Announced in 2003, the Enterprise Innovation Scheme (EIS) gives up to 400% tax deductions or allowances on up to $400,000 of qualifying expenditure per year on qualifying activities under the EIS. These activities exist to support or incentivise companies to engage in innovation-based activities such as R&D and upskilling their workforce.
Companies can also choose to convert up to $100,000 of qualifying expenditure to cash at a rate of 20%. This is to help small, growing businesses with their cashflow.
Read Also: From Loss Carry-Back Relief To BIPS: How To Save Corporate Income Tax In Singapore
Eligibility
In order to be eligible for enhanced tax deductions or allowances, your business must carry on active business operations in Singapore and incur qualifying expenditure during the qualifying YA. To qualify for EIS payouts, on top of these criteria, your business must file the income tax return for the respective YA before the statutory filing due date
(18 Apr for Sole Proprietorships and Partnerships) and have at least 3 full-time local employees who have received CPF contributions for at least 6 months within the basis period of the qualifying YA.
Read Also: 4 Corporate Business Grants/Payouts That Are Taxable (And Why Others Are Not)
Qualifying Activities
#1 Qualifying R&D Undertaken In Singapore
From YA2024 to YA2028, Qualifying R&D Undertaken in Singapore is eligible for 100% tax deduction per YA. The first $400,000 of qualifying R&D expenditure will receive an additional 300% tax deduction, and the remainder in excess of $400,000 will be eligible for an additional 150% of tax deduction per YA.
#2 Registration Of Intellectual Property
From YA2024 to YA2028, companies can receive a 400% tax deduction on the first $400,000 of qualifying Intellectual Property Registration costs per YA. The remainder in excess of $400,000 of qualifying Intellectual Property costs will be eligible for 100% tax deduction.
#3 Acquisition And Licensing Of Intellectual Property Rights
From YA2024 to YA2028, companies can receive 400% allowance and/or tax deduction of the first $400,000 of qualifying Intellectual Property Rights Acquisition or Licensing expenditure per YA. This cap is shared between both categories.
In addition to this, 100% of Write-Down Allowances can be claimed on the balance of qualifying Intellectual Property Rights acquisition costs.
The remaining qualifying IPR Licensing expenditure in excess of $400,000 will still qualify for 100% tax deduction.
#4 Training Employees
From YA2024 to YA2028, companies can receive a 400% tax deduction on the first $400,000 of qualifying training expenditure, and a 100% tax deduction on the remainder in excess of $400,000 for staff training expenditure.
#5 Innovation Projects With Qualified Partners
To encourage businesses to collaborate with the polytechnics and ITE, or other qualified partner institutions, a 400% tax deduction will be given on up to $50,000 of qualifying innovation expenditure by businesses for each YA on projects conducted with partner institutions.
The business must be a beneficiary of the qualifying innovation project, and the qualifying innovation expenditure does not include expenditure that is offset by any government grant or subsidy for the purposes of this project.
Read Also: Complete Guide To Singapore Corporate Taxes: Tax Rates, Tax Rebates And Tax Exemptions
EIS Payouts
Since Corporate Income Tax is already not charged on companies which are not yet profitable, the tax incentives do not serve to incentivise innovative activities, because no further savings on tax can be made. However, for these companies, this is where the EIS payouts come in, because up to $100,000 of qualifying expenditure can be converted into a non-taxable cash payout at a rate of 20%.
Businesses can apply for an EIS Cash payout once per YA. Converting qualifying expenditure to a cash payout cannot be reversed. All records such as invoices, instalment agreement and relevant documents relating to the EIS cash payouts must be kept for 7 years.
The EIS Cash payout application will take 3 months to process, following which, IRAS will commence the disbursement to your company either to your company’s bank account or through PayNow.
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