Singapore's R&D relief is a deduction, which is worth nothing to a business with no taxable profit until the losses can be used. The Enterprise Innovation Scheme adds a modest cash element: a business can convert up to S$100,000 of qualifying expenditure across EIS activities into a cash payout at 20%, so up to S$20,000 per Year of Assessment. The condition is a local workforce: at least three full-time local employees (Singapore Citizens or Permanent Residents with CPF contributions), each earning a gross monthly salary of at least S$1,400, employed for six months or more in the basis period. This page explains the mechanics and when to use it.
What it is
| Element | Rule |
|---|---|
| Rate | 20% of the converted expenditure |
| Maximum conversion | S$100,000 of qualifying expenditure per Year of Assessment, across all EIS activities combined |
| Maximum payout | S$20,000 per Year of Assessment |
| Employee condition | At least three full-time local employees, each earning at least S$1,400 gross a month, employed for six months or more in the basis period |
| Trade-off | Converted expenditure earns no deduction |
| Tax status | The payout is not taxable |
| Timing | Apply after filing the income tax return and before the filing due date, through the Apply for EIS Cash Payout service |
| Years | YA 2024 to YA 2028; not available for the AI adoption category |
| Irrevocable | Once approved, the election cannot be reversed |
Who it applies to
Businesses with qualifying EIS expenditure that meet the employee condition. The S$1,400 threshold and the CPF requirement mean the three employees must be Singapore Citizens or Permanent Residents on the payroll for at least six months of the basis period; the business owner can count where employed on those terms, but shareholders who are not employees do not. Sole proprietors and partners count their employees, not themselves.
The payout is designed for small and loss-making businesses, and its size reflects that. For a company with profits, the deduction is almost always worth more: S$100,000 of Singapore staff costs at 400% is a S$400,000 deduction, worth S$68,000 of tax at 17%, against a S$20,000 payout. For a company with no profit and no prospect of using losses soon, S$20,000 now beats a deferred and uncertain saving.
Two further points shape the decision. The payout is per Year of Assessment, so a business that is loss-making for several years can take up to S$20,000 in each of them. And the conversion applies across EIS activities, so a business with little R&D but training or IP registration spend can still use it; the choice of which expenditure to convert is the business's, within the S$100,000 cap.
How it works
- Confirm the employee condition from CPF records for the basis period.
- Choose the expenditure to convert, up to S$100,000 across R&D and the other EIS activities. Convert the expenditure that would earn the lowest deduction first, if any choice exists; R&D staff costs in the 400% tier are the most valuable to keep as deductions.
- File the income tax return, excluding the converted expenditure from the deductions claimed.
- Apply for the payout in myTax Portal after filing and before the filing due date.
- Receive the payout, usually within a few months of approval, and record it as non-taxable.
- Keep the records for the converted expenditure as for any EIS claim; IRAS reviews payouts and recovers them with penalties where the expenditure did not qualify.
Worked example
Illustrative example. Two hypothetical companies each have S$300,000 of qualifying Singapore R&D staff costs in YA 2026 and four full-time local employees above S$1,400 a month.
| Marina Analytics (profitable, 17% on the relevant income) | Punggol Devices (loss-making, no profits expected for 3 years) | |
|---|---|---|
| Option A: deduct everything | S$300,000 at 400% = S$1,200,000 deduction; tax saved S$204,000 | S$1,200,000 added to losses carried forward; no cash now |
| Option B: convert S$100,000 | S$200,000 at 400% = S$800,000 deduction, tax saved S$136,000, plus S$20,000 payout: S$156,000 | S$800,000 added to losses; S$20,000 cash now |
| Better choice | A, by S$48,000 | B, unless the losses will be used soon and the shareholding test is safe |
Punggol's decision depends on its runway: the S$400,000 of deduction given up would save S$68,000 of tax once it is profitable, if its shareholders have not changed enough to fail the shareholding test by then.
Common questions
Can we convert more than S$100,000? No. The cap is S$100,000 of expenditure, S$20,000 of payout, per Year of Assessment.
Do the three employees have to work on the R&D? No. The condition is about the business's local workforce, not the R&D team.
We filed on 30 November. Can we still apply? No. The application must be made after filing and before the due date, so file earlier.
Is the payout taxable? No.
Which expenditure should we convert? Whatever deduction is worth least to you. Since all EIS R&D staff costs and consumables sit in the enhanced tiers, the real choice is usually between EIS activities, or between converting now and carrying losses forward, and it depends on when the business expects to be profitable.
Related pages
Official sources
Educational content only, not tax advice. See the disclaimer.