IP Development Incentive (IDI) in Singapore (2026): Concessionary Tax on IP Income

Singapore wants companies not just to own intellectual property, but to develop it here. The Intellectual Property Development Incentive (IDI) is the tax scheme built for that purpose. It gives an approved company a concessionary corporate tax rate of 5% or 10% on qualifying income from IP that the company has helped create through research and development in Singapore, rather than IP that is merely acquired and parked here.

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This 2026 guide explains what the IDI is, the modified nexus principle that governs how much income qualifies, who administers it, and how it fits with Singapore’s other innovation and IP tax measures. For IP-rich businesses, the IDI can materially lower the effective tax rate on royalty and licensing income, but it is a negotiated, substance-based incentive, not an automatic relief.

What is the IDI?

The IDI is a tax incentive administered by the Singapore Economic Development Board (EDB) under the Economic Expansion Incentives (Relief from Income Tax) Act. An approved IDI company enjoys a reduced tax rate, either 5% or 10%, on a portion of its qualifying IP income during an approved incentive period, in place of the headline 17% corporate tax rate. The concessionary rate is designed to step up gradually over time, increasing by 0.5% at prescribed intervals, in line with Singapore’s move toward broad-based minimum taxation.

The incentive was introduced with effect from 1 July 2018 to modernise Singapore’s IP tax regime and bring it in line with international standards, in particular the OECD’s work on harmful tax practices. It replaced older, more generous IP-related concessions that did not require the taxpayer to have carried out the underlying R&D.

What income qualifies

Qualifying IP income is broadly the income a company receives from the commercial exploitation of qualifying IP rights, for example royalties and licensing income from patents and copyrights subsisting in software. The incentive is aimed at IP created through genuine innovation, so marketing-related intangibles such as trademarks are generally outside its scope.

Crucially, the IDI is not an all-or-nothing benefit on the whole royalty stream. The proportion of income that enjoys the concessionary rate is determined by the modified nexus approach, explained below.

The modified nexus approach

The modified nexus approach comes from Action 5 of the OECD BEPS project. The principle is simple: a company should enjoy a preferential rate on IP income only to the extent that it itself incurred the qualifying R&D expenditure that created that IP. In other words, the tax benefit must be linked to real innovation activity, not to outsourcing all the R&D to related parties or simply acquiring finished IP.

In practice, the qualifying proportion is calculated using a ratio of the company’s own qualifying R&D expenditure to its total expenditure on the IP (with a limited uplift). A company that does most of its R&D in-house in Singapore will see a high proportion of its IP income qualify for the concessionary rate. A company that acquired the IP or had it developed largely by related parties abroad will see a much lower proportion qualify. This makes robust tracking of R&D expenditure, by IP asset, essential.

Who is it for, and how is it granted

The IDI is targeted at companies that carry on substantive R&D and IP commercialisation activity in Singapore, and that are prepared to make and meet economic commitments such as headcount, spending and the anchoring of high-value functions here. Because it is a discretionary EDB incentive, it is negotiated and approved, not claimed off the shelf. A company applies to EDB, agrees quantitative and qualitative conditions, and receives approval for a defined incentive period, which can be renewed subject to performance.

This is a different model from broad-based reliefs. Contrast it with the Enterprise Innovation Scheme and the R&D deductions under sections 14C and 14D, which are available to qualifying companies generally without an approval negotiation.

How the IDI fits with other incentives

The IDI often sits alongside other EDB incentives for substantive operations, such as the Pioneer Certificate Incentive and the Development and Expansion Incentive, which offer concessionary rates on qualifying trading income. Where a company both develops IP and carries on a wider qualifying trade, these incentives can be structured to work together. On the expenditure side, companies that acquire IP rather than develop it may instead look to writing-down allowances under section 19B. Because these regimes interact, and because the nexus calculation drives the benefit, IP-rich groups should plan the structure holistically.

Frequently asked questions

Can we get the IDI just by holding our group’s IP in a Singapore company?

No. That is precisely what the modified nexus approach is designed to prevent. The concessionary rate applies only to the extent the Singapore company itself funded the R&D that created the IP. Simply relocating ownership of finished IP will not deliver the benefit.

Does the IDI cover income from trademarks and brands?

Generally no. The incentive is aimed at innovation-driven IP such as patents and software copyrights. Marketing intangibles such as trademarks are typically excluded.

Is the 5% or 10% rate fixed for the whole period?

The concessionary rate is designed to increase by 0.5% at prescribed intervals over time, so a company should model the rate across the incentive period rather than assume a flat rate.

How do we apply?

Through EDB. The IDI is a negotiated incentive with economic commitments, so early engagement with EDB, supported by a clear business and R&D plan, is important.

Raffles Corporate Services can help you assess whether your IP activities fit the IDI, model the nexus outcome, and coordinate the tax and corporate structuring around it. Reach us via our contact page.

See EDB’s incentive information at edb.gov.sg, IRAS guidance at iras.gov.sg, and the governing statute on Singapore Statutes Online.

— The Editorial Team, Raffles Corporate Services