Singapore’s government has recently announced its new incentive to support companies in their R&D activities, called the Enterprise Innovation Scheme (EIS). This new scheme builds upon the success of the R&D Tax Measures, which already enables companies to benefit from a tax deduction of 250% for their R&D activities since YA 2018.
Set to take effect from YA 2024 to YA 2028 (expenditure for Fiscal Year 2023 to 2027), the EIS will offer significant benefits to companies engaged in R&D activities. Specifically, companies can expect to receive a net saving of 68% for the first $400,000 of qualifying R&D expenditure (equivalent to a 400% tax deduction), and 42.5% for R&D expenditure in excess of $400,000 (equivalent to a 250% tax deduction). Additionally, R&D expenditure incurred overseas will remain eligible for a 17% net saving (10%% tax deduction).
But the Enterprise Innovation Scheme isn’t just limited to R&D activities. Companies will also be able to claim enhanced tax deductions on qualifying expenditure incurred on a range of qualifying activities. These include registration of intellectual property (“IPs”), acquisition and licensing of IP rights (“IPRs”), training, and innovation projects carried out with polytechnics, the Institute of Technical Education (“ITE”), or other qualified partners. The scope of the scheme is broad, which means companies can receive support across various areas of innovation.
In addition to the new Enterprise Innovation Scheme, eligible businesses can also benefit from the option to convert their qualifying expenditure into a cash payout. This is especially beneficial for small and growing businesses that need to defray their innovation costs. Under this option, eligible businesses can convert up to $100,000 of their total qualifying expenditure across all qualifying activities for each year of assessment (YA) into cash, at a conversion rate of 20%. The cash payout is capped at $20,000 per YA and is not taxable. However, once an amount of qualifying expenditure is converted into cash, it will no longer be available for tax deductions. This means that companies that choose the cash payout option are sacrificing a $68,000 net saving on tax for a $20,000 cash payout.
The Enterprise Innovation Scheme announcement is still quite recent, so we don’t have all the details on the claim process just yet. However, everything indicates that the process will be similar to that of the R&D Tax Measures. To learn more about the claim process for the R&D Tax Measures, check out our previous article “The Hidden Feature of the R&D Tax Measures”. We’ll be sure to provide additional information on the EIS as soon as it’s released by the Inland Revenue Authority of Singapore (IRAS), which should be before June 30, 2023.
Overall, Singapore’s commitment to fostering innovation and supporting R&D activities is admirable and sets an example for other countries to follow. The introduction of the Enterprise Innovation Scheme is another step in the right direction, and we’re excited to see how it will help businesses of all sizes take their innovation to the next level.
If you require any assistance for identifying the qualifying expenses, secure and optimize your claim, contact our experts today!