Page 9 - RSM Budget 2023 Highlights

CORPORATIONS AND BUSINESSES

 Cash payout
Eligible businesses are allowed, in lieu of tax deductions/allowances, to opt for a non-taxable cash payout at a cash
conversion ratio of 20% on up to $100,000 of total qualifying expenditure across all qualifying activities in (a) to (f)
above per YA.
The cash payout option will be capped at $20,000 per YA, and will only be available to businesses which have at least
6
three full-time local employees (Singapore Citizens or Permanent Residents with CPF contributions) earning a
gross monthly salary of at least $1,400 in employment for six months or more in the basis period of the relevant YA.
Partial cash conversion will be allowed for qualifying R&D undertaken in Singapore, licensing of IP rights, training and
innovation projects carried out with Polytechnics, Institute of Technical Education or other qualified partners. The
option to convert into a cash payout for IP registration and IP rights acquisition will be on a per IP registration or IP
rights basis.
Once an amount of qualifying expenditure is converted into cash, it will no longer be available for tax
deduction/allowance. The option to convert the qualifying expenditure into cash is irrevocable once exercised.
The cash payout option is available on an annual basis. Applications for the cash payout are to be submitted together
with the filing of the businesses’ income tax return.

More information on qualifying innovation projects will be released by 31 March 2023. IRAS will also provide further
details of the changes by 30 June 2023.

Effective date

Each YA from YA 2024 to YA 2028

Comments

 The introduction of the EIS is timely as businesses are transforming through R&D, innovation and capability
development activities.

 It remains to be seen though whether IRAS will adopt a less stringent approach in interpreting what constitutes
as qualifying R&D expenditure or project as defined under the ITA.

 Only the first $400,000 of staff costs and consumables incurred on qualifying R&D projects conducted in
Singapore will qualify for the enhanced 400% tax deduction. As for qualifying R&D projects conducted outside
of Singapore, the existing 100% tax deduction remains and is not enhanced. It appears obvious that businesses
are encouraged to conduct qualifying R&D activities onshore.

 Singapore ranks quite highly in the world stage as an excellent location to house IP rights as it provides a
comprehensive legal framework and supporting infrastructure for the protection of various types of
intellectual property rights, trademarks, copyrights and patents. With a rather generous enhanced tax
deduction at 400% for the first $400,000 of qualifying IP registration costs incurred, it would likely entice
businesses to consider Singapore for the registration of their IP rights. This in turn would increase IP related
activities in Singapore.

6 For the purposes of the cash payout, “employees” may include individuals who are deployed to the business under a centralised hiring
arrangement or secondment arrangement.

BUDGET 2023 HIGHLIGHTS | 7