IRAS checks R&D claims in two ways: queries raised while the return is being assessed, and audits of assessed years. The claim form for larger claims gives IRAS a project-level view at filing, and IRAS uses technical experts to assess novelty and technical risk where it needs to. Because the deductions are generous, 400% on the first S$400,000, IRAS treats them as a focus area. This page covers how a review starts, what it asks, how to respond and what follows; the IRAS requirements page covers what to have ready.
How reviews start
Pre-assessment queries. IRAS reviews returns before issuing the notice of assessment and may write with questions about the R&D claim: the projects, the three requirements, the expenditure by tier and location. Claims above the threshold that come with the R&D claim form are read against it; claims without enough detail draw a request for it.
Audits. IRAS selects companies for audit on a risk basis, and an audit may cover R&D claims for several Years of Assessment within the 4 year period. IRAS has statutory powers to require information and documents and to interview staff.
Technical review. For the novelty or technical risk requirement, IRAS may consult technical experts, including from research agencies, and may ask the company's technical staff to present the project.
What is requested
| Area | Typical requests | What satisfies them |
|---|---|---|
| The three requirements | For each project: the objective, the state of knowledge, the novelty or technical risk, the systematic study and its outcome | The project charter, plans, test records and reports |
| Staff costs | Who worked on each project, the time portion and its basis, remuneration and CPF | Timesheets, payroll, CPF records |
| Consumables and other expenditure | Invoices, how items were used, the tier applied | Purchase records coded to projects |
| Location | Where the work was carried out, for the Singapore versus overseas split | Location records, contracts |
| Outsourced R&D | Contracts, the 60% portion treated as staff costs and consumables, the provider's status | Contracts and invoices |
| Cash payout | The employee condition and the converted expenditure | CPF records for the three local employees |
| Grants | Government funding of the same costs | Grant agreements |
IRAS sets a response date in each letter, commonly a few weeks, and extends it on request.
Responding to a review
- Check for errors first. Under IRAS's voluntary disclosure programme, errors disclosed within one year of the filing due date attract no penalty; later disclosures made before an audit attract a reduced penalty of 5 percent per year of the tax undercharged.
- Answer by project and by tier. IRAS reasons project by project on the three requirements and tier by tier on the expenditure.
- Put the technical staff forward for the novelty and technical risk questions; an adviser can coordinate but should not substitute.
- Reconcile the numbers to payroll, CPF and the ledger before replying.
- Concede what cannot be supported and ask for the assessment to reflect agreed adjustments.
- Keep the correspondence for any objection or appeal.
Outcomes, penalties and appeals
Assessment. IRAS allows the claim, reduces it or disallows it, and issues the notice of assessment or an additional assessment with tax and interest due. Where a cash payout was paid on expenditure later found not to qualify, IRAS recovers it and may impose penalties, so the payout is reviewed on the same standard as the deduction.
Penalties. An incorrect return made without reasonable excuse attracts a penalty of up to 200% of the tax undercharged under section 95, and a return made wilfully with intent to evade attracts up to 400% under section 96, with criminal prosecution possible in serious cases. In practice IRAS composes most careless cases at a lower percentage and reserves the higher bands for deliberate conduct.
Objections and appeals. A company that disagrees with an assessment objects in writing within 2 months of the notice of assessment. If IRAS does not agree, the company can appeal to the Income Tax Board of Review, and from there to the High Court on a question of law.
Illustrative example
Illustrative example. Woodlands Fintech Pte Ltd, a hypothetical company, claims S$600,000 of Singapore staff costs across three projects at the enhanced tiers for YA 2025. IRAS queries the claim before assessment and asks for the projects' technical risk. For two projects the chief technology officer's test records show architectures benchmarked against targets that published approaches did not meet, and IRAS accepts them. The third, a mobile app redesign, shows no technical risk, and Woodlands withdraws it, reducing staff costs to S$450,000. IRAS also finds that S$30,000 of utilities was treated as consumables and moves it to the 100% tier. The assessment issues on the corrected figures; because the errors were corrected during the query and were not deliberate, no penalty is imposed.
Related pages
Official sources
Educational content only, not tax advice. See the disclaimer.