Singapore recognises the significance of driving innovation and growth in its business landscape. Thus, it unveiled the Enterprise Innovation Scheme (EIS) in Budget 2023. This scheme is a significant step towards achieving the country’s goal of becoming a global hub for technology, innovation, and entrepreneurship.
In this blog, we take you through the different aspects of the EIS, including what it covers, the qualifying conditions, application process, and more.
What is the Enterprise Innovation Scheme in Singapore?
The EIS is a government initiative to promote innovation and enhance productivity among Singapore businesses. Its qualifying period is from YA 2024 to YA 2028. Here are the key aspects of the Enterprise Innovation Scheme:
| Tax Deductions/Allowances | Cash Payout |
|---|---|
|
400% tax deduction or allowances on up to S$400,000 of eligible expenditure every year for each of these qualifying activities:
400% tax deductions on up to S$50,000 of expenditure every year for:
|
The option to convert up to S$100,000 of the total qualifying spend across all the qualifying activities for each YA into a non-taxable cash payout at a 20% conversion rate in lieu of tax deductions and/or allowances.
*Specific conditions apply to the conversion of qualifying expenditure incurred under “Registration of IPs” and the “acquisition and licensing of IPRs” |
How Do I Qualify for the EIS?
- Sole-proprietorships
- Partnerships
- Companies, including registered business trusts
- Registered branches and subsidiaries of a foreign parent or holding company
The table below summarises the qualifying conditions:
| Enhanced Tax Deductions/Allowances | EIS Cash Payout |
|---|---|
|
|
Note that in the situation where a body of persons (BOP) is expected to carry on a business under Section 11 of the Singapore Income Tax Act 1947, the BOP is eligible for EIS enhanced deductions/allowances if it meets the qualifying conditions stated in the table above. However, it will not be eligible for the cash payout.
What is the Option to Convert Qualifying Expenditure Into a Cash Payout?
This is a cash payout aimed at helping small and growing businesses alleviate the costs of their innovation activities.
Eligible businesses can choose to convert up to S$100,000 of their total qualifying expenditure across all the qualifying activities for each YA into cash at a 20% conversion rate. The cash payout is capped at S$20,000 and is not taxable.
Partial cash conversion can be chosen for qualifying R&D performed in Singapore, licensing of IPRs, training and innovation projects done with polytechnics, the ITE or other qualified partners. Partial cash conversion is not allowed for IP registration and IPR acquisition.
For IP registration and IPR acquisition, the option to convert qualifying expenditure into a cash payout will be on a per IP registration or per IPR basis, where:
- Businesses must convert the full IP registration costs to cash payout, subject to the cap
- Qualifying companies or partnerships must convert the full amount of qualifying IPR acquisition costs incurred on a qualifying IPR into cash, subject to the cap
- Any IP registration or acquisition of IPR costs incurred beyond the cap will be forfeited and will not be able to be deducted against the business income
After an amount of qualifying expenditure is converted into cash, the same amount cannot be used for tax deductions and/or allowances. The option to convert the qualifying expenditure cannot be revoked once exercised.
The option to convert qualifying expenditure into a cash payout is available on a yearly basis. A qualifying business that wants to convert its qualifying expenditure into cash must make the irrevocable election by submitting its application via the Apply for EIS Cash Payout digital service after filing its income tax return and before the income tax filing due date for the relevant YA.
Qualifying Conditions for the EIS Cash Payout
| Enhanced Tax Deductions/Allowances | EIS Cash Payout |
|---|---|
|
Carrying on Active Business Operations in Singapore |
An eligible business must be carrying on a trade or business to receive the EIS Cash Payout. The business must be active at the time of disbursement of cash payout and cannot be considered to have ceased business operation. A business entity is considered to have ceased business operation if its status in the Accounting and Corporate Regulatory Authority (ACRA) register is:
These businesses are ineligible for the EIS Cash Payout:
*For these two business types, it will be so unless they can prove that they continue to carry on their trade or business during the basis period of the YA and have not ceased operations at the point of cash payout disbursement |
|
Incurring Qualifying Expenditure |
The EIS cash payout is only available when the qualifying expenditure is incurred by the business. An expense is incurred when the legal liability to pay occurs, regardless of the date of actual monetary payment. |
|
Meeting the 3 Full-time Local Employee Condition |
A business meets this condition if it makes Central Provident Fund (CPF) contributions for at least 3 local employees for a minimum of 6 months during the basis period of the qualifying YA.
For the purpose of the EIS Cash Payout, a full-time employee refers to a Singapore Citizen or Singapore Permanent Resident earning a gross monthly salary of at least S$1,400 and is needed under a contract of service with an employer to work for at least 35 hours weekly. This excludes sole-proprietorships, partners of the partnership, and shareholders who are also the directors of the company. A full-time employee may also include an individual deployed to a business under a centralised hiring arrangement or secondment arrangement, subject to certain conditions. |
How to Claim the EIS
Businesses claiming enhanced tax deductions or allowances in their income tax returns must make the claim by the filing due dates for the relevant YA. The filing due dates are:
- 18 Apr for Sole Proprietorships and Partnerships
- 30 Nov for Companies
| Sole Proprietorships/Partnerships | Companies |
|---|---|
|
|
The qualifying expenditure for the EIS benefits is the amount incurred after deducting any grant or subsidy received from the government or statutory board.
GST-registered businesses should exclude any GST claimable as input tax when determining the qualifying costs incurred for claiming the EIS benefits. Conversely, for a non-GST registered business, GST can be included as part of the qualifying costs.
How to Apply for the EIS Cash Payout
A business applying for the EIS cash payout must e-file the application via the Apply for EIS Cash Payout digital service in the myTax Portal after submitting their income tax returns for the relevant YA no later than the filing due date for the relevant YA.
When to Apply for the EIS Cash Payout
| Type of Business Entity | Opening Date for YA 2024 | Due Date for YA 2024 |
|---|---|---|
| Sole Proprietorships | 1 Feb 2024 | 1 Feb 2024 |
| Partnerships | 1 Mar 2024 | 18 Apr 2024 |
| Companies | Adheres to the official opening of the Form C-S/Form C-S Lite/Form C filing digital service | 30 Nov 2024 |
When Will the EIS Cash Payout Be Received?
Typically, the EIS cash payout application will be processed within 3 months from receipt of the completed online application and other supporting documents that may be requested.
After approval, a physical paper notice will be sent to your registered address. IRAS will disburse the EIS cash payout via:
- Direct credit to the company or its GIRO bank account linked to pay income tax or GST
- Payout via PayNow Corporate, PayNow NRIC, or FIN for sole proprietors and individuals
How to Amend Errors in the Online EIS Application
Applicants can amend errors by logging in to their myTax Portal and emailing them via myTax Mail with the subject line “EIS Cash Payout – Amend Filing”.
Let InCorp Help You With Your EIS Application
Our tax team at InCorp has extensive experience in assisting clients with their EIS application. We can provide guidance and support throughout the entire process to ensure that your application is submitted accurately and efficiently.
Contact us today to learn more about how we can help you maximise your EIS benefits!
FAQs about Enterprise Innovation Scheme (EIS)
- The key tax relief components under the scheme include enhanced tax deductions of up to 400% or allowances of up to S$400,000 on qualifying expenditure.
- The cash payout component of the EIS involves the option to convert up to S$100,000 of the total qualifying spend across all the qualifying activities for each YA into a non-taxable cash payout at a 20% conversion rate.
- Entities that meet the qualifying conditions may apply for the EIS.
Let us help with your EIS application!
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