Enhancement to Renovation & Refurbishment Scheme

Section 14N of the Income Tax Act 1947 was introduced to allow a tax deduction for qualifying capital expenses incurred by taxpayers for the renovation or refurbishment works done to their business premises (renovation and refurbishment or R&R expenditure). The deduction, which helps reduce business costs, is given over a period of three consecutive years on a straight-line basis.

To ease compliance burdens and improve the relevance of the R&R scheme, several enhancements have been made with effect from year of assessment (YA) 2025:

1. Option for one-year write-off

All businesses are given an option to claim R&R deductions in one YA instead of over three YAs, subject to the prevailing expenditure cap (currently at $300,000). This option has now been made permanently available to businesses, allowing them greater flexibility to manage their cashflow needs.

2. Expanded scope of qualifying expenditures

Recognising that it is now common for designer and professional fees to be incurred for renovation works, the scope of qualifying expenditures has been expanded to include designer fees or professional fees that do not affect the structure of the business premises (where approval from the Commissioner of Building Control is required).

3. Fixed relevant three-year period

Prior to YA 2025, Section 14N deduction was claimed on qualifying R&R expenditure for every three-year period starting from the YA in which the business first incurred R&R expenditure and made a claim under Section 14N. The relevant three-year period is now fixed, with the first fixed three-year period being YA 2025 to YA 2027.

As a transitional measure, a taxpayer whose previous relevant three-year period does not coincide with the first fixed three-year period will be allowed a refreshed expenditure cap of $300,000 for the period from YA 2025 to YA 2027.

Key considerations

Businesses looking to renovate and refurbish their premises may plan their projects strategically to take advantage of the expanded scope of qualifying expenditures and the refreshed expenditure cap from YA 2025.

For example, if a company’s previous relevant three-year period is from YA 2023 to YA 2025 and it had already fully utilised its expenditure cap of $300,000 in YA 2023 and YA 2024, under the transitional measure, it is allowed a refreshed $300,000 expenditure cap for the period from YA 2025 to YA 2027.

Separately, it should be noted that a company opting for a one-year write-off for Section 14N deduction may make an irrevocable election on a YA-by-YA basis. The company may claim Section 14N deduction over three years in subsequent YAs if it has not made an election for these YAs. There you have it, the key Singapore tax updates to look out for in 2025. By planning ahead, you can meet the new compliance requirements and take full advantage of the new schemes where applicable. And with that, may you have an “uneventful year” with no surprises from the taxman!

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