Singapore's R&D relief is a deduction, not a credit, and the deduction comes in tiers that depend on what the money was spent on and where. Staff costs and consumables for R&D carried out in Singapore earn 400% on the first S$400,000 each Year of Assessment from YA 2024 to YA 2028 and 250% above that, made up of the 100% base deduction and additional deductions. Other R&D expenditure, and R&D carried out overseas, earns the 100% base deduction. This page sets out the categories, the tiers and the exclusions.
Cost categories that qualify
| Category | In Singapore | Overseas, related to the trade | Basis |
|---|---|---|---|
| Staff costs | 400% on the first S$400,000 (with consumables), 250% above | 100% | Salaries, bonuses, CPF contributions and other remuneration of staff engaged in the R&D, apportioned |
| Consumables | 400% on the first S$400,000 (with staff costs), 250% above | 100% | Materials and items consumed or transformed in the R&D |
| Outsourced R&D to an R&D organisation | Enhanced deductions on 60% of the fee, which IRAS treats as qualifying staff costs and consumables | 100% | Payments to a provider that undertakes R&D on the taxpayer's behalf |
| Other R&D expenditure | 100% | 100% | Overheads, utilities, software, data, travel and other revenue costs of the R&D |
| Cost-sharing payments | Can qualify for deduction, subject to conditions | Can qualify for deduction, subject to conditions | Payments under an R&D cost-sharing agreement |
| Capital expenditure | Capital allowances, not the R&D deduction | Capital allowances | Plant and machinery under the ordinary rules |
Staff and time
Staff costs are the core of the enhanced tiers. They cover the remuneration of employees directly engaged in the R&D, including salary, bonus, allowances and employer CPF contributions, for the portion of time spent on the R&D. IRAS expects the portion to be supported by time records or a reasonable, documented allocation. Bonuses and allowances follow the same apportionment as salary, and the CPF contributions claimed are the employer's contributions for the same period and portion. Staff who support the R&D indirectly, such as administration and management not engaged in the technical work, are other R&D expenditure at 100% at best. Directors' fees are excluded from staff costs for the enhanced deduction.
The S$400,000 threshold for the 400% tier is per Year of Assessment and per business, and it is shared with consumables, so a company with S$300,000 of staff costs and S$150,000 of consumables in Singapore has S$400,000 at 400% and S$50,000 at 250%.
Contractors and subcontracted work
For R&D outsourced to an R&D organisation in Singapore, IRAS treats a fixed portion of the fee (60 percent) as qualifying staff costs and consumables, and the enhanced deductions apply to that portion. The provider cannot claim the enhanced deduction on the same work. Outsourcing to an overseas provider earns the 100% deduction only, where the R&D is related to the trade. Contractors who work under the company's direction as part of its own team are treated as staff costs where engaged on employment-like terms, otherwise as outsourcing; the contract and the working arrangement decide.
Payments under an R&D cost-sharing agreement can qualify for deduction, subject to conditions; they are common in multinational groups.
Materials, software and overheads
Consumables consumed or transformed in the R&D are enhanced-tier expenditure. Utilities are not consumables for this purpose. Materials that become part of products sold are treated as cost of sales rather than R&D consumables.
Software, data and cloud used in the R&D are other R&D expenditure at 100%, unless capital in nature, in which case capital allowances apply.
Overheads such as rent, utilities and administrative support attributable to the R&D are other R&D expenditure at 100% on a reasonable apportionment. They do not earn the enhanced tiers, which is the main difference from the UK, Australian and New Zealand rules, where apportioned overheads earn the same relief as staff costs. Companies moving between regimes often overclaim the Singapore tiers on overhead items.
Costs that are excluded
| Excluded or limited | Treatment |
|---|---|
| Capital expenditure, including plant, equipment and buildings | Capital allowances, not the R&D deduction |
| Expenditure on excluded activities | Not R&D; ordinary deductibility rules apply |
| Overseas R&D not related to the trade | Not deductible |
| Expenditure funded by a government grant | Deductible only to the extent not funded |
| Directors' fees | Not staff costs for the enhanced tiers |
| Utilities | Not consumables; other R&D expenditure at 100% |
| Expenditure converted to a cash payout | No deduction on the converted amount |
Illustrative example
Illustrative example. Changi Materials Pte Ltd, a hypothetical company, has these costs for a qualifying project in the basis period for YA 2026:
| Cost | Amount | Tier | Deduction |
|---|---|---|---|
| Singapore engineers, 70% on the project, remuneration and CPF S$600,000 | S$420,000 | First S$400,000 at 400%, S$20,000 at 250% | S$1,650,000 |
| Consumables used in Singapore trials | S$60,000 | 250% (the 400% tier is used up) | S$150,000 |
| Singapore R&D organisation | S$100,000 | 60% at 250%, 40% at 100% | S$190,000 |
| Overseas subsidiary testing, related to the trade | S$80,000 | 100% | S$80,000 |
| Rent, utilities and software | S$90,000 | 100% | S$90,000 |
| Test equipment | S$150,000 | Capital allowances | Outside the R&D deduction |
| Total R&D deduction | S$750,000 spent | S$2,160,000 |
At the 17% corporate tax rate the deduction is worth about S$367,000 of tax, against S$127,500 for a plain 100% deduction.
Related pages
Official sources
Educational content only, not tax advice. See the disclaimer.