R&R”) claim under S14Q over 1 year
Based on Budget 2020 announcement, a taxpayer can opt to claim qualifying R&R costs incurred in the basis period for YA 2021 (i.e. financial year 2020) in one year (i.e. in YA 2021) instead of over three years.
3. Enhanced carry-back relief system
Based on Budget 2021 announcement, the enhanced carry-back relief will be extended to YA 2021 as follows:
Taxpayers may opt to carry back unutilised CAs and trade losses from YA 2021 up to three YAs immediately preceding YA 2021 (i.e. YA 2018, YA 2019 and YA 2020) (“YA 2021 enhanced carry-back relief”)
Taxpayers may opt for the current or enhanced carry-back relief based on an estimate of the current year unutilised CAs and trade losses for YA 2021.
Speak to your accountant
We understand that keeping track of tax changes on top of managing your daily business operations can be overwhelming at times. If you have any queries, feel free to drop us a message or email us and let us know how we can assist you. Our general response time is one business day.
The above article is written based on information from IRAS website and IRAS e-Tax guide as of 14 May 2021.
