What is LIA
It was announced in Budget 2010 that to support enhanced land productivity among industrial users, businesses may claim LIA on qualifying capital expenditures incurred for the construction of a qualifying building or structure.
The commencement date of the incentive is 1 July 2010 and this incentive will be in place for 5 years. LIA is administered by Economic Development Board ("EDB") and more details will be released by Jun 2010.
What are the qualifying criteria for LIA
The qualifying criteria are:
a) The user of the building or structure belongs to one of the following nine industry sectors:
i) Pharmaceuticals;
ii) Petrochemicals;
iii) Petroleum;
iv) Specialties;
v) Other Chemicals;
vi) Semiconductor-Wafer fabrication;
vii) Aerospace;
viii)Marine and Offshore Engineering; and
ix) Solar Cell Manufacturing
b) The land on which the building or structure is to be built is zoned as Business 1 or Business 2 (excluding Business 1 White and Business 2 White) under the URA Master Plan; and
c) The building or structure meets the Gross Plot Ratio ("GPR") benchmark1 relevant to the industry sector of the building user. To encourage intensification, the benchmarks for each industry sector will be set around the 75th percentile of actual GPRs for the sector.
What are the qualifying capital expenditures for LIA
The qualifying capital expenditures are costs incurred for the construction of a qualifying building or structure.
How to compute LIA
LIA is computed as follows:
- Initial allowance (IA): 25% of qualifying costs
- Annual allowance (AA): 5% of qualifying costs (building or structure must be put to use at end of basis period).
This means that the qualifying capital expenditure can be written down over 15 years.
How to claim LIA
Application for LIA should be first submitted to EDB. Upon approval from EDB, you can then submit your claim in your tax computation, and forward your approval letter from EDB when you file your Income Tax Return (Form C).