BUDGET 2023 – ENTERPRISE INNOVATION SCHEME

16/02/2023

Companies that invest in innovation, such as research and development (R&D), will be able to enjoy more tax deductions.

Presently, businesses enjoy tax deductions of up to 250% on four types of innovation-related activities. These tax deductions will be raised to 400% on each of these activities, with a new activity added to the list.

The 5 activities are:

Research and development (R&D) conducted in Singapore;
Registration of intellectual property (IP) including patents, trademarks and designs;
Acquisition and licensing of IP rights;
Innovation carried out with polytechnics and Institutes of Technical Education (ITEs); and
Training via courses approved by SkillsFuture Singapore which are aligned to the Skills Framework.

The expenditure on each activity will be capped at $400,000, except for innovation carried out with polytechnics and ITEs, which has an expenditure cap of $50,000.

Businesses that make full use of the scheme could enjoy tax savings of nearly 70 per cent of their investment.

Smaller firms, which may pay little or no taxes, will also have an option to get a non-taxable CASH PAYOUT. Start-ups, small and medium-sized enterprises (SMEs) and other smaller businesses that have yet to turn profitable can opt to convert 20 per cent of their total qualifying expenditure across all five categories per year of assessment into a cash payout of up to $20,000. This means that up to $100,000 of qualifying expenditure will be defrayed.

Applications for these cash payouts are to be submitted together with the filing of businesses’ income tax returns.

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