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One-Year Accelerated Depreciation Allowance for Energy Efficient Equipment and Technology (ADAS)

Objective and Form of Assistance


Objective

This tax incentive scheme encourages companies to replace old, energy-consuming equipment with more energy efficient ones and to invest in energy-saving equipment. Inefficient equipment not only incur high operating costs as they consume more energy but also have a negative impact on the environment as a result of higher emission of pollutants to the environment. It is provided under the Income Tax Act. The National Environment Agency encourages interested parties to apply for this scheme. While you can enjoy the benefit of accelerated depreciation of your capital expenditure, you would also be contributing to a better environment.

What is the Incentive?
Under this scheme, the capital expenditure on the qualifying energy efficient or energy-saving equipment can be written off or depreciated in one year instead of three. In other words, you would pay less tax in the first year (see example). Capital expenditure pertains to costs incurred by the investment in or purchase of long-term business assets.

All costs directly related to the project, including the equipment, supplies and installation costs, are eligible for accelerated tax allowance. However, costs incurred for consultancy work relating to the project should not be included as capital expenditure.

Eligibility Criteria


Who can Qualify?

Any person carrying on a trade, profession or business in Singapore is eligible for the tax incentive. The applicant must own the equipment and use it for business purposes only.

There are two categories of projects that would qualify for this scheme:

Category A: Replacement Machines and Equipment
The project must involve the replacement of old equipments with more energy efficient ones, which would result in significant energy savings. The equipment to be replaced must fall under the List of Approved Replacement Machines and Equipment.

List of Approved Replacement Machines and Equipment

  • any air-conditioning system;
  • any boiler;
  • any water pumping system;
  • any washing or dry-cleaning machine system;
  • any refrigeration system;
  • any lift or escalator; and
  • any instant hot water system.

Category B: Energy-Saving Equipment and Devices
The project must involve the installation of energy-saving equipments that would result in significant energy savings. The energy-saving equipment must fall under the List of Approved Energy-saving Equipment and Devices shown below.

List of Approved Energy-Saving Equipment and Devices

  • any solar heating or cooling system
  • any solar energy collection system (e.g. solar photovoltaic (PV) installations)
  • any heat recovery system (e.g. economizer)
  • any power factor controller;
  • any high efficiency electric motor
  • any variable speed drive motor control system
  • any high frequency lighting system
  • any computerised energy management system

For more information on capital allowance and corporate tax related topics, please visit IRAS.

Example on How the Scheme Works


Assume that a company recently upgraded its air-conditioning system, which resulted in significant energy savings. As the project qualifies for accelerated depreciation allowance, the capital expenditure incurred can be fully written off in the first year. Let's assume the following:

  • Capital expenditure = $100,000
  • Tax rate = 17% (for Year of Assessment 2010 onwards)
  • Cost of money = 10% per annum
  • Straight line depreciation

The table below compares the amount of tax that could be reduced under normal 3-year depreciation and accelerated 1-year depreciation:

Normal 3-Year Depreciation Accelerated 1-Year Depreciation

Year 1

33 1/3% × $100,000 × 17% =

$5,667

$100,000 × 17% =

$17,000

Year 2

(33 1/3% × $100,000 × 17%) / 1.1 =

$5,152

-

-

Year 3

(33 1/3% × $100,000 × 17%) / 1.21 =

$4,683

-

-

Total Tax Offset

-

$15,502

-

$17,000

Net Benefit = $17,000 - $15,502 = $1,498

In this example, accelerated 1-year depreciation allows the company to reduce its tax liability in the first year by $17,000 as compared to about $6,000. Additionally, if the value of money decreases by 10% every year, the company could enjoy a net saving of over $1,498 at the end of the 3 years.

Application and Enquiries


Application Procedures for Category A projects;

  1. Check that the equipment installed is in the List of Approved Replacement Machines and Equipment.
  2. Download the application form for Category A.
  3. Engage a Professional Engineer to complete or endorse the evaluation report.
  4. Submit the completed application form and the supporting invoices to the Inland Revenue Authority of Singapore (IRAS) when making your tax submission.
  5. Forward a copy of the application form and the evaluation report to:
     
    Director (Energy Efficiency & Conservation Department)
    National Environment Agency
    40 Scotts Road #19-00 Environment Building
    Singapore 228231

Application Procedures for Category B projects

  1. Check that the equipment installed is in the List of Approved Energy-Saving Equipment and Devices.
  2. Download the application form for Category B.
  3. Obtain a certificate of approval from ESCO. (how)?
  4. Submit the completed application form, the certificate of approval and supporting invoices to the Inland Revenue Authority of Singapore (IRAS) when making your tax submission.
  5. Forward a copy of the application form and the certificate of approval to:

    Director (Energy Efficiency & Conservation Department)
    National Environment Agency
    40 Scotts Road #19-00 Environment Building
    Singapore 228231

For queries on Category B application procedures, please kindly contact either of the ESCOs below:

 CBM Solutions Pte Ltd

 LJ Energy Pte Ltd

 151 Lorong Chuan #05-07 New Tech Park (Lobby G)
Singapore 556741
 Tel: (65) 6513 0808
 Fax: (65) 6223 5925
 Email: [email protected]

 194 Pandan Loop #06-09 Pantech Business Hub
 Singapore 128383
 Tel: (65) 6776 1580
Fax: (65) 6776 1519
Email: [email protected]




If you have any feedback, comments or questions on the accelerated depreciation allowance scheme, please kindly contact:


Mr Brent Liu
Energy Efficiency & Conservation Department
National Environment Agency
40 Scotts Road #19-00 Environment Building
Singapore 228231
Tel: (65) 6731 9425
Fax: (65) 6734 9656
Email: [email protected]



 
 
Last Updated on : 04 January 2016
© 2012 National Environment Agency