20 February 2023
The Intellectual Property Development Incentive in Singapore
Our accountants in Singapore describe an inventive program that will apply for companies in case of selected IP rights.
The Intellectual Property Development Incentive regime was established in order to encourage investors to explore research and development activities. The regime is based on a concessionary tax rate, a percentage of the intellectual property (IP) income that will be taxed at a preferential rate. The incentive was legislated in 2017, is administered by the Economic Development Board and is available for awards approved until 31 December 2028.
Our team of accountants in Singapore can give you complete information about this regime. The measure is just one of the number of incentives available to investors that also make Singapore an attractive location to base a business.
The features of the IP development incentive
Under the Income Tax Act provisions that introduced this regime in 2017, the incentive will be based on a concessionary tax rate. This means that a certain percentage of the income derived from IP rights (that qualifies for this purpose) will be taxed at a 5 percent or 10 percent rate. This taxation rate will be subject to an increased rate of at least 0.5% starting with the 11th year of the incentive period.
A condition applies in regards to the duration of the intellectual property development incentive: the initial tax relief cannot exceed a period of ten years and the subsequent extension cannot exceed ten years for each new period.
Scope of the incentive
The incentive follows the OECD modified nexus approach, so the share of IP income qualifying for the concessionary rate depends on the R&D carried out by the company itself. The scope of the intellectual property development incentive will cover copyrights and patents and will not cover income from IP rights associated with trademarks.
Authorities in Singapore will need to determine the circumstances in which income from IP activities that were previously taxed at a concessionary tax would be afterward taxed at the normal rate. The agents at our accounting firm in Singapore can keep you up to date with the latest changes to this incentive.
Investors can contact our accounting firm in Singapore for more detailed information about the existing tax incentives. In order to review, evaluate, and provide management with solutions about accounting and financial reporting of transactions and operations, the financial audit is the most suitable option. The main goal of this type of service is to make sure that the financial activity is completely and accurately recorded in the relevant financial reports and in compliance with applicable laws. Our auditors in Singapore can offer such a service.