Singapore’s Enterprise Innovation Scheme to See Enhancements
The Budget Statement for the Financial Year 2023 highlighted a number of tax changes. Chief amongst these changes are those for a new Enterprise Innovation Scheme designed to encourage research and development, intellectual property (IP) registration, IP rights acquisition and IP rights licensing.
New Enterprise Innovation Scheme
In order to encourage businesses to engage in R&D, an improvement in a suite of tax measures has been announced. This scheme would see the following changes:
- Enhanced tax deduction for staff costs and consumables incurred on qualifying R&D projects
Previously, companies benefited from a 250% tax deduction for staff costs and consumables incurred on qualifying R&D projects conducted in Singapore under sections 14C and 14D of the Income Tax Act 1947 (ITA).
Enhanced: Increased to 400% for the first S$400,000 incurred for each Year of Assessment (YA) from YA2024 to YA2028.
- Enhanced tax deduction for qualifying IP registration costs
Previously, a 200% tax deduction for the first S$100,000 and 100% for amounts exceeding this, of qualifying IP registration costs under section 14A of the ITA
Enhanced: Increased to 400% for the first S$400,000 of qualifying IP registration costs incurred per YA for YA2024 to YA2028.
- Enhanced tax allowance/deduction for acquisition and licensing of qualifying IP rights
Previously, the tax allowance or deduction for qualifying expenditure incurred on the acquisition and licensing of IP rights supported 200% for the first S$100,000 (and 100% for amounts exceeding) of qualifying IP rights licensing expenditure under sections 14, 14C, and 14U or the ITA.
Enhanced: Increased to 400% for the first S$400,000 (combined cap) incurred per YA for YA2024 to YA2028. This enhancement is restricted to businesses that generate less than S$500 million in revenue in the relevant YA.
- Enhanced tax deduction for qualifying training expenditure
Previously, a 100% tax deduction could be claimed for qualifying training expenditure incurred, subject to provisions under the ITA.
Enhanced: Increased to 400% for the first S$400,000 qualifying expenditure incurred on courses that are eligible for SkillsFuture Singapore funding and aligned with the Skills Framework per YA from YA2024 to YA2028.
- New tax deduction for innovation projects carried out with polytechnics, ITE or other qualified partners
A new 400% tax deduction is introduced for up to S$50,000 of qualifying innovation expenditure incurred on qualifying innovation projects carried out with polytechnics, the Institute of Technical Education (ITE), and other qualified partners per YA from YA2024 to YA2028.
- Cash Conversion
Beneficial to those businesses which have yet to turn profitable or do not have sufficient profits to maximise the benefits from the above deductions, this cash conversion can be used in lieu of tax deductions and allowances. These businesses will be allowed to opt for a non-taxable cash payout at a cash conversion ratio of 20% on up to S$100,000 of total qualifying expenditure across all qualifying activities listed above. This option is capped at S$20,000 per YA and is limited to businesses that have at least three full-time local employees earning a gross monthly salary of at least S$1,400 in employment for six months or more in the basis period of the relevant YA.
Extend IP Development Incentive
In addition to the above enhancements, the IP Development Incentive will be extended until 31 December 2028. This incentive supports companies that use and commercialise IP rights arising from R&D in Singapore. Recipients are eligible for concessionary tax rates of 5% or 10% on a percentage of qualifying IP income.
Who We Are:
Research and development is the engine of economic growth in an increasingly knowledge-based global economy, however more investment is needed to help boost human creativity, innovation and economic output.
Swanson Reed is one of Singapore’s largest Specialist SR&ED tax advisory firms. We manage all facets of the R&D tax credit program, from claim preparation and audit compliance to claim disputes.
To find out more about R&D or to determine the eligibility of your business for receiving an R&D tax credit, contact a Swanson Reed R&D Tax Advisor today.
