Tax Treatment of Grants/ Payouts Commonly Received by Companies

 

General guiding principle on the taxability of grant/ payout:

  • Grant/ payout will be taxable if it is given to supplement trading receipts or to defray operating expenses of the company (i.e. grant/ payout is revenue in nature)
  • Grant/ payout will not be taxable if it is given for the purpose of acquiring capital assets of the company (i.e. grant/ payout is capital in nature)

As announced in Budget 2020, tax deductions and allowances (i.e. capital allowances, writing-down allowances and investment allowances) will no longer be given on expenditures funded by capital grants from the Government or Statutory Boards that are approved on or after 1 Jan 2021. For expenditures that are partially funded by capital grants, tax deductions and allowances will only be allowed on the net amount. This change seeks to eliminate double-incentivisation where the capital grants are not taxed while the expenditures funded by these grants are eligible for tax deductions and allowances. 

The list of grants below is not intended to be exhaustive. For more information on other types of grants available, please refer to the Enterprise Singapore.

For the taxability of COVID-19-related payouts [e.g. Jobs Support Scheme (JSS)], please refer to Income Tax Treatment of COVID-19-Related Payouts to Businesses and Individuals (PDF, 41KB). 

S/NGrant/ PayoutAdministering AgencyPurpose of Grant/ PayoutTax Treatment of Grant/ Payout

1

Productivity and Innovation Credit (PIC) Cash Payout

PIC scheme expires after YA 2018

IRAS

To encourage companies to undertake improvements in productivity and innovation

Not taxable as the payout received is an outcome arising from the conversion of tax benefits (i.e. 400% tax deductions/ allowances) into cash

2

PIC Bonus

(PIC Bonus is only applicable from YA 2013 to YA 2015)  

 IRAS

To defray companies' rising operating costs such as wages and rentals; to encourage companies to undertake improvements in productivity and innovation

Taxable as the payout is revenue in nature

3

Wage Credit

 IRAS

To help companies that may face rising wage costs in a tight labour market

Taxable as the payout is revenue in nature

4

Government Paid Leave/ Benefit including:

  • Adoption leave (AL)
  • Child Care leave (GPCL)
  • Maternity leave (GPML)
  • Maternity benefit (GPMB)
  • Paternity leave (GPPL)
  • Shared Paternal leave (SPL)

MOM and  CPF Board

To defray companies' operating costs

Taxable as the payout is revenue in nature

5

Special Employment Credit (SEC)

CPF Board

To defray companies' operating costs

Taxable as the payout is revenue in nature

6

iSPRINT

IMDA

To support SME's use of technology to boost SME's productivity and growth

Taxable as the grant is revenue in nature

7Temporary Employment Credit (TEC)  MOM Employment credit given to help employers cope with higher wage costs arising from CPF changes taking place in 2015 and 2016 ( i.e. increases in CPF contribution rates to the Medisave Account, CPF salary ceiling and employer CPF contribution rates for older workers)Taxable as the payout is revenue in nature 
8SkillsFuture Enterprise CreditESGTo defray companies' operating costsTaxable as the payout is revenue in nature 
9SME Go Digital ProgrammeIMDATo help SMEs use digital technologies, build strong digital capabilities and participate in the Digital EconomyNot taxable as the payout is capital in nature
10 Enterprise Development GrantESGTo support companies with projects that help them upgrade, innovate or venture overseas

Taxable, unless the grant is awarded by ESG for the following categories:

  1. Automation;
  2. Product development;
  3. Mergers and acquisitions;
  4. Overseas marketing presence; or
  5. Pilot project and test bedding