Page 10 - RSM Budget 2020 Highlights

CORPORATIONS AND BUSINESSES

Acceleration of Renovation and Refurbishment
Expense Claim
Current
Under Section 14Q of the ITA, a taxpayer which incurs
qualifying expenditure on renovation and
refurbishment (“R&R”) for the purposes of its trade,
profession or business is allowed to claim tax
deduction on such expenditure over three
consecutive YAs, starting from the YA relating to the
basis period in which the R&R expenditure is incurred.
A cap of $300,000 for every relevant period of three
consecutive YAs applies.

Proposed changes
A taxpayer which incurs qualifying expenditure on
R&R during the basis period for YA 2021 (i.e. FY 2020)
for the purposes of its trade, profession or business
will have an option to claim R&R deduction in one YA
(i.e. accelerated R&R deduction). The cap of
$300,000 for every relevant period of three
consecutive YAs will still apply. This option, if
exercised, is irrevocable.

This option will be in addition to the existing option
currently available under Section 14Q of the ITA.

Effective date
Qualifying R&R expenditure incurred during the basis
period for YA 2021.

Comments
 The accelerated R&R deduction provides an
encouragement for businesses to undertake
R&R project during the present lull period of low
economic activities. The accelerated deduction
for expenditure incurred in FY 2020 is timely as
such claim if made would translate into a lower
tax burden for businesses.

 A slight disappointment though as the
expenditure cap remains at $300,000. An
increased cap would have been much welcomed
by industries such as hotel, retail, food and
beverage sectors where R&R expenditure is
generally much higher due to the need to carry
out frequent R&R work in order to remain
competitive.

 Given that the $300,000 cap for every relevant
period of three consecutive YAs still applies, for
businesses where the expenditure cap of
$300,000 had already exceeded for the
immediate preceding two years, the announced
proposed changes would have no impact to
them.

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