8 February 2023

Singapore is recognized worldwide as dynamic economy which particularly invest in R&D and innovation sectors. The country’s ability to foster innovation has been reflected in its ranking on the Global Innovation Index 2022, where it placed 7th, gaining one spot compared to the 2021 ranking. With generous R&D and innovation funding policies, the Singaporean innovative ecosystem is very favorable to make new technologies flourish in the country.

However, despite the fact that many innovations are held within foreign corporations established in Singapore, a lot of them are struggling to claim the public funding schemes. The burden of holding 30% of local shareholders within the company is weighing on many of them.

This raises the following question:

How foreign companies established in Singapore can successfully access public R&D funding?

In this article, we will address it through 2 complementary strategies: direct funding and indirect funding.

Direct funding

The first thing that comes to company’s mind when talking about R&D public incentives is the grant & subsidy system.

In Singapore, like in many countries around the world, grants are provided by public agencies through call of projects. They announce, evaluate, and allocate the grant depending on specific objectives and requirements defined depending on the government and agency’s agenda.

As a company, you will not qualify for every grant available at a given period. The first step in establishing a winning strategy on direct public funding is to find the right type of grants for your project and establish a contact with the public agency in charge. You will find below a non-exhaustive list of main actors that can provide foreign companies with adequate direct public fundings:

  • The Singapore Economic Development Board (EDB) with Innovation Scheme for Companies (RIS(C)): this government agency under the Ministry of Trade and Industry is responsible for strategies that enhance Singapore’s position as a global center for business, innovation, and talent. One of their missions is to attract foreign investment into Singapore. The scheme that aims at financing innovative projects is Research Innovation Scheme for Companies (RIS(C)). It supports company’s developments of technologies, product and processes, innovation activities from Singapore.
  • Monetary Authority of Singapore (MAS) and their Financial Sector Technology and Innovation Scheme: It seeks to attract financial institutions to set up innovation centers of excellence or laboratories in Singapore. Financial companies looking to establish or expand its R&D efforts in Singapore, especially by testing innovative ideas and roll out market solutions can benefit from this direct funding scheme.
  • Marine and Port Authority (MPA) with their MINT Fund Call for Proposals: This fund aims at developing a competitive edge for the port of Singapore, transform the Singaporean maritime sector in an innovative cluster and build up technological capabilities locally in key niche areas.
  • Energy Market Authority (EMA) with their Research Innovation, Enterprise and Deployment plan: This plan focuses on catalyzing research and innovation, supporting enterprise development and facilitating deployment of promising solutions in the energy sector. The decline of costs for clean energy have spurred investments, which EMA tries to include in a sustainability strategy.

Once the right grant has been identified, you must enter the application process in the right period, which can be difficult for companies with limited resources allocated to claim such incentives.

In conclusion, your strategy on public fundings will rely on the availability of subsidies in your sector at a given time, which can be anticipated correctly if you establish a good contact with the appropriate administration.

Indirect funding

Though less popular than subsidies and grants, indirect funding can make up for a significant amount of companies’ R&D funding if correctly claimed and done.

It refers to all tax incentives, tax credits and tax deductions that a company can benefit from running R&D activities. The Singaporean government has been supporting companies in that sense in the past already through the Productivity and Innovation Credit (PIC) scheme, which has ended and been replaced in 2018 by a generous R&D Tax Incentive. This scheme enables a tax a deduction of 250% of R&D expenses incurred during the year, corresponding to a net saving of 42.5% (when applying the 17% corporate tax rate). Moreover, it is accessible to any company registered in Singapore, regardless of the nationality of shareholders.

As a counterpart to this generous and open tax incentive, the claiming company has to be the beneficiary of the R&D work. In other words, no re-invoicing to other companies in the group is possible, and the IP must be located accordingly. When deciding on a funding strategy for your R&D activities, this is an important matter to consider if you are an international group with already constituted financing and IP policies that are hard to modify.

In conclusion, a well-thought-out strategy for R&D public funding must rely on these two components: direct and indirect funding. These two types of funding intervene at different moments of the project: before the start of expenses for the grants and each year at the time of the tax return for the R&D tax deduction. Although grants are generally preferred by companies as they limit initial investment to launch a new R&D activity, the R&D Tax Deduction ensures stability and predictability of the financial support received by the government.

FI Group as an expert in public R&D funding strategy can assist you in the definition and execution of your strategy, customizing it to your company needs and specific challenges.

Contact our experts!

 

 

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