If your Singapore company spends money on research, developing new products, registering intellectual property, or training staff in new capabilities, there is a tax incentive you should not overlook. The Enterprise Innovation Scheme (EIS), introduced in Budget 2023, offers enhanced tax deductions of up to 400% on qualifying innovation activities, and — for companies that are not yet profitable — the option to convert some of that benefit into a cash payout instead.
The scheme runs from Year of Assessment (YA) 2024 to YA 2028, so there is still a meaningful window to plan around it. This guide explains what qualifies, how the 400% deduction and the cash conversion work, and how the EIS fits alongside Singapore’s other tax reliefs.
What is the Enterprise Innovation Scheme?
The EIS is a package of enhanced and expanded tax deductions administered by the Inland Revenue Authority of Singapore (IRAS). It is designed to encourage businesses of all sizes to invest in innovation and build capabilities, by boosting the tax deduction they can claim on five categories of qualifying activity.
For most of these activities, the deduction is raised to 400% on the first S$400,000 of qualifying expenditure per activity per YA. That is made up of the ordinary 100% deduction plus an additional 300% enhanced deduction. Expenditure above the S$400,000 cap continues to attract the normal 100% deduction.
The five qualifying activities
1. Research and development (R&D) conducted in Singapore
Qualifying R&D undertaken in Singapore attracts the enhanced deduction on staff costs and consumables, with the cap applied to the relevant portion of expenditure. This is the flagship category for companies building genuinely new products, processes or know-how here.
2. Registration of intellectual property
Costs of registering qualifying IP — patents, trade marks, designs and plant varieties — qualify for the 400% deduction on up to S$400,000 of registration costs per YA. If you are registering a patent, our guide on patent registration with IPOS pairs naturally with an EIS claim.
3. Acquisition and licensing of intellectual property rights
Businesses that acquire or license qualifying IP rights to use in their trade can claim the enhanced deduction (or writing-down allowance) on the relevant expenditure, subject to the S$400,000 cap. This category is subject to conditions, including on the business’s turnover.
4. Training
Expenditure on qualifying training courses — broadly, courses aligned to the Skills Framework and eligible for SkillsFuture Singapore funding — attracts the 400% deduction on up to S$400,000 per YA. This is an accessible category for companies that are upskilling staff rather than running a lab.
5. Innovation projects carried out with partner institutions
Qualifying innovation projects conducted with polytechnics, the ITE, or other approved partners attract the enhanced deduction on up to S$50,000 of qualifying expenditure per YA for this specific category.
The cash conversion option: turning deductions into cash
A tax deduction is only valuable if you have taxable profits to deduct it against. Many innovative companies — particularly early-stage ones — are loss-making in exactly the years they invest most heavily in R&D. The EIS addresses this with a cash conversion option.
Instead of claiming the enhanced deduction, an eligible business can elect to convert up to S$100,000 of total qualifying expenditure across all five activities per YA into a non-taxable cash payout. The payout rate is 20%, which means the maximum cash payout is S$20,000 per YA.
Key points to understand about the cash option:
- The S$100,000 cap is a single combined cap across all qualifying activities — not per activity.
- The cash payout is non-taxable.
- Electing cash conversion for an amount means you give up the tax deduction on that same amount — you cannot claim both on the same dollar.
- There are conditions, including a requirement that the business is active and meets a local employee headcount condition.
A simple worked example
Suppose a profitable Singapore company spends S$300,000 on a qualifying R&D project in Singapore in a YA. Under the EIS, it can claim a 400% deduction on the full S$300,000 (well within the S$400,000 cap), giving a total tax deduction of S$1,200,000. At the prevailing 17% corporate tax rate, that deduction is worth roughly S$204,000 in tax savings — compared with about S$51,000 under an ordinary 100% deduction.
Now suppose an early-stage company with no taxable profits spends S$80,000 on qualifying training. Rather than carry forward a deduction it cannot yet use, it can elect cash conversion on the S$80,000 and receive a non-taxable payout of 20%, i.e. S$16,000 in cash.
Illustrative only — the actual benefit depends on your tax position, and claims are subject to IRAS conditions. Always confirm eligibility and figures with IRAS or your tax adviser before filing.
How the EIS fits with Singapore’s other reliefs
The EIS is one layer in a broader system. Companies should look at it alongside:
- The Start-Up Tax Exemption and Partial Tax Exemption that reduce tax on ordinary chargeable income;
- General deductibility of business expenses under Sections 14 and 15;
- The Section 19B writing-down allowance for acquired IP, where relevant.
You claim the EIS in your corporate income tax return (Form C / Form C-S), supported by proper records of the qualifying expenditure. As with all reliefs, the burden is on the company to substantiate the claim, so documentation matters.
Common mistakes to avoid
In practice, the errors that cost businesses their EIS benefit are rarely about eligibility — they are about substantiation and timing. The most frequent pitfalls we see are:
- Poor records. Claiming the enhanced deduction without contemporaneous documentation of what was spent, on what activity, and why it qualifies. IRAS can ask, and the burden of proof sits with the company.
- Mixing grant-funded and self-funded costs. Claiming an enhanced deduction on expenditure that a government grant already covered — the relief only applies to the net cost the business bears.
- Missing the cash-conversion election. Loss-making companies sometimes bank deductions they cannot use for years, when a timely cash-conversion election would have put real money in the bank.
- Misclassifying training. Assuming any staff course qualifies, when the enhanced deduction is tied to eligible, aligned courses.
A short conversation with your tax adviser before the financial year closes usually pays for itself, because most of these mistakes can only be fixed before the return is filed.
Frequently asked questions
Which years does the EIS cover?
The enhanced benefits apply from YA 2024 to YA 2028. Expenditure incurred in the basis periods for those years can be claimed, subject to the scheme’s conditions.
Do I need to apply in advance?
For most categories there is no separate pre-approval — you claim in your tax return. Certain activities (such as some innovation projects and IP matters) have specific conditions and documentation requirements, so check the IRAS guidance for the category you are claiming.
Can a small company benefit, or is this only for big R&D firms?
Small companies can benefit — particularly through the training and IP registration categories, and the cash conversion option, which was specifically designed so that loss-making and early-stage businesses are not left out.
Can I claim EIS and a government grant on the same expenditure?
You generally cannot claim an enhanced deduction on expenditure that has been funded by a grant — the deduction is on the net amount the business actually bears. Coordinate your grant claims and tax claims carefully to avoid double-counting.
The bottom line
The Enterprise Innovation Scheme is one of the most generous tax incentives currently available to Singapore businesses, and it is deliberately broad — covering R&D, IP, training and collaboration, with a cash option for companies that cannot yet use deductions. With the scheme running only to YA 2028, the businesses that plan their innovation spending with the EIS in mind stand to capture the most value.
If you would like help identifying which of your costs qualify, structuring the claim, and coordinating it with your grants and corporate tax filing, our accounting and tax team can assist.
— The Editorial Team, Raffles Corporate Services