Q:
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Who can claim R&D tax benefits?
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A:
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In general, only taxpayers who are the beneficiaries of the R&D activities can claim R&D deductions on the R&D expenditure incurred.
A beneficiary of R&D activities:
1.
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bears the financial burden of carrying out the R&D activities; and
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2.
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effectively owns and can commercially exploit the know-how, intellectual property or other results of the R&D activities.
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Taxpayers in the trade or business of providing R&D services will generally not be able to claim the R&D tax benefits, unless the R&D is performed on its own account such that it is the beneficiary of the R&D activities.
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Q:
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How to determine if a project qualifies for R&D tax benefit?
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A:
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The three requirements are as follows:
The objective of the project is to
1.
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Acquire new knowledge;
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2.
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Create new products or processes; or
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3.
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Improve existing products or processes;
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It involves novelty or technical risk; and
It involves a systematic, investigative and experimental ("SIE") study in a field of science or technology.
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Q:
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What is Non-Qualifying R&D Activities?
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A:
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An activity will not qualify as R&D if it falls within the list of activities stated below.
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quality control or routine testing of materials, devices or products
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2.
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research in the social sciences or the humanities
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3.
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routine data collection
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4.
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efficiency surveys or management studies
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5.
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market research or sales promotion
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6.
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routine modifications or changes to materials, devices, products, processes or production methods
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7.
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cosmetic modifications or stylistic changes to materials, devices, products, processes or production methods
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Q:
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What is the tax deduction for qualifying R&D Activities?
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A:
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The tax deductions for qualifying R&D expenditure are subject to specific restriction rules for certain categories of expenses disallowed under Section 15 of the Income Tax Act.
Generally, the R&D benefits granted would depend on the place that the R&D work is conducted and whether the R&D is related to the existing trade of the taxpayer. R&D works may be conducted wholly in Singapore or outside Singapore, or partly in Singapore and partly outside Singapore.
On top of the 100% normal tax deduction, additional tax deduction of 150% for qualifying R&D expenditure (i.e. staff costs and consumables) on qualifying R&D projects performed in Singapore.
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Q:
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What is the tax deduction for non-qualifying R&D Activities?
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A:
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Where a project does not meet the requirement of qualifying R&D and thus the R&D tax deduction, the relevant expenses may still qualify for normal tax deduction, subject to the tax deduction rules under sections 14 and 15 of the ITA. This means that the expenses have to be revenue expenditures that are wholly and exclusively incurred in the production of income, before they can qualify for tax deduction. The tax deduction will be at 100% of the expenses.
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FAQ
