Renovation costs to get tax relief

Renovation costs to get tax relief

 

BUSINESSES can now claim new deductions on capital spending, thanks to a new tax incentive introduced by the Inland Revenue Authority of Singapore (IRAS) after it was approached by the Pro-Enterprise Panel (PEP).

 

Just about all businesses spend on fixtures and fittings, either to refurbish the premises for a fresher look or when starting operations.

 

But before Feb 16 this year there was no tax relief on these expenses. Fixtures and fittings did not qualify for an allowance because they related to the setting in which the business was conducted, and not the provision of plant or machinery.

 

Now a new incentive, which will be available for five years, grants a tax allowance on qualifying expenditure on renovation and refurbishment for the purposes of trade, business or profession, except expenses relating to structural works and expansion of space.

 

The expense has to be written off over three years on a straight-line basis, subject to a cap of $150,000 every three years.

 

With the change, businesses – particularly those in the service sector – will save tax and improve their bottom line. The revision came after two companies approached PEP because they could not claim tax deductions on immovable items or renovation expenses.

 

PEP approached Iras with the objective of supporting a reduction in business costs.

 

According to PEP, businesses – especially small and medium enterprises – felt tax relief should be offered, since the government’s intent is to help business cut costs.

 

One of the companies that appealed to PEP told it: ‘Most commercial (retail) lease terms are for a period of three years only, after which, if we vacate the premises, we will have to restore the premises to its original condition.

 

‘In other words, the benefit of the enhancement of the property does not get translated to the retailer and worse still, tenants will incur renovation costs twice, and not be able to claim capital allowances.’

 

The Pro-Enterprise Panel (PEP) was established in 2000 to actively solicit feedback from businesses on how government rules and regulations can be improved to create a more pro-enterprise environment in Singapore. The PEP is chaired by the Head of Civil Service, Peter Ho, and comprises mainly business leaders from the private sector.

 

Source: Business Times

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