Most of the seven countries restrict or exclude overseas R&D. Singapore allows it, but pays less for it. R&D carried out in Singapore earns the enhanced tiers on staff costs and consumables: 400% on the first S$400,000 each Year of Assessment from YA 2024 to YA 2028 and 250% above. R&D carried out overseas earns the 100% base deduction, and only where it is related to the trade. For a company with teams in several countries, deciding where each part of a project is carried out is the central question of the claim.
What it is
| R&D carried out in Singapore | R&D carried out overseas | |
|---|---|---|
| Relationship to trade | Not required: R&D in Singapore is deductible even if unrelated to the existing trade | Required: must be related to the trade |
| Staff costs and consumables | 400% on the first S$400,000, 250% above | 100% |
| Other R&D expenditure | 100% | 100% |
| Outsourced to an R&D organisation | Enhanced tiers on 60% of the fee, treated as staff costs and consumables | 100% of the fee |
| Cost-sharing agreement payments | Can qualify for deduction, subject to conditions | Can qualify for deduction, subject to conditions |
| Cash payout | Available | Not available on overseas expenditure |
Who it applies to
Any business with R&D in more than one place: a Singapore headquarters with an engineering centre abroad, a Singapore subsidiary performing part of a group project, or a company that outsources testing or trials to a provider overseas. IRAS looks at where the R&D activity is physically carried out, not where the company is resident, where the costs are booked or where the results are used. Staff employed in Singapore who travel abroad for part of a project are carrying out that part overseas; staff seconded into Singapore from a foreign affiliate are carrying out their work in Singapore.
How it works
- Map the project to locations. For each activity, record where the people performing it were and where the experiments or testing took place.
- Allocate the costs. Staff costs follow the location of the work; a Singapore engineer's time abroad is overseas R&D. Consumables follow where they were used. Outsourced fees follow where the provider performed the work.
- Test the overseas part against the trade. Overseas R&D must be related to the existing trade; a new line of business developed abroad does not qualify.
- Apply the tiers: enhanced on Singapore staff costs and consumables, 100% on the rest.
- Document the basis so IRAS can see how the split was made.
Where IRAS reviews a mixed claim, the location evidence is the first request: travel records, payroll locations, provider contracts and the project plan. A company that cannot show where the work was done risks the enhanced tiers on the whole project.
Two edge cases come up often. Software developed by a distributed team is carried out wherever each developer sits, so a company with engineers in Singapore and abroad splits staff costs by location even where they work on the same codebase; commit records and payroll locations evidence the split. And testing performed overseas because the facility does not exist in Singapore is still overseas R&D at 100%: unlike Australia, Singapore has no exception for work that cannot be done at home. The cash payout follows the same line, since only Singapore expenditure can be converted.
Worked example
Illustrative example. Orchard Robotics Pte Ltd, a hypothetical company, develops a warehouse robot with a team of eight engineers in Singapore and three in Vietnam, and contracts field trials to a provider in Australia. Its costs for the basis period for YA 2026:
| Item | Location | Amount | Deduction |
|---|---|---|---|
| Singapore engineers' staff costs on the project | Singapore | S$550,000 | S$400,000 at 400% plus S$150,000 at 250%: S$1,975,000 |
| Singapore engineers' time on site in Vietnam (two months) | Overseas | S$40,000 | 100%: S$40,000 |
| Vietnam team staff costs | Overseas | S$120,000 | 100%: S$120,000 |
| Prototype components consumed in Singapore | Singapore | S$70,000 | 250% (cap used): S$175,000 |
| Australian field trial provider | Overseas | S$90,000 | 100%: S$90,000 |
| Total | S$870,000 | S$2,400,000 |
Had the Vietnam team's work been performed in Singapore, its S$120,000 would have earned 250% rather than 100%, a difference of S$180,000 in deduction, about S$30,600 of tax at 17%. Orchard weighs that against the cost of relocating the work.
Common questions
Our overseas subsidiary does the R&D and recharges us. Which tier? The R&D is carried out overseas: 100%, if related to our trade, and the recharge must be at arm's length.
A foreign engineer works in our Singapore office. Singapore or overseas? Singapore. Location of the work decides.
Can we claim overseas R&D for a new product line? Not unless it is related to the existing trade. R&D in Singapore does not have that condition.
Does remote work count as Singapore R&D? Where the person performing it is physically in Singapore, yes.
Can we restructure so the overseas team invoices us for Singapore R&D? No. The test is where the work is physically performed; invoicing arrangements and the location of the contracting entity do not change it, and IRAS asks for travel, payroll and project records to confirm the location.
Does the 60% treatment apply to overseas providers? No. It concerns the enhanced tiers, which overseas R&D does not earn; the overseas fee is simply deducted at 100%.
Related pages
Official sources
Educational content only, not tax advice. See the disclaimer.