R&D tax deductions are granted to encourage pervasive R&D in Singapore and to build innovative capabilities of our people and businesses.

What Qualifies for R&D Tax Deductions

The R&D scheme has benefitted many businesses. In 2018, about 520 companies claimed enhanced R&D benefits. Small and Medium Enterprises (SMEs) comprised the majority of R&D beneficiaries, making up 85% of R&D claims. Based on the R&D claims processed, 83% of SME claims were granted full R&D benefits, with another 6% of the claims adjusted by IRAS on the approved expenditure.

Eligible Taxpayers

Your company must assess whether it is eligible for R&D tax benefits. In general, only taxpayers who are the beneficiaries of the R&D activities can claim R&D deductions on the R&D expenditure incurred.

A beneficiary of R&D activities:

  • Bears the financial burden of carrying out the R&D activities; and
  • Effectively owns and can commercially exploit the know-how, intellectual property or other results of the R&D activities.

A company in the trade or business of providing R&D services is generally not able to claim the R&D tax benefits, unless the R&D is performed on its own account such that it is the beneficiary of the R&D activities.

Learn more on who is eligible for R&D tax benefits (PDF, 1.22MB).

Qualifying R&D Projects

A project qualifies for R&D tax benefits if it:

  • Meets the 3 requirements set out in Section 2 of the Income Tax Act; and
  • Does not fall within the list of specified excluded activities.

3 Requirements Under Section 2 of the Income Tax Act

The 3 requirements are as follows:

  1. The objective of the project is to -
    1. Acquire new knowledge;
    2. Create new products or processes; or
    3. Improve existing products or processes;

  2. It involves novelty or technical risk; and
  3. It involves a systematic, investigative and experimental (SIE) study in a field of science or technology.
R&D requirement Description
Objective

The objective refers to the primary purpose of the project (i.e. why the project is undertaken). It has to be clearly set out before the project commences. The objective should be to overcome existing scientific or technological challenges to achieve 1 or more of the following outcomes:

  • To acquire new knowledge
  • To create new products or processes
  • To improve existing products or processes

The desired outcome should be something that is not known or readily deducible before the project starts.

Novelty Novelty exists when there is something new (i.e. first of its kind in Singapore) in relation to the creation or improvement of products, processes or knowledge. The creation or improvement must involve more than minor or routine upgrading.
Technical Risk

A project involves technical risk if there is scientific or technological uncertainty that cannot be readily resolved by a competent professional in the relevant field of science or technology at the start of the R&D project.

Scientific or technological uncertainty exists when there is a gap between the current state of scientific or technological knowledge and the intended outcome of the project.

A competent professional broadly refers to someone with the necessary knowledge, qualifications, experience and skills to participate in the relevant field of science or technology with a reasonable level of skill. He need not be an employee of the business.

SIE Study

An SIE study refers to a series of planned activities to test or find out something that is not known or readily deducible in the field of science or technology, as set out in the R&D objective. The following elements are indicative of an SIE study:

  • A planned and orderly approach to conducting the study, set out before commencing the study
  • Activities undertaken to find out how to close the gap between the desired outcome and the state of scientific or technological knowledge prior to the commencement of the study
  • A series of structured steps to test out the potential solution for solving a technical problem or creating a new thing. An iterative process is often needed

Learn more about the R&D requirements (PDF, 1.22MB) and view examples of qualifying R&D (PDF, 59KB). These examples show how the R&D principles are applied, specifically, the application of novelty, and the type of information and documentation provided by the taxpayers. Do note that the examples are of a general nature and there may exist variations to these examples that could lead to a different conclusion.

Non-Qualifying R&D Activities

An activity does not qualify as R&D if it falls within the list of activities stated below:

  • Quality control or routine testing of materials, devices or products
  • Research in the social sciences or the humanities
  • Routine data collection
  • Efficiency surveys or management studies
  • Market research or sales promotion
  • Routine modifications or changes to materials, devices, products, processes or production methods
  • Cosmetic modifications or stylistic changes to materials, devices, products, processes or production methods

Quantum of Qualifying R&D Expenditure Eligible for Deduction

Your company may:

  • Undertake R&D work directly ('in-house R&D')
  • Outsource it to a R&D service provider ('outsourced R&D')
  • Participate in a R&D cost-sharing agreement ('R&D CSA')

Generally, the R&D benefits granted depend on the place that the R&D work is conducted and whether the R&D is related to the existing trade of the company. R&D works may be conducted wholly in Singapore or outside Singapore, or partly in Singapore and partly outside Singapore.

In-house R&D & Outsourced R&D

The tables below provide an overview of the R&D tax benefits available on qualifying in-house and outsourced R&D projects where the R&D project is conducted wholly in Singapore or wholly overseas.

Year of Assessment (YA) 2018 and before

R&D is conducted wholly in Singapore (regardless of whether it is related to trade) - In-House R&D is conducted wholly in Singapore (regardless of whether it is related to trade) - Outsourced R&D is conducted wholly Overseas
  1. 100% tax deduction1; and
  2. Additional 50% deduction2 on:
    • Staff costs (excluding directors' fees)
    • Consumables
  1. 100% tax deduction1; and
  2. Additional 50% deduction2 on:
    • 60% of fee paid; or
    • Actual staff costs (excluding directors' fees) and consumables incurred if the amount is more than 60% of fee paid

100% deduction for R&D related to trade1, 4

No deduction if R&D conducted is not related to trade

YA 2019 onwards

R&D is conducted wholly in Singapore (regardless of whether it is related to trade) - In-House R&D is conducted wholly in Singapore (regardless of whether it is related to trade) - Outsourced R&D is conducted wholly Overseas
  1. 100% tax deduction1; and
  2. Additional 150% deduction3 on:
    • Staff costs (excluding directors' fees)
    • Consumables
  1. 100% tax deduction1; and
  2. Additional 150% deduction3 on:
    • 60% of fee paid; or
    • Actual staff costs (excluding directors' fees) and consumables incurred if the amount is more than 60% of fee paid
100% deduction for R&D related to trade1

No deduction if R&D conducted is not related to trade

Notes

1 Subject to specific restriction rules under Section 15 of the Income Tax Act.

2 From YAs 2011 to 2018, an additional 250% of qualifying R&D expenditure on staff costs (excluding directors' fees) and consumables can be claimed under the Productivity and Innovation Credit (PIC) scheme, subject to a certain expenditure cap.

3 To support businesses to build their own innovations, the R&D additional deduction of 50% has been increased to 150% for qualifying R&D expenditure (i.e. staff costs and consumables) incurred during the basis periods for YAs 2019 to 2025 on qualifying R&D projects performed in Singapore.

4 From YAs 2011 to 2018, an additional 300% of qualifying R&D expenditure on staff costs (excluding directors' fees) and consumables can be claimed under the PIC scheme. However, the additional 300% deduction is not allowed if the R&D conducted is not related to the existing trade of the company.

Learn about the tax deduction rules where the R&D project is mixed (PDF, 1.22MB) (i.e. the project is undertaken partly in Singapore and partly overseas).

R&D Cost-Sharing Agreement (CSA)

The tables below provide an overview of the R&D tax benefits available on qualifying R&D CSAs.

Year of Assessment (YA) 2017 and before

R&D is conducted in Singapore
(regardless of whether it is related to trade)
R&D is conducted Overseas
  1. 100% tax deduction1; and
  2. Additional 50% deduction2 on:
    • 60% of fee paid; or
    • Actual staff costs (excluding directors' fees) and consumables incurred if the amount is more than 60% of fee paid

100% deduction for R&D related to trade1, 4

No deduction if R&D conducted is not related to trade

YA 2018 onwards

R&D is conducted in Singapore
(regardless of whether it is related to trade)
R&D is conducted Overseas
  1. 100% tax deduction5; and
  2. Additional 50% deduction2 or 150% deduction3 on:
    • 60% of fee paid; or
    • Actual staff costs (excluding directors' fees) and consumables incurred if the amount is more than 60% of fee paid
100% deduction4, 5

Notes

1 Subject to specific restriction rules under Section 15 of the Income Tax Act.

2 From YAs 2011 to 2018, an additional 250% of qualifying R&D expenditure on staff costs (excluding directors' fees) and consumables can be claimed under the Productivity and Innovation Credit (PIC) scheme, subject to a certain expenditure cap.

3 To support businesses to build their own innovations, the R&D additional deduction of 50% has been increased to 150% for qualifying R&D expenditure (i.e. staff costs and consumables) incurred during the basis periods for YAs 2019 to 2025 on qualifying R&D projects performed in Singapore.

4 From YAs 2011 to 2018, an additional 300% of qualifying R&D expenditure on staff costs (excluding directors' fees) and consumables can be claimed under the PIC scheme. However, the additional 300% deduction is not allowed if the R&D conducted is not related to the existing trade of the company.

5 With effect from YA 2018, the tax treatment for CSA payment in respect of Section 14D claim has been enhanced to:

  • Provide 100% deduction on CSA payment without the need to exclude expenditure not tax-deductible under Section 15 of the Income Tax Act
  • Remove the 'related to trade' condition for CSA payment

Learn more about the tax treatment for CSA payment in respect of Section 14D claim (PDF, 1.22MB).

How to Claim R&D Tax Deductions

Your company must make the R&D claim in its Corporate Income Tax Return for the relevant Year of Assessment (YA) and complete the R&D Claim Form.

Your company does not need to file any supporting documents with Form C-S/ Form C-S (Lite)/ Form C. However, it is required to prepare and retain proper documentation from the start of the R&D project and present them upon IRAS’ request.

Documentation

Your company must maintain proper documentation of its R&D projects, so that it can substantiate its R&D claims to IRAS when requested. Such documentation should be maintained from the start of the R&D project, rather than as an after-event.

R&D requirement Examples of information/ documentation that can substantiate R&D claims
Objective
  • Explanation of how the R&D project goes beyond the current state of technology and knowledge
  • Records of enquiries/ research done on the current state of technology/ knowledge and the results
Novelty
  • Press statements, marketing materials or website information stating that the product is new in Singapore
  • Award of a patent resulting from the R&D
Technical Risk
  • Explanation of the scientific or technological uncertainty involved and why it could not be readily resolved by a competent professional before the start of the R&D project
Systematic, investigative and experimental (SIE) Study
  • Records of challenges and why they could not be resolved without undertaking an SIE study
  • Design of your experimental process, including your potential solution
  • Test results
  • Record of steps taken to improve the chances of success for subsequent attempts

View more examples of documentation (PDF, 1.22MB).

Smaller businesses may not always formally document the steps of their R&D projects. In such cases, IRAS is prepared to accept other forms of documentation that the business has to substantiate its claim. Such documentation may include (but are not limited to) working papers, email discussion, test result scripts, etc. Small and Medium Enterprises (SMEs) may contact IRAS if they need clarifications on the requisite documentation.

Review Process

 

Review Process_ R&D Tax Measure

1 IRAS may consult IPOS International Pte Ltd (IPOS-I), a wholly-owned subsidiary of the Intellectual Property Office of Singapore (a statutory board under the Ministry of Law), in its review of R&D applications.

Technical Advisory Panel

IRAS has set up a Technical Advisory Panel ('Panel') to advise IRAS and enhance IRAS' ability to review R&D applications. The members of the Panel are Dr Lee Kwok Cheong (Chairman), Mr Sherman Tan, Dr Josephine Kwa, Prof. Chiew Sing-Ping, Prof. Freddy Boey, Dr Sze Tiam Lin, Prof. Tan Beng Hee Reginald, Prof. Alex Siow, Mr Tan Chee Seng, Dr Richard Kwok and Prof. Ng Siu Choon.

R&D cases are referred to the Panel when:

  • The company requests for the referral specifically; or
  • IRAS rejects the R&D claim after 2 rounds of review and the company wishes to pursue the claim.

For cases referred to the Panel, a summary of the project, the company’s views, IRAS' evaluation, supporting documents provided by the company and IRAS' correspondence with the company will be submitted to the Panel for review.

While the Panel will generally advise IRAS based on the documents provided, the Panel may request for further clarifications from the company on the R&D claims before providing technical advice to IRAS. In such instances, IRAS will collate the questions and seek clarifications from the company.

The Panel may also request to meet the company to seek further clarifications directly on the R&D claims. The meeting is solely for clarifications on R&D claims and is not an arbitration session. If the company is unable to meet the Panel, IRAS will continue to liaise with the company on the clarifications sought.

With the technical advice from the Panel, IRAS will make the final decision on the company’s claims for R&D tax benefits.

R&D Assurance Framework

New! 1. Overview

The R&D Assurance Framework (“Framework”) provides taxpayers with upfront certainty on their R&D claims. Subject to the requirements set by IRAS, taxpayers can enjoy the upfront certainty on their R&D claims for up to 3 Years of Assessment (YAs).

2. Eligibility 

You can apply if you have:

  • good internal evaluation process and supporting documentation to prove that projects included in R&D claims satisfy the requirements of the R&D Tax Measures (PDF, 1.22MB); 
  • at least 5 R&D projects undertaken in-house by the company in Singapore in the YA of application; and 
  • the qualifying* R&D expenditure for these projects is at least $500,000 in the YA of application.

* Qualifying for Section 14D deduction

3. Information to provide 

To apply for the Framework, you will need to submit the following information to IRAS: 

Taxpayer to submitDescription
1. Application for R&D Framework (DOCX, 65KB)

Application form with completed information under Part A to Part D. 

2. List of R&D Projects (XLSX, 40KB)

A complete list of R&D projects to be included under the Framework. IRAS will select projects to conduct detailed review. 

After we have received the application, we will contact you to discuss the application.

4. Application and evaluation process 

The key steps of the application and evaluation process and timeline are summarised in the table below. It is important to ensure that the required information is submitted to IRAS on a timely basis. If the review of the application is not completed before the tax filing deadline (i.e. 30 November of the relevant YA), the taxpayer would need to submit the Completed R&D Form (PDF, 396KB) for each project for that YA. 

StepsTimeline
1. Taxpayer submits list of R&D projects and application
  • At least 9 months before the deadline for filing tax return for that YA 
  • IRAS to inform taxpayer the selected sample projects within 2 weeks
2. Taxpayer submits details of R&D projects selected by IRAS
  • Within 2 months from IRAS’ request
3. IRAS to conduct meeting with taxpayer. If applicable, IRAS may request for additional information 
  • Within 2 months after receiving the complete information from taxpayer
  • If additional information is required after the meeting, taxpayer to provide within 2 months from IRAS’ request
4. IRAS to inform taxpayer of the evaluation outcome
  • Within 2 months after the meeting or after receiving additional information

5. After the review

IRAS will inform the taxpayer of the outcome of its application: 

  • For successful applicants, the letter will explain the taxpayer’s responsibilities and information to be provided for tax filing purposes. 
  • For unsuccessful applicants, IRAS will provide reasons and recommend areas for improvement.

Frequently Asked Questions

1. How many sample projects would IRAS select for detailed review?

IRAS will select up to 5 projects or 20% of the total number of projects (whichever is higher) for detailed review. As the Framework will cover R&D claims for 3 YAs (including the YA of application), a sufficient sample size is required for IRAS to obtain assurance that the projects covered under the application are in compliance with R&D tax requirements.

2. How would my company’s R&D claims be affected if my company undertakes less than 5 in-house R&D projects after a successful application?

The company’s application would not be impacted if it undertakes less than 5 in-house R&D projects in the second or third year. However, as IRAS would continue to select sample cases for review in the subsequent YAs upon successful application to ensure adherence to the requirements, companies are strongly encouraged to assess if they would undertake more than 5 R&D projects for future YAs before making an application.

3. Can my company submit a revised list of projects to be included under the Framework?

Companies are strongly encouraged to ensure the completeness of the list of projects to be included under the Framework at the time of application. Should there be subsequent changes to the list of the projects to be included, the review of the company’s application may be delayed.

4. Does my company need to continue to maintain detailed documentation of all our R&D projects upon successful application?

Companies are required to maintain detailed documentation of their R&D projects regardless of the outcome of their application. This is in view that IRAS would continue to select sample projects for review in the second and third year. 

    If you are interested or have any enquiries, please contact us via e-mail to [email protected] with the subject heading “R&D Assurance Framework”.