1 February 2023
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If you are an R&D service provider based in Singapore, the R&D Tax Deduction scheme may be an incentive you know of, but may not know how to benefit from. Designed to fully accompany the companies that you are rendering services to, there is nothing for you to gain from this incentive for your own benefit. But what if we show you how you can effectively use the scheme and collect up to 42.5% of your R&D expenses back?

The R&D Tax Deduction scheme, outlined under provision 14C/14D of the Income Tax Act, can be claimed each year to alleviate the R&D expenses of a company. To be eligible for such an incentive, the IRAS states that you need to be the beneficiaries of the R&D activities, which can be achieved by the following requirements:

  • Bear the financial burden of carrying out the R&D activities; and
  • Effectively own and be able to commercially exploit the know-how, intellectual property, or other results of the R&D activities.

By that definition, any company that undertakes an R&D project on behalf of a third party (whether the two parties are related or not) on a cost-plus basis or under any other fee arrangement is an R&D service provider. As you are not the beneficiary of the R&D activities, you will not be able to claim R&D Tax benefits on that project.

But there is still a way for you to benefit from the R&D Tax Deduction scheme in this scenario. Your client, as the beneficiary of the project, can include your fees in their R&D Tax Deduction claim. When you establish and negotiate contracts with your client, informing them about the scheme and tailoring the activity so that it is eligible can be a valuable negotiating point for you as an R&D service provider, allowing you to potentially increase your fees or expand the scope of your services.

Moreover, if you undertake an R&D project on your own account and meet the eligibility requirements, you can claim the relief on your expenses. Bookkeeping precisely what expenses are incurred for your client’s benefit and your own benefit will allow you to claim the R&D Tax Deduction safely, while being recognized as a valuable R&D player by your clients, prospects, and the administration.

If you’re interested in learning more about how to take advantage of and secure these financial incentives as an R&D service provider, FI Group can help. We are experts in navigating the complex world of R&D funding and can assist you in understanding how to optimize your R&D investment and grow your business. Contact us today to learn more.

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