§ 20 — Balancing allowances and charges for machinery or plant

20.—(1) Except as provided in this section, where at any time after the setting up and on or before the permanent discontinuance of a trade, profession or business, any event occurs whereby machinery or plant in respect of which allowances under section 19 or 19A have been made to a person carrying on a trade, profession or business —(a)

ceases to belong to that person (whether on a sale of the machinery or plant or in any other circumstances of any description); or

(b)

while continuing to belong to that person —(i)

in a case where the machinery or plant which —(A)

was provided for any research and development undertaken by that person directly in Singapore or by a research and development organisation on that person’s behalf in Singapore; and

(B)

was not provided for the purpose of a trade or business carried on by that person,

permanently ceases to be used for any research and development undertaken by that person directly in Singapore or by a research and development organisation on that person’s behalf in Singapore, and is not used for the purpose of a trade, profession or business carried on by that person; or

(ii)

in any other case, permanently ceases to be used for the purpose of a trade, profession or business carried on by that person in Singapore (whether by reason of the discontinuance of the trade, profession or business, or discontinuance of use of such machinery or plant in a trade, profession or business which continues to be carried on in Singapore),

an allowance or a charge, to be known as a balancing allowance or a balancing charge, is in the circumstances mentioned in this section to be made to or (as the case may be) on that person for the year of assessment in the basis period for which that event occurs.

(1A) Where the property in machinery or plant passes at less than the open‑market price, then for the purpose of determining the amount of any balancing allowance or balancing charge the event is treated as if it had given rise to sale moneys of an amount equal to the open‑market price of the machinery or plant.

(2) Where machinery or plant continues to belong to that person after the date on which it permanently ceases to be used for the purposes of a trade, profession or business carried on by that person in Singapore, or (as the case may be) for the purpose of any research and development undertaken by that person directly in Singapore or by a research and development organisation on that person’s behalf in Singapore, it is deemed to have been sold on the date of permanent cessation of use at the open‑market price on that date.

(2A) Where there are no sale, insurance, salvage or compensation moneys or where the amount of the capital expenditure of the person in question on the provision of the machinery or plant still unallowed as at the time of the event exceeds those moneys, a balancing allowance is to be made, and the amount thereof is the amount of the expenditure still unallowed as aforesaid or (as the case may be) the excess thereof over those moneys.

(3) If the sale, insurance, salvage or compensation moneys exceed the amount (if any) of the said expenditure still unallowed as at the time of the event, a balancing charge is to be made, and the amount on which it is made is an amount equal to the excess or, where the said amount still unallowed is nil, to those moneys.

(4) Despite anything in subsection (3), the amount on which a balancing charge is made on a person must not in any case exceed —(a)

the aggregate of the initial allowance (if any) and the annual allowances (if any) made to the person under section 19 in respect of the expenditure in question; and

(b)

the allowances (if any) made to the person under section 19A in respect of the expenditure in question.[27/2021]

(5) Despite anything in this section but subject to subsection (6A), where a balancing allowance or balancing charge falls to be made under subsection (1) in respect of a motor car to which section 19(3) applies, the sum to be taken in lieu of the open‑market price or sale, insurance, salvage or compensation moneys for the purpose of calculating such balancing allowance or charge is ascertained in accordance with the formula

where A

is the open‑market price or sale, insurance, salvage or compensation moneys in respect of the motor car; and

B

is the capital expenditure incurred in respect of the motor car.

(6) Despite anything in this section, no balancing allowance may be made in respect of a motor car within the meaning of section 19(4)(a) which is not, for any basis period after the basis period for the year of assessment 1981, registered as a business service passenger vehicle for the purposes of the Road Traffic Act 1961.

(6A) Unless otherwise provided in this Act or the Economic Expansion Incentives (Relief from Income Tax) Act 1967, where, in the basis period for any year of assessment, the trade, profession or business, for which purpose the machinery or plant is provided, produces income that is exempt from tax as well as income chargeable with tax, and any balancing allowance or balancing charge arises to be made —(a)

the balancing allowance is to be made against each income for that year of assessment in such proportion as appears reasonable to the Comptroller in the circumstances; and

(b)

such proportion of the balancing charge is exempt from tax as appears reasonable to the Comptroller in the circumstances.

(6B) Section 14C(4) and (5) applies in relation to the balancing allowance to be made to a person under subsection (1)(b)(i) as it applies in relation to the deduction of the expenditure and payments referred to in section 14C(1)(aa), (c) and (f), subject to the following modifications:(a)

a reference to the amount of the expenditure or payments is a reference to the amount of the balancing allowance;

(b)

a reference to unabsorbed losses is a reference to unabsorbed allowances; and

(c)

a reference to a specified amount of the expenditure or payments is a reference to an amount computed in accordance with the formula

where A

is the amount of the balancing allowance that could have been made against the income of the person under subsection (1)(b)(i) if the income had been subject to tax at the rate specified in section 43(1)(a);

B

is the rate of tax specified in section 43(1)(a); and

C

is —

(i)

in a case where the concessionary income (as defined in section 14C(5)) derived by the person from the trade or business carried on by the person is subject to tax at a single concessionary rate of tax, that rate; or

(ii)

in a case where the concessionary income derived by the person from the trade or business carried on by the person is subject to tax at 2 or more concessionary rates of tax, the higher or highest of those rates.

(6C) Despite anything in this Act or the Economic Expansion Incentives (Relief from Income Tax) Act 1967, where a balancing charge falls to be made on a person under subsection (1)(b)(i), the amount of the charge is deemed to be income of that person that is chargeable to tax at the rate of tax specified in section 43(1)(a).

(7) In this section, “open‑market price”, in relation to any machinery or plant, means the price which the machinery or plant would have fetched if sold in the open market at the time of the event in question; except that where the Comptroller is satisfied by reason of the special nature of any machinery or plant that it is not practicable to determine an open‑market price, the Comptroller may adopt such other value as appears to the Comptroller to be reasonable in the circumstances.

—(1) Except as provided in this section, where at any time after the setting up and on or before the permanent discontinuance of a trade, profession or business, any event occurs whereby machinery or plant in respect of which allowances under section 19 or 19A have been made to a person carrying on a trade, profession or business —(a)

ceases to belong to that person (whether on a sale of the machinery or plant or in any other circumstances of any description); or

(b)

while continuing to belong to that person —(i)

in a case where the machinery or plant which —(A)

was provided for any research and development undertaken by that person directly in Singapore or by a research and development organisation on that person’s behalf in Singapore; and

(B)

was not provided for the purpose of a trade or business carried on by that person,

permanently ceases to be used for any research and development undertaken by that person directly in Singapore or by a research and development organisation on that person’s behalf in Singapore, and is not used for the purpose of a trade, profession or business carried on by that person; or

(ii)

in any other case, permanently ceases to be used for the purpose of a trade, profession or business carried on by that person in Singapore (whether by reason of the discontinuance of the trade, profession or business, or discontinuance of use of such machinery or plant in a trade, profession or business which continues to be carried on in Singapore),

an allowance or a charge, to be known as a balancing allowance or a balancing charge, is in the circumstances mentioned in this section to be made to or (as the case may be) on that person for the year of assessment in the basis period for which that event occurs.

(1A) Where the property in machinery or plant passes at less than the open‑market price, then for the purpose of determining the amount of any balancing allowance or balancing charge the event is treated as if it had given rise to sale moneys of an amount equal to the open‑market price of the machinery or plant.

(2) Where machinery or plant continues to belong to that person after the date on which it permanently ceases to be used for the purposes of a trade, profession or business carried on by that person in Singapore, or (as the case may be) for the purpose of any research and development undertaken by that person directly in Singapore or by a research and development organisation on that person’s behalf in Singapore, it is deemed to have been sold on the date of permanent cessation of use at the open‑market price on that date.

(2A) Where there are no sale, insurance, salvage or compensation moneys or where the amount of the capital expenditure of the person in question on the provision of the machinery or plant still unallowed as at the time of the event exceeds those moneys, a balancing allowance is to be made, and the amount thereof is the amount of the expenditure still unallowed as aforesaid or (as the case may be) the excess thereof over those moneys.

(3) If the sale, insurance, salvage or compensation moneys exceed the amount (if any) of the said expenditure still unallowed as at the time of the event, a balancing charge is to be made, and the amount on which it is made is an amount equal to the excess or, where the said amount still unallowed is nil, to those moneys.

(4) Despite anything in subsection (3), the amount on which a balancing charge is made on a person must not in any case exceed —(a)

the aggregate of the initial allowance (if any) and the annual allowances (if any) made to the person under section 19 in respect of the expenditure in question; and

(b)

the allowances (if any) made to the person under section 19A in respect of the expenditure in question.[27/2021]

(5) Despite anything in this section but subject to subsection (6A), where a balancing allowance or balancing charge falls to be made under subsection (1) in respect of a motor car to which section 19(3) applies, the sum to be taken in lieu of the open‑market price or sale, insurance, salvage or compensation moneys for the purpose of calculating such balancing allowance or charge is ascertained in accordance with the formula

where A

is the open‑market price or sale, insurance, salvage or compensation moneys in respect of the motor car; and

B

is the capital expenditure incurred in respect of the motor car.

(6) Despite anything in this section, no balancing allowance may be made in respect of a motor car within the meaning of section 19(4)(a) which is not, for any basis period after the basis period for the year of assessment 1981, registered as a business service passenger vehicle for the purposes of the Road Traffic Act 1961.

(6A) Unless otherwise provided in this Act or the Economic Expansion Incentives (Relief from Income Tax) Act 1967, where, in the basis period for any year of assessment, the trade, profession or business, for which purpose the machinery or plant is provided, produces income that is exempt from tax as well as income chargeable with tax, and any balancing allowance or balancing charge arises to be made —(a)

the balancing allowance is to be made against each income for that year of assessment in such proportion as appears reasonable to the Comptroller in the circumstances; and

(b)

such proportion of the balancing charge is exempt from tax as appears reasonable to the Comptroller in the circumstances.

(6B) Section 14C(4) and (5) applies in relation to the balancing allowance to be made to a person under subsection (1)(b)(i) as it applies in relation to the deduction of the expenditure and payments referred to in section 14C(1)(aa), (c) and (f), subject to the following modifications:(a)

a reference to the amount of the expenditure or payments is a reference to the amount of the balancing allowance;

(b)

a reference to unabsorbed losses is a reference to unabsorbed allowances; and

(c)

a reference to a specified amount of the expenditure or payments is a reference to an amount computed in accordance with the formula

where A

is the amount of the balancing allowance that could have been made against the income of the person under subsection (1)(b)(i) if the income had been subject to tax at the rate specified in section 43(1)(a);

B

is the rate of tax specified in section 43(1)(a); and

C

is —

(i)

in a case where the concessionary income (as defined in section 14C(5)) derived by the person from the trade or business carried on by the person is subject to tax at a single concessionary rate of tax, that rate; or

(ii)

in a case where the concessionary income derived by the person from the trade or business carried on by the person is subject to tax at 2 or more concessionary rates of tax, the higher or highest of those rates.

(6C) Despite anything in this Act or the Economic Expansion Incentives (Relief from Income Tax) Act 1967, where a balancing charge falls to be made on a person under subsection (1)(b)(i), the amount of the charge is deemed to be income of that person that is chargeable to tax at the rate of tax specified in section 43(1)(a).

(7) In this section, “open‑market price”, in relation to any machinery or plant, means the price which the machinery or plant would have fetched if sold in the open market at the time of the event in question; except that where the Comptroller is satisfied by reason of the special nature of any machinery or plant that it is not practicable to determine an open‑market price, the Comptroller may adopt such other value as appears to the Comptroller to be reasonable in the circumstances.