Singapore's Tax Authority Publishes Outcome Of R And D Consultation

by Mary Swire, Tax-News.com, Hong Kong

14 November 2008

Singapore's Ministry of Finance (MoF) has received 52 responses on the public consultation exercise conducted throughout August and September of this year on the draft circular entitled 'Guidelines on What is Research and Development (R&D) for Income Tax Purposes'.

Significant enhancements to R&D tax incentives were introduced in Singapore's 2008 Budget. These R&D tax changes aim to encourage pervasive R&D in Singapore, amongst large and small companies alike. The public consultation sought feedback on what will be regarded as R&D for income tax purposes.

In the draft guidelines, R&D is defined to refer to any systematic, investigative and experimental study that involves novelty or technical risk carried out in the field of science or technology, and with the objective of acquiring new knowledge or using the results of the study to create or improve products or processes.

Of the 52 responses received, 43 relate to the definition of R&D, especially on the condition for exclusion of software development activities and the list of excluded activities. Of these, the MoF has accepted 27 suggestions which will be incorporated into the final circular. The other 16 responses were inconsistent with the policy intention of the specific provisions.

The remaining nine responses fell outside the scope of this public consultation exercise, being requests for clarification or feedback on the tax administration of the R&D incentives, e.g. furnishing of R&D expenditure details to support tax deduction claims.

The points raised in these nine responses are addressed in the circular 'Research & Development Tax Measures' issued by the Inland Revenue Authority of Singapore which provides detailed information on the R&D concessions, including the claims procedures.

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