Writing-Down Allowances for Intellectual Property Rights (IPRs): A Detailed Guide

Writing-Down Allowances (WDAs) are a key tax incentive provided under Singapore's corporate tax framework, enabling businesses to claim deductions for the cost of acquiring Intellectual Property Rights (IPRs). Apexia Corporate Advisory is here to guide you through the process of maximizing this valuable tax benefit.

Overview of Writing-Down Allowances

Writing-Down Allowances (WDAs) provide businesses with tax deductions for the amortization of qualifying IPRs. These deductions are spread over a specified number of years, depending on the election made by the company during the first year of claim. This helps businesses manage their taxable income while supporting innovation and growth.

Qualifying Intellectual Property Rights

The following IPRs qualify for WDAs under Singapore's Income Tax Act:

• Patents
• Copyrights
• Trademarks
• Registered designs
• Geographical indications
• Trade secrets or information with commercial value
• Plant varieties

The IPR must be acquired for use in the business and must be legally protected under Singapore law or equivalent foreign law.

Conditions for Claiming WDAs

To claim WDAs, businesses must meet the following conditions:

• The IPR must be acquired on or after 1 November 2003.
• The legal and economic ownership of the IPR must belong to the company claiming the allowance.
• The IPR must be used for the purpose of the company's trade or business.
• The acquisition cost of the IPR must be capital in nature.

How to Calculate Writing-Down Allowances

Before the Year of Assessment (YA) 2017, writing-down allowances were granted to the transferee on a straight-line basis over a 5-year period beginning from the YA of the basis period in which the capital expenditure is incurred in acquiring the IPRs.

From YA 2017, your company is allowed to make an irrevocable election to claim the writing-down allowances over a 5-year, 10-year, or 15-year period (on a straight-line basis) beginning from the YA of the basis period in which the capital expenditure is incurred in acquiring the IPR.

The irrevocable election applies for IPRs acquired from YA 2017 and must be made via a Declaration Form at the time of filing the Corporate Income Tax Return (Form C-S/ Form C-S (Lite)/ Form C) in the first YA of the writing-down allowance claim. Submit the Declaration Form through the Submit Document digital service at mytax.iras.gov.sg.

Non-Qualifying Expenditures

Expenditures that do not qualify for WDAs include:

• Costs related to IPR creation or development.
• Costs incurred for the transfer or licensing of IPRs.
• Acquisition costs not capital in nature.

Documentation Requirements

To support your WDA claim, you must maintain the following documents:

• Acquisition agreements and contracts.
• Invoices and payment receipts.
• Legal documentation proving ownership of the IPR.
• Evidence that the IPR is used in the business.
• Third-party independent valuation report on the value of the IPRs acquired where:
• The capital expenditure incurred in acquiring the IPRs is ≥ $0.5 million for a related party transaction; or
• The capital expenditure incurred in acquiring the IPRs is ≥ $2 million for an unrelated party transaction.

For the purpose of this requirement to submit a valuation report, your company and the transferor (i.e. person from whom the IPRs are being acquired) are considered to be 'related parties' where one person, whether directly or indirectly, can control the other or where both of you, whether directly or indirectly, are under the control of a common person.

How Apexia Corporate Advisory Can Help

At Apexia, we specialize in ensuring your business fully utilizes tax benefits such as WDAs. Our services include:

• Reviewing your IPR acquisitions to determine eligibility for WDAs.
• Preparing comprehensive documentation to support your claims.
• Providing advice on compliance with IRAS requirements.
• Filing accurate WDA claims to optimize tax relief.

Our expertise ensures your claims are well-documented, compliant, and audit-ready, giving you peace of mind while maximizing tax savings.