The IBA has been phased out. Companies are not allowed to claim IBA on the capital expenditure incurred from 23 Feb 2010 on the construction or purchase of industrial buildings or structures, except in specified scenarios provided for under the transitional rules.
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What Qualifies for IBA

Before 23 Feb 2010, companies could claim IBA on capital expenditure incurred on the construction or purchase of industrial buildings or structures if:

  • The company used the industrial buildings or structures for any of the qualifying trades or activities ('qualifying trade'); or
  • The company leased the industrial buildings or structures to persons who used them for any of the qualifying trades.

'Industrial building or structure' is defined in Section 18(1) of the Income Tax Act 1947. Qualifying trades are likewise specified in the Act.

Examples of qualifying trades include:

  • Trade carried on in a mill, factory or other similar premises
  • Transport, dock, water or electricity undertaking
  • Trade which consists in the manufacture of goods or materials or the subjection of goods or materials to any process
  • Trade which consists in the storage of goods or materials which are to be used in the manufacture of other goods or to be subjected, in the course of a trade, to any process
  • Trade which consists of the storage of goods or materials on their arrival in Singapore

With the phasing out of IBA, IBA cannot be claimed on the capital expenditure incurred from 23 Feb 2010 on the construction or purchase of an industrial building or structure, except in specified scenarios provided for under the transitional rules.

Learn more about the phasing out of Industrial Building Allowance (PDF, 118KB).

Qualifying Expenditure

Qualifying capital expenditure for IBA refers to expenditure that is incurred for the construction of a building. Land cost does not qualify for IBA.

Examples of qualifying capital expenditure include:

  • Cost of preparing plans in connection with obtaining building approval
  • Architect fees
  • Expenditure incidental to the construction of the building (e.g. plumbing, drainage, electrical installations)

Under Section 18(6) of the Income Tax Act 1947, an 'industrial building or structure' does not include any building or structure in use as, or as part of, a dwelling-house, retail shop, showroom, hotel (other than a Sentosa hotel) or office or for any purpose ancillary to any such purpose.

Where part of a building or structure does not qualify as an industrial building or structure, but the expenditure incurred on the construction of the non-qualifying part is 10% or less of the total expenditure on construction of the whole building or structure, the whole building or structure qualifies as an industrial building or structure under Section 18(7) of the Income Tax Act 1947.

Transitional Rules

If your company is claiming IBA under the transitional rules, make the claim in your company’s tax computation.

For Existing Buildings

Case 1: Purchase of an Existing Industrial Building

Criteria to be met for transitional rules to apply Capital expenditure qualifying for IBA under the transitional rules
  1. The option to purchase was granted on or before 22 Feb 2010

    or
  2. The agreement to purchase was signed on or before 22 Feb 2010
Purchase costs (including legal fees, stamp duties relating to the title of the building) of the industrial building

Case 2: Construction of an Adjoined or a Separate Extension to an Existing Industrial Building

Criteria to be met for transitional rules to applyCapital expenditure qualifying for IBA under the transitional rules
  1. A qualified person (QP)1 was engaged on or before 22 Feb 2010

and

  1. The development application (DA)2 was submitted to the Urban Redevelopment Authority (URA) on or before 31 Dec 2010

Construction costs of the extension incurred up to the earlier of the following dates:

  1. Date of issue of temporary occupation permit (TOP)

    or
  2. Last day of the basis period for Year of Assessment (YA) 2016

1 A QP refers to a registered architect or registered professional engineer as defined in the First Schedule of the Planning Act 1998.

2 A DA is a building project application submitted to URA for planning permission and other regulatory approvals. Only a QP can submit a DA.

Case 3: Construction of an Extension to an Existing Building That is Used as an Industrial Building Upon Completion of the Construction of the Extension

Criteria to be met for transitional rules to applyCapital expenditure qualifying for IBA under the transitional rules
  1. A QP1 was engaged on or before 22 Feb 2010

and

  1. The DA2 was submitted to URA on or before 31 Dec 2010
  1. Construction costs of the extension incurred up to the earlier of the following dates:
    1. Date of issue of TOP

      or
    2. Last day of the basis period for YA 2016

and

  1. Construction or purchase costs or residue of expenditure (ROE), as the case may be, of the existing building which is converted to an industrial building upon completion of the construction of the extension

Case 4: Renovation of an Existing Industrial Building

Criteria to be met for transitional rules to applyCapital expenditure qualifying for IBA under the transitional rules
A renovation contractor was engaged on or before 22 Feb 2010

Renovation costs incurred up to the earlier of the following dates:

  1. End of the renovation project

    or
  2. Last day of the basis period for YA 2016

This applies only to renovation works that do not require a DA to be submitted to URA.

Case 5: Renovation of an Existing Building That is Used as an Industrial Building Upon Completion of the Renovation

Criteria to be met for transitional rules to applyCapital expenditure qualifying for IBA under the transitional rules
A renovation contractor was engaged on or before 22 Feb 2010
  1. Renovation costs incurred up to the earlier of the following dates:
    1. End of the renovation project

      or
    2. Last day of the basis period for YA 2016

and

  1. Construction or purchase costs or ROE, as the case may be, of the existing building which is converted to an industrial building upon completion of renovation works

This applies only to renovation works that do not require a DA to be submitted to URA.

For New Industrial Buildings

Case 1: Construction of a New Industrial Building

Criteria to be met for transitional rules to applyCapital expenditure qualifying for IBA under the transitional rules
  1. Any 1 of the following:
    1. The option to purchase the land (on which the building is to be built) was granted by the private land owner on or before 22 Feb 2010
    2. The agreement to purchase the land was signed with the private land owner on or before 22 Feb 2010
    3. The lease agreement to lease the land from the private land owner was signed on or before 22 Feb 2010
    4. An application to bid, buy or lease the land was submitted to the government on or before 22 Feb 2010

and

  1. The DA to build the industrial building was submitted to URA on or before 31 Dec 2010

Construction costs of the industrial building incurred up to the earlier of the following dates:

  1. Date of issue of TOP

or

  1. Last day of the basis period for YA 2016

Case 2: Purchase of a New Industrial Building

Criteria to be met for transitional rules to applyCapital expenditure qualifying for IBA under the transitional rules
  1. The option to purchase was granted on or before 22 Feb 2010

or

  1. The agreement to purchase was signed on or before 22 Feb 2010
Purchase cost (including legal fees, stamp duties relating to the title of the building) of the industrial building

Section 24 Election

When an industrial building is transferred between related persons, the election under Section 24 of the Income Tax Act 1947 is not available to the transferor and transferee where:

  • The option to purchase is granted after 22 Feb 2010; or
  • The agreement for sale or transfer is signed after 22 Feb 2010.

Balancing adjustment will be made on the transferor. The transferee cannot claim IBA on the industrial building.

How to Calculate IBA

IBA is computed as follows:

  1. Initial allowance (IA): 25% of the qualifying expenditure
  2. Annual allowance (AA): 3% of the qualifying expenditure
Type of building Building purchased before 1 Jan 2006Building purchased from 1 Jan 2006 to 22 Feb 2010 (except for the specified scenarios given above)
Newly constructed building IA and AA granted based on construction cost No change
New building with leasehold interest of less than 25 years No IA and AA granted IA and AA granted based on the purchase price of the building
New building with leasehold interest of 25 years or more IA and AA granted based on the lower of construction cost and purchase price IA and AA granted based on the purchase price of the building
Used building with leasehold interest of less than 25 years AA granted based on the remaining balance of expenditure AA granted based on the purchase price of the building
Used building with leasehold interest of 25 years or more AA granted based on the remaining balance of expenditure AA granted based on the purchase price of the building
Building which is more than 50 years old since it was first used No AA granted AA granted based on the purchase price of the building

Example 1: IBA claims for Constructed Buildings

Scenario Initial Allowances Annual Allowances

Land is acquired for $1mil and $0.5mil is incurred on the construction of an industrial building on the land.

As land cost of $1mil is a non-qualifying cost, IBA is given only on the construction cost of $0.5mil.

IA = 25% x $500,000
= $125,000

IA can only be claimed in the year that the expenditure is incurred. In subsequent years, only AA can be claimed.

AA = 3% x $500,000
= $15,000

Example 2: IBA claims for Purchased Buildings

Scenario Initial Allowances Annual Allowances

A new building is purchased for $2mil. Based on the valuation, the amount applicable to land is $1.8mil.

As land cost of $1.8mil is a non-qualifying cost, IBA is given only on $0.2mil.

IA = 25% x $200,000
= $50,000

IA can only be claimed in the year that the new building is acquired. In subsequent years, only AA can be claimed.

AA = 3% x $200,000
= $6,000

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