Capital Allowance 

Use

In Singapore, capital allowance is the term used for tax depreciation on fixed assets such as plant and equipment, motor vehicles, commercial buildings, and so forth.

In the SAP system, you calculate capital allowance using the standard depreciation functions. Unlike standard depreciation, however, the Singapore Income Tax Act stipulates that capital allowance always be calculated and claimed in the year when expenditure is incurred. Therefore, capital allowance also extends to assets under construction. And, if an asset under construction is capitalized – that is, settled to a receiver asset – during its useful life, you continue to calculate capital allowance until the end of the receiver asset's useful life.

Activities

There are special procedures to observe for posting and reporting assets that you can claim capital allowance for. When you post assets, you must follow the procedures described under Calculation of Capital Allowance. For reporting purposes, you calculate capital allowance using the standard depreciation report, but to display what capital allowance is due to you, you use the Capital Allowance Report. You also use the Balancing Adjustment Report to display the capital allowance in the event of the sale of any assets before the end of their tax life. Finally, to calculate the deferred income tax (the difference between book depreciation and capital allowance), use the Depreciation Comparison report.