Enterprise Innovation Scheme (EIS)

To further incentivise businesses, especially the small and medium enterprises ("SMEs") and the large local enterprises ("LLEs"), to invest in R&D, the tax deduction for qualifying R&D expenditure incurred on qualifying R&D undertaken in Singapore will be further enhanced as follows:

a.   A further 150% tax deduction is granted on the first $400,000 of qualifying R&D expenditure incurred by a person on qualifying R&D undertaken in Singapore in a basis period, in addition to the 100% base deduction under Section 14C and the current additional 150% tax deduction under Section 14D(1). This means that a total of 400% tax deduction is available on the first $400,000 of qualifying R&D expenditure incurred in the basis period.

b.  The current additional 150% tax deduction allowable under Section 14D(1) remains applicable to qualifying R&D expenditure exceeding $400,000 incurred in the basis period.

All other conditions governing the additional tax deduction for qualifying R&D expenditure incurred on qualifying R&D undertaken in Singapore remain the same.

Extend the relaxation of the “related to trade or business” condition

Currently, R&D claims under Section 14C of the ITA need not be related to the taxpayer’s existing trade or business if the R&D activity is undertaken in Singapore. The relaxation of this “related to trade or business” condition is effective for YA 2009 to YA 2025. 

To align with the EIS, the effective period to which the relaxation of “related to trade or business condition” is extended to and including YA 2028.

Extend the additional tax deduction for qualifying R&D expenditure under Section 14D

The additional tax deduction of 150% on qualifying R&D expenditure under Section 14D(1) is available up to YA 2025. To align with the EIS, the additional 150% tax deduction for qualifying R&D expenditure on qualifying R&D projects (related or not related to trade) is extended to and including YA 2028.

To encourage more firms to create and protect their innovations, the tax deduction for qualifying IP registration costs will be enhanced as follows:

a.  Extend the tax deduction for qualifying IP registration costs till YA 2028; and

b. Enhance the tax deduction to 400% (i.e., 100% tax deduction and additional 300% tax deduction) for up to $400,000 of qualifying IP registration costs incurred by a person for each YA from YA 2024 to YA 2028. The 100% tax deduction will continue to be allowable for qualifying IP registration costs in excess of $400,000 incurred by the person for each YA from YA 2024 to YA 2028.

Specific condition applicable to the option to convert qualifying IP registration costs into a cash payout

The option to convert into a cash payout is on a per registration basis, subject to a cap of $100,000 of qualifying expenditure across all the qualifying activities for each YA. A business must convert the total registration costs incurred in relation to a single application for registration of an IP into cash, subject to the cap. The registration costs in excess of the cap are forfeited and will not be available for deduction against the income of the business. 

Minimum ownership period of IPRs

In order to qualify for the enhanced tax deduction and option to convert qualifying expenditure into a cash payout, businesses must own the related IPRs registered (or, where applicable, ensure the application for registration or grant of the related IPR is not assigned to another person) for a minimum period of one year (“one-year ownership period”). Claw-back provisions shall apply if the one-year ownership period requirement is not complied with.

All other conditions of the existing scheme remain the same.

Businesses may either acquire or license IPRs to develop new products, services, or processes. 

To encourage more firms to engage in IP-related activities and use innovations to improve their productivity and outcomes, the WDA under Section 19B and tax deduction under Section 14U will be enhanced as follows:

a. Acquisition of IPRs under Section 19B: 

(i) Extend the granting of WDA for qualifying IPR acquisition till YA 2028 (i.e., WDA is allowed for capital expenditure incurred in respect of qualifying IPRs acquired on or before the last day of the basis period for YA 2028);

(ii) Enhance the WDA to 400% (i.e., 100% WDA and additional 300% WDA) for up to $400,000 of capital expenditure incurred by a company or partnership to acquire qualifying IPRs in each basis period from YA 2024 to YA 2028. Capital expenditure incurred in excess of $400,000 will continue to enjoy the 100% base WDA.

b. Licensing of IPRs under Section 14U: 

(i) Extend the tax deduction for qualifying IPR licensing expenditure till YA 2028;

(ii) Enhance the tax deduction to 300% for up to $400,000 of qualifying IPR licensing expenditure incurred by a person for each YA from YA 2024 to YA 2028. Together with the 100% base deduction allowed under Section 14 or Section 14C (as the case may be), a total of 400% tax deduction is available on the first $400,000 of qualifying IPR licensing expenditure.

The amount of qualifying IPR acquisition costs and qualifying IPR licensing expenditure eligible for the new enhanced WDA and enhanced tax deduction is subject to a combined cap of $400,000 for each relevant YA, and is computed based on the amount of qualifying expenditure incurred by the business net of any Government grant or subsidy received by the business in respect of the acquisition and licensing of IPRs.

The new enhanced WDA and enhanced tax deduction is only available to businesses with annual revenue³ of less than $500 million in the basis period of the YA of claim.

Specific condition applicable to the option to convert qualifying expenditure incurred on acquisition of IPRs into a cash payout

a. For acquisition of IPRs, the option to convert into a cash payout is on a per IPR basis, subject to a cap of $100,000 of qualifying expenditure across all the qualifying activities for each YA. Where the capital expenditure incurred on a qualifying IPR is in excess of the cap of $100,000, the excess is forfeited upon conversion and will not be available for deduction as WDA against the income of the company or partnership concerned.

b. For licensing of IPRs, the option to convert into a cash payout need not be made on a per IPR basis.

Minimum ownership period of IPRs

a. For acquisition of IPRs, in order to qualify for the enhanced WDA and option to convert qualifying expenditure into a cash payout, companies and partnerships must own the relevant qualifying IPRs for a minimum period of one year (“one-year ownership period”). Claw-back provisions shall apply if the one-year ownership period requirement is not complied with.

b. The one-year ownership period requirement is not applicable to licensing of IPRs.

All other conditions under Section 19B and Section 14U remain the same.

To further reinforce existing measures to encourage employers to invest in enterprise training and capabilities of their employees, an additional 300% tax deduction is granted on the first $400,000 of qualifying training expenditure incurred in a basis period.

Together with the 100% base deduction under Section 14 of the ITA, a total of 400% tax deduction is granted on the first $400,000 of qualifying training expenditure incurred for each YA. All other training expenditure, including qualifying training expenditure exceeding $400,000, incurred during the basis period continues to enjoy 100% base deduction, subject to the general tax deduction rules under Sections 14 and 15.

The enhanced tax deduction is applicable to qualifying training expenditure incurred on courses that are eligible for SkillsFuture Singapore (SSG) funding and aligned with the Skills Framework⁴.

For the purpose of the EIS, qualifying training expenditure refers to course fees paid by employers (whether directly or in the form of reimbursement) to a SSG-funded course provider, including certification fees and assessment fees. The enhanced tax deduction is computed based on the amount of qualifying training expenditure incurred by a business net of any Government grant or subsidy received by the business in respect of the course.

To encourage businesses to kickstart their innovation journey by tapping on existing technical and innovation capabilities within the polytechnics, the  ITE or other qualified partners (collectively known as “partner institutions⁵”), a 400% tax deduction will be granted on up to $50,000 of qualifying innovation expenditure  incurred by businesses for each YA on qualifying innovation projects  carried out with the partner institutions. These expenses are currently not allowable as a deduction under Section 14 or Section 14C of the ITA, on the basis that they are capital in nature and does not meet the definition of R&D under Section 2 of the ITA.

To qualify for the tax deduction, the business must be the beneficiary of the qualifying innovation project. The deduction is computed based on the amount of qualifying innovation expenditure incurred by the business net of any Government grant or subsidy received by the business in respect of the qualifying innovation project.

For the purpose of the EIS, qualifying innovation projects refer to projects that predominantly involve one or more of the following innovation activities defined within the Oslo Manual 2018⁶:

(a) Research and experimental development activities;

(b) Engineering, design and other creative work activities;

(c) IP-related activities; and

(d) Software development and database activities.

This scheme will be administered by the partner institutions. The partner institutions will validate the project as a qualifying innovation project and issue the innovation project invoice. Expenditure incurred outside of the collaboration with the partner institutions will not qualify for this tax deduction.