Enhanced Tax Deductions/ Allowances for Businesses
Businesses planning to engage in research and development (“R&D”) and innovation and capability development activities may qualify for enhanced tax deductions. Eligible businesses may also opt to convert up to $100,000 of the total qualifying expenditure for each Year of Assessment (“YA”) into cash at a conversion rate of 20%.
Summary of benefits
Businesses may benefit from enhanced/ new tax deductions and/ or allowances on qualifying expenditure incurred on the following qualifying activities:
Qualifying R&D undertaken in Singapore;
Registration of intellectual property (“IPs”);
Acquisition and licensing of IP rights (“IPRs”);
Innovation projects carried out with polytechnics, the Institute of Technical Education (“ITE”) or other qualified partners.
An option to convert up to $100,000 of the total qualifying expenditure across all qualifying activities for each YA into a non-taxable cash payout at a conversion rate of 20%, in lieu of tax deductions and/ or allowances, is available to eligible businesses.
| Qualifying Activities
| Amount of Tax Deductions and/ or Allowances Granted From YA 2024 to YA 2028
Qualifying R&D undertaken in Singapore
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- 100% tax deduction on R&D expenditure plus
- Additional 300% tax deduction on first $400,000 of qualifying R&D expenditure plus
- Additional 150% tax deduction on balance of qualifying R&D expenditure in excess of $400,000
Registration of IPs
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- 400% tax deduction on first $400,000 of qualifying IP registration costs plus
- 100% tax deduction on balance of qualifying IP registration costs in excess of $400,000
Acquisition and licensing of IPRs
Find out more – acquisition of IPRs
Find out more – licensing of IPRs
- 400% writing-down allowance (“WDA”) and/ or tax deduction on first $400,000 (combined cap) of qualifying IPR acquisition costs and/ or qualifying IPR licensing expenditure plus
- 100% WDA on balance of qualifying IPR acquisition costs in excess of claim for enhanced allowances plus
- 100% tax deduction on qualifying IPR licensing expenditure in excess of claim for enhanced tax deduction
List of eligible courses
- 400% tax deduction on first $400,000 of qualifying training expenditure plus
- 100% tax deduction on balance of qualifying training expenditure in excess of $400,000 and all other training expenditure
Innovation projects carried out with polytechnics, the ITE or other qualified partners
- 400% tax deduction on first $50,000 of qualifying innovation expenditure
Find out more about the EIS
How to Apply
Businesses may claim the enhanced deductions/ allowances in their income tax returns. Businesses must maintain adequate records of their qualifying activities and expenditures and provide them to IRAS upon request.
Eligible businesses that wish to convert their qualifying expenditures into cash are to make an irrevocable option by submitting a prescribed election form together with the filing of the businesses’ income tax returns. The option must be exercised not later than the income tax filing due date for the relevant YA.
Innovation Projects carried out with Polytechnics, the ITE or other qualified partners
Businesses undertaking innovation projects that are capital in nature and do not meet the definition of R&D under Section 2 of the Income Tax Act, may be eligible for tax deductions if these projects are qualifying innovation projects carried out with the polytechnics, the ITE or other qualified partners (collectively known as “partner institutions”).
Qualifying innovation projects refer to projects that predominantly involve one or more of the following innovation activities defined within the Oslo Manual 2018:
a. Research and experimental development activities;
b. Engineering, design and other creative work activities;
c. IP-related activities; and
d. Software development and database activities.
This scheme will be administered by the partner institutions. The partner institutions will validate the project as a qualifying innovation project and issue the innovation project invoice. Expenditure incurred outside of the collaboration with the partner institutions will not qualify for this tax deduction.
Businesses seeking to undertake qualifying innovation projects may contact the respective partner institutions for more information.
Centres of Innovation
The Institute of Technical Education
Click here for more information about Centres of Innovation.