When a Singapore company buys intellectual property, whether a patent, a trademark or a portfolio of trade secrets, the cost is usually capital in nature and cannot be deducted outright against income. Section 19B of the Income Tax Act 1947 solves this by allowing the company to write down that capital expenditure over time and claim it as an allowance. For technology, media, pharmaceutical and brand-heavy businesses, the writing-down allowance for intellectual property rights is one of the more valuable, and less understood, reliefs in the tax code.
This guide explains what qualifies, how the allowance is claimed, the election you must make, and how it interacts with other incentives.
What Section 19B does
Section 19B of the Income Tax Act 1947 grants a writing-down allowance (WDA) on capital expenditure incurred by a company in acquiring qualifying intellectual property rights (IPRs) for use in its trade or business. Instead of a one-off deduction, the cost is spread as an allowance across a fixed number of years, reducing the company’s taxable income in each of those years.
Which intellectual property rights qualify
The definition of qualifying IPRs is broad. It covers patents, copyrights, trademarks, registered designs, geographical indications, layout-designs of integrated circuits, trade secrets or information with commercial value, and the grant of protection of a plant variety. In each case the company must acquire the legal and economic ownership of the IPR, although the Inland Revenue Authority of Singapore (IRAS) can, in specified cases, allow a claim where only economic ownership is acquired.
If your company is at the stage of creating and registering its own IP rather than buying it, our guides on trademark registration and patent registration cover that side of the picture.
Choosing the writing-down period: 5, 10 or 15 years
A distinctive feature of Section 19B is that the company chooses how quickly to write the expenditure down. The allowance is claimed on a straight-line basis over a period of 5 years, 10 years or 15 years, based on the company’s election. A five-year write-down front-loads the relief, giving larger annual allowances and quicker tax savings, while a fifteen-year write-down spreads smaller allowances over a longer horizon.
The choice matters because the election is irrevocable. The company makes it via a declaration form attached to its income tax return in the first Year of Assessment (YA) of the claim, and it cannot change its mind later. The election is available for IPRs acquired in or after YA 2017. A company that expects strong profits in the near term often prefers the five-year option to absorb the relief while it has income to shelter, but the right answer depends on the profit forecast.
When a valuation report is needed
To guard against inflated claims, particularly on acquisitions from related parties, IRAS requires an independent valuation report where the capital expenditure on the IPR exceeds prescribed thresholds. The valuation must be carried out by a qualified valuer and supports the amount on which the allowance is claimed. Companies acquiring IP from a connected party should plan for this requirement rather than discover it at filing time.
How Section 19B fits with other incentives
Section 19B does not sit in isolation. The Enterprise Innovation Scheme (EIS) offers enhanced deductions of up to 400% on qualifying expenditure for activities including the acquisition and licensing of intellectual property rights, subject to caps. Companies undertaking significant IP acquisition should model the interaction carefully, because the enhanced EIS treatment and the base Section 19B allowance operate on the same expenditure and the rules coordinate how relief is given.
Section 19B is also conceptually similar to the wear-and-tear regime for physical assets. If your capital spend is on plant and machinery rather than IP, the relevant relief is under Sections 19 and 19A capital allowances instead.
Scheme availability
The Section 19B writing-down allowance is a legislated relief that has been extended several times, and is currently available for qualifying IPR acquisitions up to YA 2028. Because government incentives are reviewed at each Budget, companies planning large acquisitions should confirm the current sunset date and any conditions with IRAS or their tax adviser before committing.
Conditions and restrictions to watch
Several conditions shape whether a claim will hold up. The IPR must be acquired for use in the company’s trade or business, not held passively as an investment. The company must generally acquire both the legal and economic ownership of the right; where only economic ownership is acquired, a claim is possible only in the specific circumstances IRAS permits, and typically requires approval. If the company later sells or transfers the IPR before the end of the write-down period, a balancing adjustment may arise, effectively clawing back allowances if the disposal proceeds exceed the tax written-down value. Related-party acquisitions attract particular scrutiny, both on price and on the commercial substance of the transaction, so the arrangement should be documented as if between independent parties.
Record-keeping and documentation
Because Section 19B claims can run for many years and often involve substantial sums, good records are essential. Keep the acquisition agreement, evidence of the purchase price and payment, the declaration form recording the elected write-down period, any independent valuation report, and evidence that the IPR is used in the trade. IRAS can review claims, and a well-documented file makes the difference between a smooth review and a protracted dispute. Companies that also claim under the Enterprise Innovation Scheme should keep the supporting evidence for both reliefs aligned, since they draw on the same underlying expenditure.
A worked illustration
Suppose a Singapore company acquires a patent for $1.5 million to use in its trade in the basis period for YA 2026, and elects a five-year write-down. It would claim a writing-down allowance of $300,000 in each of YA 2026 through YA 2030. At the headline corporate tax rate of 17%, that translates into roughly $51,000 of tax saved each year, before any interaction with the Enterprise Innovation Scheme or other reliefs. Had it elected a fifteen-year period, the annual allowance would be $100,000 instead, spread over YA 2026 to YA 2040.
Buying IP versus creating it
Section 19B is about acquiring intellectual property, not creating it in-house. If your company develops its own IP, the relevant reliefs are different: research and development expenditure may attract enhanced deductions, including under the Enterprise Innovation Scheme, and the costs of registering IP you have created, such as filing a patent or trademark, fall under separate provisions. It is common for a growing company to do both, buying in some rights while developing others, and the tax treatment must be mapped activity by activity. Confusing an acquisition (Section 19B territory) with self-created IP registration can lead to a misclaimed deduction, so it is worth setting out clearly which pathway each item of expenditure follows before filing.
Why the election deserves proper thought
Because the choice of a 5, 10 or 15-year write-down cannot be reversed, it should be made with a view of the company’s expected profitability across the whole period, not just the year of acquisition. A profitable company that can absorb larger allowances now usually favours the shorter period; a company still building towards consistent profits may prefer to spread the relief so that allowances are not wasted in loss years. Because unused allowances interact with the loss carry-forward rules, modelling the outcome before locking in the election is time well spent.
The bottom line
Section 19B turns non-deductible IP acquisition costs into a stream of tax allowances. Confirm the right qualifies, secure legal and economic ownership, obtain a valuation where required, and choose your 5, 10 or 15-year election carefully because it cannot be reversed. For IP-driven businesses, getting this election right is worth real money, and it is best mapped out alongside your wider tax planning before the acquisition completes.
— The Editorial Team, Raffles Corporate Services