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Tax Deductibility

IRAS Update on Reinstatement Costs (expenses incurred to reinstate premises to its original condition prior to vacating it at the end of the tenancy agreement)

Updates

IRAS Update on Reinstatement Costs

IRAS have published the following update pertaining to reinstatement costs (expenses incurred to reinstate premises to its original condition prior to vacating it at the end of the tenancy agreement) on 13 August 2015.

Reinstatement Costs (expenses incurred to reinstate premises to its original condition prior to vacating it at the end of the tenancy agreement)

Generally, reinstatement costs are not deductible as they are considered to be capital expenditure disallowed under section 15(1)(c) of the Income Tax Act (ITA). This is because such expenditure are usually incurred in respect of business premises vacated and hence no longer used for acquiring income. Following a review of the tax treatment for reinstatement cost, we concluded that there are merits in considering costs incurred under certain conditions to have a nexus to the leasing of the premises for use by the business and hence deductible under Section 14(1) of the ITA. Specifically, we are prepared to allow the deduction where the costs incurred meet the following conditions:-

a) Costs claimed do not relate to provisions made under FRS 16(1) (i.e. expense has been incurred);

(b) Costs claimed are contractually provided for in the tenancy agreement and hence considered to be part of the costs of renting the property for use in the business in the first place; and

(c) The premises are not vacated due to cessation of business.


(1) Under paragraph 16 of FRS 16, the cost of an item of property, plant and equipment includes the initial estimate of the costs of dismantling and removing the item, restoring the site on which the item is located, the obligation for which an entity incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period.

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IRAS Update on Tax Treatment of Motor Vehicle Expenses

Updates

IRAS Update on Tax Treatment of Motor Vehicle Expenses

IRAS have published the following update pertaining to the tax treatment of motor vehicle expenses on 13 August 2015.

Tax Treatement of Motor Vehicle Expenses

Motor vehicle expenses incurred on goods and commercial vehicles such as vans, lorries and buses are deductible. Some examples of motor vehicle expenses are repairs, maintenance, parking fees and petrol costs.

No deduction is allowed on motor vehicle expenses incurred on S-plated cars, RU-plated cars and company cars (excluding Q-plated cars registered before 1 Apr 1998), whether they are directly incurred or paid in the form of reimbursement. This is so even if these cars are being used for business purposes.

The tax treatment of motor vehicle expenses incurred by a company is summarised as follows:

New! Transportation Services

Expenses incurred on transportation services are to be distinguished from expenses to hire a motor car. The former is a payment for services to commute from one place to another without the passenger having any control or possession of the motor car whereas in the latter scenario, the motor car would be at the disposal of the hirer.

Such payment for transportation services (e.g. bookings for SZ-plated or S-plated car via mobile applications) will qualify for tax deduction, if such expenses were incurred for business purposes. On the other hand, the hiring charges for SZ-plated or S-plated cars used in Singapore will not qualify for tax deduction.

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