Almost every company buys something durable in its first year of trading. A laptop, a delivery van, a set of office partitions. The question that follows looks simple but trips up a lot of business owners: does the purchase go straight to the profit and loss account, or does it sit on the balance sheet and get written down over several years? Accounting for fixed assets and depreciation in a Singapore company is one of those areas where a small habit, repeated for a few years, becomes a real problem at audit or during due diligence.
The rules are not complicated. What causes trouble is that two separate systems run in parallel: financial reporting has its own view of fixed assets and depreciation, and IRAS has a different one built around capital allowances. Confuse the two and your accounts will not agree with your tax computation.
Who this applies to
This applies to every company incorporated in Singapore that owns anything used in the business for longer than one accounting period. Size does not exempt you. A two-person consultancy with a single laptop still has a fixed asset, and it still needs to appear on the balance sheet if it clears the company’s capitalisation threshold.
It applies whether you report under full Singapore Financial Reporting Standards or SFRS for Small Entities, and to unaudited compilation reports as much as audited accounts. Sole proprietorships and partnerships are affected too: no depreciation deduction, but capital allowances are available.
Key rules and requirements in Singapore
Section 199 of the Companies Act requires every company to keep accounting records that sufficiently explain its transactions and financial position, and to retain them for at least five years. A fixed asset register is part of that obligation, not an optional extra.
On the reporting side, the relevant standard is FRS 16 Property, Plant and Equipment, or Section 17 if you apply SFRS for Small Entities. The core requirements:
- Recognition. An item is capitalised when future economic benefits are probable, its cost can be measured reliably, and it is held for use over more than one period.
- Cost. Purchase price, import duties, non-refundable taxes and directly attributable costs such as delivery, installation and testing. Trade discounts are deducted. If you are GST-registered and the input tax is claimable, capitalise the GST-exclusive amount.
- Capitalisation threshold. No law fixes this. Your company sets it, and many Singapore SMEs use SGD 1,000 or SGD 2,000. Apply it consistently and state it in your accounting policies.
- Depreciation. The depreciable amount, being cost less residual value, is allocated systematically over the asset’s useful life. Straight-line is the most common method; reducing balance and units of production are also permitted.
- Timing. Depreciation begins when the asset is available for use, not on the date you paid for it.
- Annual review. Useful lives, residual values and depreciation methods must be reviewed at each financial year end and adjusted prospectively if expectations have changed.
- Impairment. Where an asset’s carrying amount may exceed its recoverable amount, FRS 36 requires an impairment assessment.
Tax works differently. Under section 15(1)(f) of the Income Tax Act, accounting depreciation is not deductible, and capital allowances replace it. The main options are the prescribed working life write-off under section 19, the three-year write-off under section 19A(1), a one-year write-off for prescribed assets such as computers and certain automation equipment, and full write-off for low-value assets costing no more than SGD 5,000 each, capped at SGD 30,000 per Year of Assessment in aggregate. Accelerated options appear in some Budgets, so check the position each year.
Step-by-step process
- Write down a capitalisation policy. One paragraph is enough: the threshold, the asset categories, and the useful life for each.
- Capture the asset at purchase. Keep the supplier invoice, delivery note and warranty together. Reconstructing this two years later is painful.
- Work out the full cost. Add delivery, installation and commissioning; deduct trade discounts and claimable input tax.
- Assign the attributes and enter it in the fixed asset register: category, useful life, residual value, depreciation method, the date it became available for use, and a unique reference matched to a physical tag.
- Post the depreciation journal monthly or annually, debiting depreciation expense and crediting accumulated depreciation.
- Review at year end. Check additions, confirm disposals have been removed, look for impairment indicators, and reassess useful lives.
- Verify physically once a year: walk the office or warehouse and confirm the assets on the register still exist.
- Prepare the capital allowance schedule separately and reconcile it to the accounting depreciation in the tax computation.
- Disclose properly in the financial statements, including the movement schedule and the policy for each class.
Common mistakes to avoid
- Expensing everything in the belief that it produces a bigger tax deduction. It does not. Capital allowances are computed independently of how you booked the item.
- Confusing repairs with improvements. Routine maintenance is an expense; work that extends the asset’s life or capacity is capitalised. Renovation and refurbishment costs that are not capital in nature may qualify for a separate deduction under section 14N, subject to its own cap.
- Keeping no register, or keeping a purchase list that is never updated for disposals.
- Ghost assets: items long since scrapped or stolen that still sit on the register inflating the balance sheet.
- Removing only the net book value on disposal instead of eliminating both cost and accumulated depreciation.
- Using capital allowance rates as accounting useful lives. They serve different purposes and rarely match.
- Depreciating land, which has an indefinite life.
- Forgetting output tax. If you are GST-registered and sell a business asset, GST generally applies.
Practical examples
A laptop. A GST-registered company buys a laptop for SGD 2,400 excluding GST, with SGD 50 delivery. Capitalised cost is SGD 2,450. Useful life three years, no residual value, straight-line, so SGD 816.67 a year or SGD 68.06 a month. It became available for use on 15 March and the financial year ends 31 December, so the first year’s charge is ten months, SGD 680.56. For tax, the laptop is under SGD 5,000 and can be written off in full in one year, subject to the aggregate cap.
A delivery van. Cost SGD 90,000, useful life five years, residual value SGD 15,000. The depreciable amount is SGD 75,000, giving SGD 15,000 of depreciation a year. Note that commercial vehicles such as goods vans qualify for capital allowances, while private passenger cars on S-plates do not.
A disposal. A machine cost SGD 40,000 with accumulated depreciation of SGD 28,000, so net book value is SGD 12,000. It sells for SGD 15,000, giving a SGD 3,000 gain on disposal in the accounts. Separately, because the tax written down value differs from book value, a balancing charge or allowance arises in the tax computation.
How a corporate secretary can help
To be direct about it, depreciation is not a corporate secretarial function. But in most Singapore SMEs the same firm handles the corporate secretarial work, the bookkeeping and the tax filing, and that is where the value sits. A corporate secretary makes sure board approvals for significant capital expenditure are properly minuted, that resolutions exist where the constitution requires them, and that shareholder approval is obtained where a disposal is substantial enough to engage section 160 of the Companies Act.
Raffles Corporate Services supports clients across all of it: maintaining the fixed asset register alongside the general ledger, preparing the capital allowance schedule that ties back to the accounts, handling ACRA filings and XBRL, and dealing with IRAS on Form C-S and ECI. One team on both sides of the reconciliation removes a common source of error.
Frequently Asked Questions
Is there a legal minimum above which I must capitalise an asset?
No. Singapore law does not prescribe a threshold. Your company sets its own policy based on materiality and applies it consistently. Auditors expect the policy to be documented and followed.
Can I claim depreciation as a tax deduction?
No. Accounting depreciation is added back in the tax computation, and capital allowances are claimed instead under sections 19 and 19A of the Income Tax Act.
What happens if I scrap an asset that still has book value?
Remove the cost and accumulated depreciation from the register and recognise the remaining net book value as a loss on disposal. For tax, a balancing allowance is usually available.
Do I depreciate an asset delivered but not yet in service?
Depreciation starts when the asset is available for use, in the location and condition intended by management. Equipment awaiting installation is normally held as capital work in progress and not depreciated until commissioned.
How long must fixed asset records be kept?
At least five years under the Companies Act, and IRAS applies a similar period. In practice, keep them for the life of the asset plus five years after disposal, since the capital allowance history matters right up to the balancing adjustment.
Key takeaways
- Capitalise items used for more than one period that meet your documented threshold, and expense the rest.
- Cost includes delivery, installation and testing, not just the invoice price.
- Depreciation starts when the asset is available for use, and useful lives should be reviewed every year end.
- Accounting depreciation is never tax-deductible in Singapore. Capital allowances take its place.
- Keep a proper fixed asset register with disposals recorded, verify it physically once a year, and reconcile it to the capital allowance schedule before filing.
Requirements may change, so always check the latest guidance from ACRA, IRAS or MOM, or consult a professional adviser.
If you would like to find out more about how Raffles Corporate Services can assist with your company’s compliance and corporate secretarial requirements, please get in touch with the team at [email protected].
Yours sincerely,
The editorial team at Raffles Corporate Services
Disclaimer: This does not constitute legal advice. If you require legal advice, please contact a lawyer.