What is the Enterprise Innovation Scheme?
Singapore introduced the Enterprise Innovation Scheme to increase the tax support available to businesses investing in R&D, innovation and capability development.
The EIS enhances several existing tax measures and introduces additional deductions for qualifying innovation activities.
A 400% tax deduction does not mean that the Government reimburses 400% of your expenditure. It means that S$1 of qualifying expenditure can generate up to S$4 of tax deduction, subject to the applicable rules and annual expenditure cap.
The resulting financial benefit therefore depends on the company's taxable income, tax position and ability to utilise the deduction.
EIS benefits at a glance
R&D undertaken in Singapore
Up to 400% tax deduction
Annual expenditure cap: S$400,000
Registration of intellectual property
Up to 400% tax deduction
Annual expenditure cap: S$400,000
Acquisition and licensing of intellectual property rights
Up to 400% allowance or deduction
Annual expenditure cap: S$400,000 combined
Qualifying training
Up to 400% tax deduction
Annual expenditure cap: S$400,000
Innovation projects with qualifying partners
400% tax deduction
Annual expenditure cap: S$50,000
AI adoption — YA 2027 and YA 2028
400% tax deduction
Annual expenditure cap: S$50,000
The caps apply separately to each qualifying activity and for each Year of Assessment. They cannot be carried across Years of Assessment.
Where expenditure is supported by a Government grant or subsidy, EIS benefits are generally calculated on the qualifying expenditure net of that support.
The six qualifying activities under EIS
1. R&D undertaken in Singapore
EIS materially enhances the tax benefit available for qualifying R&D performed in Singapore.
For YA 2024 to YA 2028, qualifying R&D expenditure can receive:
- a 100% base deduction under Section 14C;
- an additional 300% deduction on the first S$400,000 of qualifying R&D expenditure comprising eligible staff costs and consumables; and
- an additional 150% deduction on qualifying R&D expenditure above the S$400,000 EIS cap.
The first S$400,000 can therefore receive a total deduction of up to 400%.
EIS does not, however, make all technical or product-development expenditure automatically eligible.
The underlying Singapore R&D tax rules still determine:
- whether the activity qualifies as R&D;
- which company is the appropriate claimant;
- whether the R&D is undertaken in Singapore;
- which expenditure qualifies; and
- what evidence is required to substantiate the claim.
For multinational groups in particular, the entity employing the technical team is not necessarily the entity entitled to the R&D tax benefit. Funding arrangements, ownership of the results and the ability to commercially exploit the R&D can affect the claimant position.
2. Registration of intellectual property
EIS also enhances the deduction available for qualifying costs incurred to register intellectual property.
From YA 2024 to YA 2028, businesses can claim a total 400% tax deduction on the first S$400,000 of qualifying IP registration costs incurred for each YA.
Qualifying expenditure can include eligible costs associated with registering patents, trademarks, designs and plant varieties in Singapore or overseas, subject to the applicable conditions.
Qualifying registration expenditure above the S$400,000 EIS cap can continue to receive the underlying base deduction where the statutory requirements are met.
3. Acquisition and licensing of intellectual property rights
EIS provides enhanced support for businesses acquiring or licensing qualifying intellectual property rights for use in their activities.
The tax treatment differs according to the transaction:
- qualifying IP acquisitions can benefit from enhanced writing-down allowances; and
- qualifying IP licensing expenditure can benefit from enhanced tax deductions.
The acquisition and licensing categories share a combined EIS expenditure cap of S$400,000 per YA.
Additional conditions apply. In particular, the enhanced EIS treatment for acquisition and licensing of qualifying IPRs is subject to a revenue threshold, applied at group level where relevant, as well as the underlying conditions governing the relevant IP tax provisions.
The detailed tax treatment can therefore depend on the nature of the IP, how it is acquired or licensed, how it is used and the wider corporate structure.
4. Qualifying training
Businesses investing in employee capabilities can receive a total 400% deduction on the first S$400,000 of qualifying training expenditure for each YA from YA 2024 to YA 2028.
The EIS enhancement applies to qualifying courses that meet the applicable Skills and Workforce Development Agency (SWDA) funding and Skills Framework requirements.
Qualifying expenditure can include eligible course, assessment and certification fees paid by the employer, subject to the relevant conditions and net of applicable Government support.
Training outside the EIS criteria may still be subject to the normal business-expense deduction rules, but it will not receive the EIS enhancement.
5. Innovation projects with qualifying partners
EIS provides a 400% tax deduction on up to S$50,000 of qualifying expenditure per YA for qualifying innovation projects carried out with designated partner institutions.
These can include polytechnics, the Institute of Technical Education and other recognised innovation partners.
Unlike the R&D tax incentive, this category is not restricted to projects that satisfy the statutory definition of R&D.
Qualifying innovation projects can predominantly involve activities such as:
- research and experimental development;
- engineering, design and other creative activities;
- intellectual-property-related activities; and
- software development and database activities.
The relevant partner institution validates whether the collaboration is a qualifying innovation project and the expenditure must relate to the qualifying work carried out with that partner.
For YA 2027 and YA 2028, the list of qualified partners has been expanded to include the Sectoral AI Centre of Excellence for Manufacturing.
This route can therefore be relevant to companies carrying out genuine innovation that may not meet the narrower technical definition required for an R&D tax claim.
6. AI adoption
For YA 2027 and YA 2028, EIS has been expanded to support qualifying expenditure on the adoption of artificial intelligence.
Businesses can receive a 400% tax deduction on the first S$50,000 of qualifying AI expenditure per YA.
Qualifying expenditure can include eligible expenditure on:
- subscriptions to or licences for AI systems; and
- subscriptions to, acquisition of or licensing of qualifying AI business services.
The incentive does not cover physical infrastructure or hardware such as servers, storage devices or computing equipment.
Expenditure subsidised by a Government grant or subsidy is also excluded from qualifying AI expenditure for this EIS activity.
Unlike the other eligible EIS activities, AI-adoption expenditure cannot be converted into an EIS cash payout.
Enhanced tax deduction or EIS cash payout?
For eligible expenditure, businesses may need to decide whether to retain the EIS tax deduction or convert qualifying expenditure into cash.
Enhanced tax deduction or allowance
Keeping the tax benefit may be appropriate where the business can effectively utilise the enhanced deduction or allowance.
Depending on the company's tax position, EIS deductions that are not immediately utilised can potentially form part of unutilised tax losses or allowances and may be available for treatment under Singapore's carry-forward, carry-back or group-relief rules, subject to the relevant statutory conditions.
Cash payout
Eligible businesses can instead convert up to S$100,000 of qualifying expenditure per YA across eligible EIS activities into a non-taxable cash payout at 20%.
The maximum payout is therefore S$20,000 per YA.
Cash conversion is available in lieu of the corresponding tax deduction or allowance. Once qualifying expenditure has been converted into cash, the same expenditure cannot also be used to obtain the associated tax benefit.
The election is irrevocable.
The cash option can be particularly relevant to smaller or growing companies that cannot make effective immediate use of enhanced tax deductions. But the right choice depends on the company's current and expected tax position rather than simply whether it qualifies for EIS.
AI-adoption expenditure under the YA 2027 and YA 2028 enhancement is not eligible for cash conversion.
How EIS interacts with your tax position
The headline 400% deduction is only one part of the EIS decision.
For a CFO or finance team, the actual value of the scheme can depend on several factors:
- whether the company is profitable or loss-making;
- whether the enhanced deduction can be utilised in the current YA;
- whether unutilised deductions or allowances may be carried forward, carried back or transferred through group relief;
- whether Government funding has subsidised the expenditure;
- which EIS activity the expenditure falls within;
- whether the underlying tax conditions for that activity are satisfied; and
- whether cash conversion provides a better commercial outcome.
The same expenditure cannot simply be claimed repeatedly under different provisions.
Where activities potentially overlap — for example, an innovation project that may also satisfy the R&D definition — the applicable treatment should be considered before making the claim.
EIS should therefore be assessed as part of the company's overall tax and incentive position rather than by applying the 400% headline rate in isolation.
How to claim EIS benefits
Businesses claiming EIS enhanced deductions or allowances need to establish the qualifying activity and expenditure and include the appropriate claim in their income tax filing for the relevant Year of Assessment.
In practice, this means:
Identify the qualifying EIS activity
Determine which part of the scheme applies to the expenditure.Confirm the underlying conditions
Establish whether the business, project or expenditure satisfies the requirements applying to that activity.Determine qualifying expenditure
Exclude non-qualifying costs and account for Government grants or subsidies where relevant.Calculate the EIS benefit
Apply the appropriate base and enhanced deductions or allowances and the relevant annual cap.Assess the tax position
Consider whether the deduction can be effectively utilised and whether cash conversion should be considered where available.Prepare the required claim and evidence
Include the EIS information in the relevant Corporate Income Tax Return and retain the documentation supporting the claim.
Where the EIS benefit relates to R&D undertaken in Singapore, the underlying R&D claim requirements continue to apply. This includes establishing the project eligibility, claimant position, qualifying expenditure and technical evidence supporting the R&D.
How Reeve | R&D supports EIS
EIS covers a wide range of innovation expenditure. The R&D component is particularly technical because the enhanced tax benefit depends on the interaction between the EIS rules and Singapore's underlying R&D tax framework.
This can include:
- identifying potentially qualifying R&D projects;
- assessing technical eligibility;
- establishing the appropriate claimant;
- identifying and quantifying qualifying expenditure;
- determining the EIS-enhanced R&D deduction;
- assessing the implications of tax deduction versus cash conversion;
- preparing the technical and financial claim documentation;
- supporting integration of the claim into the company's corporate income tax filing; and
- supporting subsequent clarification or substantiation where required.
For multinational groups, this also means considering how the Singapore R&D activity interacts with group funding, intellectual-property ownership and intercompany arrangements.
For Singapore SMEs, the focus may instead be on identifying qualifying R&D within ongoing development activities and determining whether the enhanced deduction or cash-conversion route is commercially more relevant.
The objective is to establish the appropriate incentive position first, then manage the R&D claim consistently from eligibility through to final documentation.
Assess your R&D and EIS position
Tell us what your business is developing, where the work is carried out and how the expenditure is structured. We can assess whether an R&D-related EIS opportunity exists and determine the appropriate next steps.