Capital Allowance

In: Business and Management

Submitted By crawky7654
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IRAS CIRCULAR

Writing-Down Allowance on Payments for Indefeasible Rights of Use (IRUs)
(1st Edition, Revised)

Published by Inland Revenue Authority of Singapore Published on 07 Oct 2003 © Inland Revenue Authority of Singapore All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, including photocopying and recording without the written permission of the copyright holder, application for which should be addressed to the publisher. Such written permission must also be obtained before any part of this publication is stored in a retrieval system of any nature.

1 1.1

Introduction On 28 February 2003, DPM and Minister for Finance announced in the 2003 Budget Speech that a deduction for writing-down allowance (WDA) will be granted on expenditure incurred for the purchase of Indefeasible Rights of Use (IRUs) over the number of years for which the IRU is acquired. This is to encourage telecommunication carriers to hub their networks in Singapore. The WDA is effective from the Year of Assessment (YA) 2004. An “Indefeasible Right of Use” or “IRU” refers to an indefeasible right to use an international telecommunications submarine cable system1. An international telecommunications submarine cable system is often built and owned by a few parties, commonly known as a consortium of members (referred to as “the grantors”). The grantors may grant the right to use international telecommunications submarine cable system through an IRU agreement or arrangement, to a third party (a nonconsortium member, referred to as the “purchaser”) for the purpose of acquiring bandwidth capacity. The rights are usually granted for a period of 10 to 25 years, often with an up-front lump sum payment. Generally, an IRU agreement confers usage rights on the purchaser and the grantor retains the ownership of the facility. The purchaser…...

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