Enterprise Innovation Scheme (EIS) 2026: Claiming Up to 400% Tax Deductions for Singapore SMEs

Singapore SMEs sitting on unclaimed research and development spend, intellectual property costs, or staff training budgets are often unaware that the Enterprise Innovation Scheme (EIS) can turn a chunk of that expenditure into a very large tax deduction, or even hard cash. Introduced at Budget 2023 and running from Year of Assessment (YA) 2024 to YA2028, the EIS allows qualifying companies to claim tax deductions or allowances of up to 400% on expenditure across five defined categories, rather than the usual 100%.

For a profitable SME already paying corporate tax, a 400% deduction can meaningfully reduce the tax bill on money that was going to be spent anyway on research, patents, training, or innovation partnerships. For an early-stage or lower-profit company that cannot fully use the deduction, the scheme also offers a cash conversion option so the benefit is not wasted.

This article sets out exactly how the Enterprise Innovation Scheme works, the five qualifying categories, the expenditure caps, the cash payout mechanics, and how to actually make the claim in your Form C-S/C filing, all verified directly against IRAS’s published EIS guidance.

What Is the Enterprise Innovation Scheme?

The Enterprise Innovation Scheme is an IRAS-administered tax scheme that provides enhanced tax deductions or allowances, or an equivalent cash payout, for businesses that incur qualifying expenditure on research and development (R&D), innovation, and capability-building activities. It applies for each YA from YA2024 to YA2028.

Under the EIS, eligible businesses can claim a 400% tax deduction or allowance, made up of the ordinary 100% deduction plus an additional 300%, on qualifying expenditure across five categories, subject to expenditure caps per category per YA. For guidance on how this fits into your overall filing, see our Form C-S/C-S (Lite)/C filing guide and our broader Singapore corporate tax rates and filing guide.

Why the Scheme Exists

The policy intent, per IRAS, is to encourage businesses, particularly SMEs, to invest in innovation and upgrading even where the amounts involved are modest in absolute terms. Larger companies running substantial R&D programmes tend to already have access to grants and incentives; the EIS was designed so that a smaller company spending, say, $50,000 to $150,000 a year on innovation-related activity can still get a proportionately large tax benefit.

The Five Qualifying Categories

IRAS confirms that the enhanced 400% deduction applies to expenditure incurred on five qualifying activities. The table below summarises each category and its expenditure cap.

Each cap applies separately, per category, per YA, across YA2024 to YA2028. Where qualifying expenditure in a category (other than the polytechnic/ITE innovation projects category) exceeds $400,000 in a YA, the excess still qualifies for the ordinary 100% deduction, it simply does not get the additional 300% uplift.

A Note on the IP and Training Categories

For IP registration, the enhanced deduction is only available where the resulting IP is legally and beneficially owned by the claiming business, and IRAS has specific anti-avoidance conditions around IP acquired from related parties. For staff training, the course must actually appear on the SSG course directory or be IBF-accredited; general in-house or informal training does not qualify for the enhanced rate, though it may still be deductible as an ordinary business expense.

Worked Example: How Much Tax Can an SME Actually Save?

Consider a Singapore-resident trading company with $600,000 of chargeable income for YA2026 before any EIS claim, taxed at the prevailing 17% corporate tax rate (before the usual partial tax exemption, which we ignore here for simplicity of illustration).

Suppose in the same year the company incurs:

• $120,000 on qualifying R&D activities carried out in Singapore
• $30,000 on registering two trademarks and a patent
• $25,000 on SSG-approved staff training courses

Total qualifying expenditure is $175,000, well within each category’s $400,000 cap. Under the EIS, the company can claim 400% of this, i.e. $700,000 of tax deduction, instead of the ordinary $175,000. That is an additional $525,000 of deduction on top of what would have been claimed anyway.

At a 17% tax rate, the additional $525,000 deduction translates into additional tax savings of roughly $89,250, on top of the normal tax relief the $175,000 expenditure would already have generated. In other words, spending $175,000 on innovation-related activity can save the company close to $119,000 in total tax (the ordinary deduction plus the enhanced uplift), a return that is difficult to match through most other means of reducing your corporate tax bill.

The Cash Payout Option

Not every SME is in a tax-paying position, particularly younger companies or those still building up revenue. Recognising this, IRAS allows eligible businesses to convert qualifying expenditure into a non-taxable cash payout instead of claiming the tax deduction.

Under this option, a business may convert up to $100,000 of qualifying expenditure, combined across all qualifying activities for that YA (excluding expenditure on the adoption of certain AI tools, which sits outside the EIS’s IP/R&D/training categories), into cash at a conversion rate of 20%. This means the cash payout is capped at $20,000 per YA, and the payout itself is not taxable.

A few mechanical points worth noting, verified against IRAS’s EIS guidance:

• The $100,000 combined cap applies at the company level (or individual/partnership level, as applicable), not per category.
• The cap cannot be carried forward or combined across different YAs, unused cash conversion room in one YA does not roll over.
• Partial cash conversion is allowed for R&D, licensing of IP rights, staff training, and innovation projects with qualified partners, meaning a business can convert only part of its spend in these categories and claim the tax deduction on the rest.
• Partial conversion is not allowed for IP registration or IP acquisition costs, for these two categories the election is all-or-nothing.

Choosing Between the Deduction and the Cash Payout

As a general rule of thumb, a profitable company paying tax at 17% is usually better off taking the 400% tax deduction, since the tax saved will typically exceed the equivalent 20% cash conversion. A company in a loss position, or one with insufficient chargeable income to absorb the enhanced deduction, is often better served by the cash payout, since an unutilised deduction carried forward has a time value cost, whereas cash is immediate. This is a decision worth revisiting each YA as the company’s profitability changes, and it interacts with how the business plans its wider treatment of losses for tax purposes.

How to Claim the EIS

The EIS is not a standalone application to a separate agency, it is claimed directly through your annual Corporate Income Tax Return. In practice this means:

• Compute the qualifying expenditure for each category, keeping supporting documentation (invoices, R&D project records, IP registration receipts, training course confirmations).
• Include the enhanced deduction, or elect for the cash payout, in the relevant sections of Form C-S or Form C for the YA in question.
• Where the cash payout option is chosen, submit the required EIS cash payout application by the stipulated deadline, which is generally tied to your income tax return filing due date.
• Retain records to support the claim in case of an IRAS review, IRAS may request evidence that the expenditure genuinely falls within one of the five qualifying categories.

Because the mechanics interact closely with how chargeable income and capital allowances are computed, it is worth reviewing your claim alongside your broader Form C-S/C filing preparation rather than treating it as an afterthought.

Avoiding Double-Claiming Against Grants

A common pitfall is attempting to claim the EIS enhanced deduction on the same dollar of expenditure that has already been funded by a government cash grant, such as an Enterprise Singapore grant or the newer consolidated EDGE Grant. As a general principle, qualifying expenditure that has been subsidised by a grant should be net of the grant amount, you cannot claim the enhanced 400% deduction on the portion of a cost that a grant has already reimbursed. Companies that draw on multiple support schemes for the same innovation project should map out exactly which costs sit under which scheme before filing, an exercise we cover in more detail in our guide on how to stack Singapore government grants without inadvertently double-claiming.

This is particularly relevant for deep-tech and R&D-heavy startups also tapping schemes like Startup SG Equity, where the same underlying R&D spend might otherwise be claimed twice across two different government programmes.

Practical Tips for SMEs

• Start tracking qualifying categories early in the financial year rather than reconstructing costs at filing time, R&D staff time in particular is easy to under-document after the fact.
• Confirm that any training course is actually on the SSG course directory or IBF-accredited before assuming it qualifies for the enhanced rate.
• If planning IP registration spend, check whether bundling several applications within one YA versus spreading them across YAs makes a difference to how much falls within the $400,000 cap.
• Model both the tax deduction and cash payout outcomes before deciding, the better option depends on your specific chargeable income position for that YA.
• Keep an eye on Singapore grant updates alongside EIS changes, as the scheme’s interaction with other schemes has shifted since Budget 2023 and may shift again before YA2028.

Conclusion

The Enterprise Innovation Scheme is one of the more generous, and more underused, tax reliefs available to Singapore SMEs today. A 400% deduction, or a 20% cash conversion, on R&D, IP, innovation partnerships, and approved training expenditure can materially change the economics of investing in your company’s capabilities, provided the claim is properly documented and correctly coordinated with any grants you are also drawing on. For founders weighing EIS claims as part of a wider business investment planning exercise, it is worth treating this as a recurring annual review rather than a one-off filing task, given the scheme runs all the way through to YA2028.

To speak with the team at Raffles Corporate Services, you can email [email protected] or call, SMS, or WhatsApp +65 8501 7133. We are happy to assist with any queries.

The Editorial Team, Raffles Corporate Services