By MoneyBees
Work out the Enterprise Innovation Scheme's 400% deduction on R&D, IP, training, projects with polytechnics or AI adoption, the tax it saves at 17%, and whether the 20% cash payout is worth more.
An IRAS scheme for YA 2024 to YA 2028 that gives a 400% tax deduction or allowance on qualifying spending on R&D in Singapore, IP registration, buying or licensing IP rights, approved training, projects with partner institutions and, from YA 2027, AI adoption.
Up to S$400,000 a year for each of R&D, IP registration, IP acquisition and licensing (combined), and training. Projects with polytechnics or ITE, and AI adoption, are capped at S$50,000 a year each.
R&D above S$400,000 still gets 100% plus an additional 150%. IP registration, IP acquisition and licensing, training and AI adoption above the cap get the normal 100%. IRAS does not state a deduction for spending on projects with partner institutions above S$50,000.
You can convert up to S$100,000 of qualifying spending a year, across all activities except AI adoption, into cash at 20%, so at most S$20,000. The payout is not taxable. Spending you convert gets no tax deduction at all, and the choice cannot be undone.
Businesses with active operations in Singapore that paid CPF for at least 3 full-time local employees for at least 6 months of the basis period, and that file their tax return on time. Each employee must be a citizen or PR earning at least S$1,400 a month.
For a profitable company, the deduction: S$1 of spending deducted at 400% saves up to 68 cents of tax at 17%, against 20 cents in cash. The payout helps a company with little or no taxable income that needs cash this year.
The unused part is treated as a trade loss or allowance. It can be carried forward, carried back to the previous Year of Assessment, or transferred under group relief, subject to the usual conditions.
AI adoption was added as a qualifying activity for YA 2027 and YA 2028, with a 400% deduction on up to S$50,000 a year and no cash option. The Sectoral AI Centre of Excellence for Manufacturing was added as a qualified partner for the same years.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).