Land Intensification Allowance (LIA)

Companies that qualify for LIA can claim qualifying capital expenditure incurred on the construction of a qualifying building or structure.

What is LIA

The Land Intensification Allowance (LIA) announced in Budget 2010 supports enhanced land productivity among industrial users. LIA is available to businesses in industry sectors which have large land takes and low Gross Plot Ratios (GPR). To encourage co-location of activities and allow a more efficient value supply chain, the LIA is enhanced in Budget 2016.

LIA can be claimed on qualifying capital expenditure incurred on the construction of a qualifying building or structure.

How to Apply for LIA

LIA is administered by the Economic Development Board (EDB) and approvals for the incentive will be granted by EDB from 1 July 2010 to 30 June 2020 (both dates inclusive).

Qualifying Conditions

To qualify for LIA, businesses are required to meet certain conditions and obtain approval from the EDB. The key qualifying conditions are summarised in the following table:

 Qualifying conditions* From 23 Feb 2010 to 21 Feb 2014 From 22 Feb 2014 to 30 Jun 2020
1. Qualifying building or structure- Built on industrial B1/B2 land

- Built on industrial B1/B2 land

- Built on Airport/ Port land

2. Qualifying trade or business- Specified manufacturing activities

- Specified manufacturing activities; or

- Specified logistics activities

3. Qualifying intensified use of the land- Meet prescribed Gross Plot Ratio ("GPR") benchmarks for specified manufacturing activities

- Meet prescribed GPR benchmarks for specified manufacturing/ logistics activities; and

- Incremental 10% GPR applies to buildings or structures which already have met the prescribed GPR benchmarks

4. "Minimum floor area" requirement- At least 80% of the total floor area of the building or structure must be used by a single user for the prescribed principal trade or business upon the completion of the construction/ renovation/ extension works of the building or structure

* For details of the qualifying criteria and application process, please refer to EDB's brochure on "Land Intensification Allowance Incentive" on the EDB website.

Budget 2016 Changes

As announced in Budget 2016, the "Minimum floor area" requirement has been enhanced as follows:

  1. Allow building used by a single user to undertake multiple prescribed trades or businesses to qualify; and
  2. Allow building used by multiple users who are related and undertaking one or multiple prescribed trades or businesses to qualify.

With the above enhancements, a building or structure can qualify for the LIA if at least 80% of the total floor area of the building or structure is used by one or more users who are related to undertake one or multiple prescribed trades or businesses. The relevant GPR benchmark will be the highest of all the prescribed trades or businesses carried out in the building or structure.

The above enhancements are applicable for LIA applications submitted to EDB from 25 March 2016 with the application for planning permission or conservation permission made from 25 March 2016. The qualifying capital expenditure for which an LIA is made will exclude any expenditure incurred before 25 March 2016.

To avoid incentivising the third-party facility providers who are naturally incentivised to intensify their land use, a new condition requiring the LIA applicant and the qualifying users to be related has been introduced. This is applicable for LIA applications submitted to EDB from 25 March 2016 with the application for planning permission or conservation permission made from 25 March 2016.

Please refer to EDB's website for further details.

Qualifying expenditure

The following capital expenditures incurred on or after 23 February 2010 up to the date of the completion of the construction or renovation/ extension of the approved LIA building or structure qualify for LIA:

  1. Cost of feasibility study on the layout of the building or structure;
  2. Design fees of the building or structure;
  3. Cost of preparing plans for obtaining approval for the building or structure;
  4. Piling, construction and renovation/ extension costs;
  5. Demolition costs of an existing building or structure;
  6. Legal and other professional fees in relation to the approved construction or approved renovation/ extension; and
  7. Stamp duties payable in respect of title of the building or structure.

Computing LIA

LIA on approved applications is computed as follows:

Initial allowance (IA)

IA comprising 25% of qualifying capital expenditure will be granted in the Year of Assessment (YA) relating to the basis period in which the capital expenditure is incurred.

Annual allowance (AA)

AA comprising 5% of qualifying capital expenditure will be granted upon the completion of the construction or renovation/ extension works, as long as all the qualifying conditions are met. If the "minimum floor area" requirement is not met at the end of any basis period, AA will not be granted for that YA.

Claiming LIA

Businesses claiming LIA need not submit any supporting documents with their Income Tax Return. However, businesses need to prepare and retain* the following documents/ information:

  1. Copy of the letter of offer from EDB;
  2. Details of qualifying capital expenditure incurred on the construction or renovation / extension of the approved LIA building or structure and the computation of the IA and AA to be claimed. Please refer to Annex B of EDB's LIA Brochure for a worked example;
  3. Copy of the verification form submitted to EDB previously upon the completion of the construction or renovation/ extension of the building; and
  4. Certificate from a qualified quantity surveyor to certify the floor area used by another user where part of the approved LIA building or structure is used by another user.

* Documents/ information must be retained for a period of at least five years from the relevant YA. These documents/ information should be submitted to the Comptroller of Income Tax upon request. For more information on record keeping, see Record Keeping Essentials for Businesses.

Unutilised LIA

Where there is insufficient income in any YA to absorb the LIA, the unutilised amount can be:

  1. Transferred to related companies under the Group Relief System;
  2. Carried back to set off against past income under the Carry-Back Relief System; or
  3. Carried forward to set off against the future income.

The above are subject to the taxpayer meeting the prevailing conditions under those systems.

Claiming LIA in Specific Scenarios

Scenario 1: No longer used for qualifying activities

No AA will be granted to the taxpayer from the YA relating to the basis period during which the permanent disuse occurs and the LIA incentive shall be terminated with effect from that YA.

Scenario 2: Change in predominate use

If approval is granted by EDB for the change in use, the taxpayer shall be allowed to continue the claim of LIA under the new qualifying activity.

Scenario 3: Sale or Transfer of building/structure

Any balance of the qualifying capital expenditure still remaining will be disregarded and there will not be any balancing adjustment on the seller of the building.

Scenario 4: Transfer to amalgamated company

When the building or structure is transferred to an amalgamated company under a qualifying amalgamation under Section 34C of the Income Tax Act.

AA will be granted to the amalgamated company until the remaining capital expenditure is fully claimed, subject to the amalgamated company meeting the same conditions for the LIA incentive.

Scenario 5: Failure to meet Gross Plot Ratio (GPR) benchmark

The IA and/ or AA will be recovered through re-assessment of preceding tax years.

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