What Qualifies for LIA
The LIA supports enhanced land productivity among industrial users and can be claimed on qualifying capital expenditure incurred on the construction or renovation of a qualifying building or structure.
The LIA is available to businesses in industry sectors that have large land takes and low Gross Plot Ratios (GPR), namely, the manufacturing and logistics sectors. Since 2017, the LIA is also available to businesses that develop Integrated Construction and Prefabricated Hubs (ICPHs).
The LIA is administered by the Singapore Economic Development Board (EDB) and the Building and Construction Authority (BCA).
For the manufacturing and logistics sectors, approval for the incentive is granted by the EDB from 1 Jul 2010 to 31 Dec 2025 (both dates inclusive). For the development of ICPHs, approval for the incentive is granted by the BCA from 8 Mar 2017 to 31 Dec 2025 (both dates inclusive).
The following types of capital expenditure incurred on or after 23 Feb 2010 (or 8 Mar 2017 for ICPHs) up to the date of the completion of the approved LIA building can qualify for LIA:
- Cost of feasibility study on the layout of the building or structure
- Design fees of the building or structure
- Cost of preparing plans for obtaining approval for the building or structure
- Piling, construction and renovation/ extension costs
- Demolition costs of an existing building or structure
- Legal and other professional fees in relation to the approved construction or approved renovation/ extension
- Stamp duties payable in respect of title of the building or structure
How to Calculate LIA
LIA on approved applications is computed as follows:
Initial allowance (IA)
25% of qualifying capital expenditure. It is granted in the Year of Assessment (YA) relating to the basis period in which the capital expenditure is incurred.
Annual allowance (AA)
5% of qualifying capital expenditure. It is granted upon the completion of the construction or renovation/ extension works, if all the qualifying conditions are met. If the 'minimum floor area' requirement is not met at the end of any basis period, AA is not granted for that YA.
In Specific Scenarios
Scenario 1: The building or structure permanently ceases to be used or permanently ceases to be used for approved qualifying activities
No AA is granted to the company from the YA relating to the basis period during which the permanent disuse occurs. The LIA incentive is terminated with effect from that YA.
Scenario 2: The predominate use of the building or structure changes from the initial qualifying activity to a different qualifying activity
If the Singapore Economic Development Board (EDB) or Building and Construction Authority (BCA) approves the change in use, the company can continue claiming LIA under the new qualifying activity.
Scenario 3: The building or structure is sold or transferred
Any balance of the qualifying capital expenditure is disregarded. There is no balancing adjustment on the seller of the building.
Scenario 4: The building or structure is transferred to an amalgamated company under a qualifying amalgamation under Section 34C of the Income Tax Act
AA is granted to the amalgamated company until the remaining capital expenditure is fully claimed. This is only if the amalgamated company meets the same conditions for the LIA incentive.
Scenario 5: The completed building or structure fails to meet the relevant Gross Plot Ratio (GPR) benchmark
IA and/ or AA is recovered through re-assessment of preceding tax years.
How to Claim LIA
Companies with approval to claim LIA do not need to file any supporting documents together with their Corporate Income Tax Return to make their claims. However, they must retain the supporting documents for at least 5 years from the relevant Year of Assessment (YA) and submit them upon IRAS’ request.
Where there is insufficient income in any Year of Assessment (YA) to absorb the LIA, the unutilised amount can be:
- Transferred to related companies under the Group Relief system;
- Carried back for set-off against past income under the Loss Carry-Back Relief system; or
- Carried forward for set-off against future income.
The above are subject to the taxpayer meeting the prevailing conditions under those systems.