What is the Land Intensification Allowance (LIA) Incentive?
The LIA Incentive
- An initial allowance at 25% of the qualifying capital expenditure incurred on the construction or renovation/extension of the approved LIA building or structure will be granted in the year of assessment relating to the basis period during which the capital expenditure is incurred.
- Upon completion of the construction or renovation/extension works and where the completed building or structure meets the relevant GPR benchmark, annual allowance at 5% of the qualifying capital expenditure incurred on the construction or renovation/extension of the building or structure will be granted for each year of assessment where at least 80% of the total floor area of the building or structure is in use by a single user for carrying out the qualifying activity. For any basis period where less than 80% of the total floor area is used by the single user for the qualifying activity, the annual allowance will not be granted for the year of assessment relating to that basis period.
- As the initial allowance is granted while the building or structure is under construction or renovation/extension, in cases where the completed building or structure fails to meet the relevant GPR benchmark, the initial and/or annual allowances will be recovered through re-assessment of preceding tax years.
- If an approved LIA building ceases permanently to be used or ceases permanently to be used for the approved qualifying activity at any time when there is still a balance of qualifying capital expenditure remaining to be claimed, the LIA incentive recipient must notify the EDB of the disuse of the LIA building. No further annual allowances will be granted to the taxpayer from the year of assessment relating to the basis period during which the permanent disuse occurs and the LIA incentive shall be terminated with effect from that year of assessment.
- If the predominant use of the approved LIA building changes from a qualifying activity to a different qualifying activity at any time when there is still a balance of qualifying capital expenditure remaining to be claimed, EDB must be notified of the change. The taxpayer shall re-apply to EDB at the point of the change in activity. The new application shall be assessed by EDB according to prevailing criteria and benchmarks at the time of application. If approval is granted by EDB, the taxpayer shall be allowed to continue to claim the LIA under the new qualifying activity.
- When the approved LIA building is sold at any time when there is still a balance of qualifying capital expenditure remaining to be claimed or after the qualifying capital expenditure has been fully claimed, any balance of the qualifying capital expenditure still remaining will be disregarded and there will not be any balancing adjustment on the seller of the building.
- Where the LIA building is transferred to an amalgamated company under a qualifying amalgamation under section 34C of the ITA, the annual allowances will be given to the amalgamated company until the remaining qualifying capital expenditure is fully claimed, subject to the amalgamated company meeting the same conditions for the LIA incentive. The taxpayer is required to notify the EDB of the amalgamation.
- When there is insufficient income in any year of assessment to absorb the initial or annual allowances, any unutilised LIA can be carried forward to offset against the taxpayer’s income in future years of assessment, subject to the taxpayer meeting the prevailing conditions for carry forward of unutilised allowances. Any unutilised allowances can also qualify for carry back under the Carry-Back Relief System or for transfer under the Group Relief System, subject to the taxpayer meeting the prevailing conditions under those systems.
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