The Enterprise Innovation Scheme (EIS) was announced in Budget 2023. Its purpose is to both enhance, as well as introduce a new tax measure. The EIS enables eligible businesses to opt to convert up to $100,000 of total qualifying expenditure for each Year of Assessment (YA) into cash at a conversion rate of 20%.
In this guide, we have heavily simplified and share the key points. If you wish to learn more, you may refer to the resources directly from IRAS.
Purpose of the EIS
Introduced in Budget 2023 to encourage businesses to engage in R&D, innovation and capability development activities.
EIS enables eligible businesses that has incurred the qualifying transactions to either
- Convert up to a total of $100,000 for each YA as cash payout at a conversion rate of 20% (maximum of $20,000 per YA) or
- Have a percentage based enhanced tax deduction / allowances.
The EIS will be available from YA2024 to YA2028.
EIS Qualifying Transactions
The EIS is granted on qualifying transactions incurred in the following 5 categories:
- Qualifying R&D activities undertaken in Singapore
- Registration of intellectual property (“IPs”)
- Acquisition and licensing of IP rights (“IPRs”)
- Training
- Innovation projects carried out with polytechnics, the Institute of
Technical Education (“ITE”) or other qualified partners.
ElS Qualifying Conditions
In addition to the EIS being eligible only to the above mentioned transactions, there are additional conditions that must be met depending on whether the business intend to opt for a cash payout, or enhanced tax deduction / allowances.
| Enhanced Tax Deduction/Allowances | Cash Payout |
|---|---|
| Carry on active business operations in Singapore; | Carry on active business operations in Singapore |
| Incurred qualifying expenditure during the basis period of the qualifying YA | Incurred qualifying expenditure during the basis period of the qualifying YA |
| 3 full-time local employee for at least 6 months during the basis period of the qualifying YA. | |
| File the Income Tax Return for the respective YA before the statutory filing due date |
Characteristics of EIS Cash Payout
- Eligible businesses may opt to convert up to $100,000 of the total qualifying expenditure across all the qualifying activities for each YA into cash at a conversion rate of 20%.
- The cash payout is capped at $20,000 per YA.
- Each cash payout application is subject to a minimum expenditure of $400.
- Cash payout is not taxable and can be used for any purpose.
- The cash conversion cap of $100,000 cannot be combined across YAs.
How to utilise the EIS
First ensure that the company has incurred the qualifying transactions, as well as meet the qualifying conditions.
Decide which EIS benefit the company intends to claim:
- 20% Cash payout or
- Enhanced tax deduction / allowances
Using EIS for Cash Payout
Businesses opting for the EIS cash payout must first:
- File and submit the business’s income tax returns (eg. Form C-S), before the tax filing due date (30th November for companies)
- Submit an online application via the Apply for EIS Cash Payout digital service
The Apply for EIS Cash Payout digital service will only be made available to businesses that have submitted their Income Tax Returns before the income tax filing due date.
EIS Cash Payout Disbursement Duration
The EIS cash payout application will generally be processed within 3 months after receiving the completed application online and all other supporting documents as may be requested.
Once the application is approved, a physical paper notice will be sent to the business registered address.
For YA 2024, IRAS will commence disbursement of EIS cash payout from Apr 2024 onwards via:
- Direct credit to your company/ business’s GIRO bank account that is linked to pay for Income Tax/ GST or
- Payout via PayNow Corporate/ Paynow NRIC/ FIN (for sole proprietors/ individuals).
If you do not have the above e-payment modes, please sign up with Paynow and you will receive the payout within 6 to 8 weeks after your successful registration.
