If your business spends money on research, protecting its ideas, upgrading staff skills or working with institutions on new products, the Enterprise Innovation Scheme (EIS) may let you claim far more than the usual tax deduction on that spending. Announced in Singapore’s Budget 2023 and administered by the Inland Revenue Authority of Singapore (IRAS), the enterprise innovation scheme is designed to encourage companies, especially small and medium enterprises, to invest in innovation and capability building.
This guide explains the five qualifying activities, how the enhanced deduction works in principle, the cash payout option and the records you should keep. It is general information, not tax advice. Rates, caps and qualifying conditions are set by IRAS and can change, so always check the current EIS pages on the IRAS website or speak to a tax professional before you claim.
What the Enterprise Innovation Scheme Does
Normally, a business can deduct qualifying expenses at 100%, meaning every dollar spent reduces taxable income by a dollar. Under the EIS, certain innovation activities qualify for an enhanced deduction. As announced, the scheme allows a 400% tax deduction on qualifying expenditure, up to a cap per activity for each Year of Assessment (YA), and it was introduced to run for a set period of Years of Assessment.
In plain terms, if the 400% rate applies to an expense, each qualifying dollar you spend reduces your taxable income by four dollars, up to the cap. For a profitable company, that can mean meaningful tax savings. For a company that is not yet profitable, the cash payout option (explained below) may be more useful.
The scheme brings together and enhances incentives that previously existed separately, so it is worth reviewing even if you have claimed R&D or training deductions in the past.
The Five Qualifying Activities
The EIS covers five broad categories. Each has its own conditions.
- Research and development (R&D) in Singapore. Qualifying R&D must generally be carried out in Singapore and meet the IRAS definition of R&D, which involves systematic investigation to resolve scientific or technological uncertainty. Routine testing, quality control or cosmetic changes usually do not count.
- Registration of intellectual property (IP). Costs of registering patents, trade marks, designs and plant varieties can qualify, subject to IRAS conditions.
- Acquisition and licensing of IP rights. Buying or licensing IP for use in your trade may qualify, with conditions on the type of IP and the parties involved.
- Training. Course fees for employee training can qualify where the courses meet the scheme’s criteria, such as courses approved or supported by the Skills and Workforce Development Agency (SWDA, formed in 2026 from Workforce Singapore and SkillsFuture Singapore) and certain other qualifying programmes. Check the IRAS list of qualifying training before relying on it.
- Innovation projects with qualifying partners. Projects carried out with institutions such as polytechnics, the Institute of Technical Education (ITE) and other qualifying partners can qualify. This category has a lower spending cap than the others.
| Activity | Typical qualifying spend | Key things to check |
|---|---|---|
| R&D in Singapore | Staff costs, consumables for qualifying R&D | Does the work meet the IRAS R&D definition? |
| IP registration | Official and professional fees to register IP | Is the IP type covered, and is it for your trade? |
| IP acquisition and licensing | Costs of buying or licensing IP rights | Related party rules and IP type conditions |
| Training | Course fees for employees | Is the course on the qualifying list? |
| Innovation projects | Fees paid to qualifying partner institutions | Is the partner on the approved list, and is the project eligible? |
The Cash Payout Option
Not every business has enough taxable profit to benefit from a large deduction. Under the EIS, eligible businesses can choose to convert part of their qualifying expenditure into a non-taxable cash payout instead of claiming the enhanced deduction on that portion.
Key points to understand:
- The cash payout applies only up to a set amount of qualifying expenditure per YA, at a fixed conversion rate set by IRAS.
- To qualify, a business generally needs to meet conditions, including a minimum number of local employees on its payroll. Check the current requirement with IRAS.
- Choosing the payout means you cannot also claim the enhanced deduction on the same dollars.
- Anti-abuse rules apply, and IRAS can recover payouts made on claims that did not meet the conditions.
For young companies that are still loss-making, the payout can turn innovation spending into much-needed cash. For profitable firms, comparing the payout against the tax savings from the deduction is a worthwhile exercise, ideally with your accountant.
How to Claim
EIS claims are made when you file your company’s income tax return (Form C or Form C-S) with IRAS, and cash payout applications are made through the channel IRAS specifies. In general you will need to:
- Identify which expenses fall under each of the five categories.
- Keep the cap for each activity in mind when tallying amounts.
- Complete the relevant EIS sections or claim forms.
- Retain supporting documents, as IRAS may ask for them.
If your company is newly incorporated, also look at the startup tax exemption scheme, which interacts with your overall tax position in the early years.
Records to Keep
Good documentation is what turns a valid EIS claim into a smooth one. Keep:
- For R&D: project plans, records of the technical uncertainty being addressed, time sheets for staff involved, and invoices for consumables.
- For IP: registration certificates, filing receipts and agreements with IP agents.
- For IP acquisition or licensing: signed agreements, valuations where relevant and proof of payment.
- For training: course details, attendance records, receipts and proof that the trainee is your employee.
- For innovation projects: agreements with the partner institution, project scope documents and invoices.
Keep these records for the period IRAS requires, which is typically several years after the relevant YA.
Common Mistakes to Avoid
- Assuming all “development” is R&D. Building a website or rolling out off-the-shelf software is usually not R&D for tax purposes.
- Claiming the same expense twice. You cannot claim EIS on costs already funded by a government grant in a way that excludes them, or claim both the payout and the deduction on the same dollars.
- Missing related party rules. IP bought from or licensed from a related company often has extra conditions.
- Forgetting the cap per activity. Spending above the cap is generally deductible only at the normal rate.
The EIS sits alongside other incentives. If you are expanding overseas, compare it with the Double Tax Deduction for Internationalisation, and for everyday costs see our guide to claiming business expenses and deductions. Used well, the enterprise innovation scheme rewards businesses that invest in their future, so it is worth a careful review at every tax filing.
Frequently Asked Questions
Should a loss-making start-up take the EIS cash payout or the deduction? A company with no taxable profit usually gains little from a deduction, so the cash payout may be more useful. You cannot claim both on the same dollars. Check the current conditions with IRAS and compare the two options with your accountant.
Does building a company website count as R&D for EIS? Usually not. Building a website or rolling out off-the-shelf software is generally not R&D for tax purposes. Qualifying R&D involves systematic investigation to resolve scientific or technological uncertainty, so confirm the IRAS definition before claiming.
Are all staff training courses eligible under the EIS? No. Only courses that meet the scheme’s criteria qualify, such as courses approved or supported by SWDA and certain other qualifying programmes. Check the IRAS list of qualifying training before you rely on any course for a claim.
How long should I keep EIS claim records? Keep supporting documents for the period IRAS requires, which is typically several years after the relevant Year of Assessment. For R&D that means project plans and time sheets; for IP, registration certificates and receipts; for training, attendance records and invoices.
Can I claim EIS on spending above the cap for an activity? Generally, spending above the cap is deductible only at the normal rate, not the enhanced one. Keep track of each activity’s cap when tallying costs, and look at current figures on the IRAS website, as caps can change.
Official sources: IRAS
Further reading: Enterprise Financing Scheme (EFS) Loans Explained for SMEs