28 March 2018
The Minister for Finance, Mr Heng Swee Keat, delivered the Budget Statement for Financial Year 2018 (“Budget 2018”) on 19 February 2018. A number of tax changes have been announced including several initiatives to support and encourage innovation in Singapore. A summary of the key changes to encourage innovation is set out below.
Enhance tax deduction for qualifying expenditure on qualifying R&D projects performed in Singapore
Businesses that have incurred qualifying expenditure on qualifying research and development (“R&D”) projects performed in Singapore can currently claim 150% tax deduction for staff costs and consumables incurred and 100% tax deduction for other qualifying expenditure. Consistent with the Government’s stated intention to foster innovation and promote R&D activity in Singapore, the tax deduction for staff costs and consumables incurred on qualifying R&D projects performed in Singapore will be increased from 150% to 250%. All other conditions of the scheme remain unchanged. This change will take effect from Year of Assessment (“YA”) 2019 to YA2025.
Enhance tax deduction for costs on protecting IP
Currently, businesses incurring qualifying IP registration costs can claim 100% tax deduction on such costs. The scheme, which is scheduled to lapse after YA2020, will be extended till YA2025. Further, the tax deduction will be enhanced to 200% for the first S$100,000 of qualifying IP registration costs incurred for each YA. This change will take effect from YA2019 to YA2025.
Enhance tax deduction for costs on IP in-licensing
To support businesses to buy and use new solutions, the tax deduction for qualifying IP in-licensing costs will be enhanced from 100% to 200% for the first S$100,000 of qualifying IP in-licensing costs incurred for each YA. Such costs include payments made by a qualifying person to publicly funded research performers or other businesses, but exclude related party licensing payments, or payments for IP where any allowance was previously made to that person. This change will take effect from YA2019 to YA2025.
New Open Innovation Platform
The Government will pilot the Open Innovation Platform (“OIP”) which is expected to be operational in Q2 2018.
A virtual crowd-sourcing platform, the OIP aims to facilitate innovation and narrow the gap between research and commercialisation by matching problem owners and solution providers across sectors. Companies can list specific challenges that can be addressed by digital solutions. They will then be matched with info-communications and technology (ICT) firms and research institutes to co-develop solutions. In this way, the OIP will enable problem owners and solution providers to collaborate and develop innovative digital products. By doing so, the OIP will help problem owners formulate problem statements and actively engage with solution providers, thereby lowering barriers of entry to innovation. At the same time, the OIP provides solution providers with resources and opportunities to develop scalable solutions.
The OIP will be administered by the Info-communications Media Development Authority (IMDA).
Productivity Solutions Grant
Existing grants supporting the adoption of pre-scoped, off-the-shelf technologies will be streamlined into a single Productivity Solutions Grant (“PSG”). This will make it easier for businesses to access support to adopt technologies and productivity solutions.
The PSG will provide funding support for up to 70% of qualifying costs. Businesses can apply for the PSG through the Business Grants Portal www.businessgrants.gov.sg from 1 April 2018. The portal will guide businesses through the application process, by allowing them to select from a list of supportable equipment and technology solutions relevant for their sectors.
Further details are expected to be released by the Ministry of Trade and Industry.
The Budget Speech for Financial Year 2018 is available from the Budget 2018 website www.singaporebudget.gov.sg.