The Inland Revenue Authority of Singapore (IRAS) has introduced some updates in Budget 2023 that could help your business with tax savings and cash payouts. The Enterprise Innovation Scheme (EIS), available from Years of Assessment (YA) 2024 to 2028, offers opportunities for businesses to benefit from innovation, Research & Development (R&D), and capability development.

1. Tax Deductions and Allowances for Innovation

The EIS, administered by IRAS, provides 400% tax deductions/allowances on up to $400,000 of qualifying expenditure per year for:

– R&D activities carried out in Singapore.
– Registration of Intellectual Property (IP).
– Acquisition and licensing of Intellectual Property Rights (IPRs).
– Employee training courses eligible for SkillsFuture Singapore (SSG) funding and aligned with the Skills Framework.

In addition, businesses involved in innovation projects with polytechnics, the Institute of Technical Education (ITE), or other qualified partners can receive 400% tax deductions on up to $50,000 of expenditure per year.

2. Cash Payout Option

Under the EIS, businesses can also opt to convert up to $100,000 of qualifying expenditure into cash at a rate of 20%, with a maximum payout of $20,000 per YA. This applies to:

– Registration of IP.
– R&D activities in Singapore.
– Acquisition and licensing of IPRs.
– Employee training.
– Innovation projects with polytechnics, ITE, or other qualified partners.

Eligibility for Cash Payout

To be eligible for the EIS cash payout, businesses must meet the following criteria set by IRAS:
– Be a sole proprietorship, partnership, company, or registered branch/subsidiary of a foreign entity.
– Operate actively in Singapore.
– Have incurred qualifying expenditure during the relevant YA.
– Employ at least three full-time local employees for six months or more during the basis period of the relevant YA.

How to Apply

Applications for the EIS cash payout can be made through IRAS’s Digital Service after filing the Income Tax Return. The deadlines for applying vary depending on the type of business, with companies having until 30 November each year.

Record-Keeping

As per IRAS guidelines, businesses must retain all relevant records (e.g., invoices, agreements) for seven years. It’s also important to note that businesses cannot claim enhanced tax deductions or allowances on the same expenditure that has been converted into a cash payout.