S’pore Firms Investing In Innovation To Have Up To 400% Tax Deductions On 5 Activities, Such As R&D

Companies Can Enjoy Up To 400% Tax Reductions Under Enterprise Innovation Scheme

In his Budget 2023 speech today (14 Feb), Deputy Prime Minister and Finance Minister Lawrence Wong announced measures to improve Singapore’s productivity and ensure better jobs.

These better jobs, in turn, will raise Singaporeans’ salaries and help them to overcome rises in the cost of living and inflation, Mr Wong said.

enterprise innovation scheme

Source: MCI Singapore on YouTube

Dubbed the Enterprise Innovation Scheme, it’ll offer tax reduction enhancements of up to 400% of qualifying expenditures.

Currently, qualifying expenditures are eligible for up to 250% tax reduction.

Enterprise Innovation Scheme covers activities like local R&D

These are the five activities that qualify for enhanced tax reduction:

  • Registration of intellectual property (IP), including patents, trademarks & designs
  • Research and development (R&D) conducted in Singapore
  • Acquisition and licensing of IP rights — for taxpayers with revenue below S$500 million
  • Innovation projects with polytechnics, Institutes of Technical Education (ITE) or other eligible partners
  • Training via courses approved by SkillsFuture Singapore and aligned with the Skills Framework

These qualifying expenditures will be capped at S$400,000 for each activity.

The sole exception is innovation carried out with polytechnics and ITE.

For these, the cap will be S$50,000 instead.

“Businesses that make full use of the scheme could enjoy tax savings of nearly 70% of their investment,” Mr Wong said.

Aim is to help innovation, including for smaller companies

With this, Singapore companies will be able to accelerate their R&D efforts.

Smaller companies yet to turn in a profit may also qualify for a non-taxable cash payout.

This is so that they can benefit as well without needing to have high taxable income.

They can choose to convert 20% of their total qualifying expenditure across all five categories per year of assessment into a cash payout of up to S$20,000.

They can thus defray up to S$100,000 of qualifying expenditure.

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