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The 2018 Singapore Budget, as announced by Finance Minister Heng Swee Keat, included a series of measures to boost the island nation’s research and development and intellectual property taxation regime. With the cessation of the Productivity and Innovation Credit (PIC) scheme in 2017, the new measures – as part of the Productivity Solutions Grant (PSG) package – are a timely means to incentivize local business to invest in research and development and IP-related activities in the coming years.
Firstly, the tax deduction for payments made by businesses to license IPRs for commercial use is to be doubled from 100 percent to 200 percent. This rate is to run from 2019 until 2025, and will be capped at a maximum expenditure of S$100,000 (US$75,900). IPRs qualifying for the enhanced tax deduction include patents, copyright (excluding any rights to the use of software), registered designs, geographical indications, lay-out designs of integrated circuits, trade secrets or information that has commercial value and plant varieties. It is notable that payments made for the use of trademarks only qualify for the regular, non-enhanced tax deduction.
Another tax deduction which has been doubled is for costs incurred in IPR registrations. This will also be capped at S$100,000 and run between 2019 and 2025. The registration costs qualifying for tax deduction include both the official fees and professional fees incurred by a company in registering patents, trademarks, designs and plant varieties for the purpose of its trade or business.
Thirdly, tax deductions on expenditure incurred in respect of R&D activities carried out in Singapore will also be increased from 150 percent to 250 percent over the same time period. To qualify for the tax benefits, the R&D activities must have the objective of acquiring new knowledge, creating new products/processes or improving existing products/processes. They should also involve a degree of novelty or technical risk and conduct a systematic, investigative and experimental study in a field of science or technology.
In addition, the Singapore Government has set aside a S$500 million (US$379.6 million) budget to support two new initiatives to spur innovative activities on the island nation.
The first initiative is the introduction of an open innovation platform that will help businesses find partners whom they can collaborate with and develop new ideas and solutions. The platform will allow companies to crowdsource solutions online by posing challenges and soliciting for collaboration. This service is expected to be ready in the second quarter of 2018.
Secondly, the Singapore government has committed to new transformation programmes that will allow the island’s leading airport and seaport to become platforms for companies to develop, test and use new technologies.
Further, the Singapore government and Temasek Holdings are pledging a S$100 million (US$75.9 million) joint venture aimed at supporting companies which are developing IPRs generated by public sector-led research.
The measures are seen as the replacement of the Productivity and Innovation Credit (PIC) scheme, which ended in late 2017. The scheme had given high deduction rates and allowances of up to 400 percent in certain circumstances. After the scheme’s cessation, tax deduction rates fell back to original levels – so the three rate increases detailed above are seen as securing business interests with regard to innovation in the next six years.
Businesses operating in Singapore also stand to benefit from budgetary measures to promote innovation such as the Enterprise Development Grant (EDG), Productivity Solutions Grant (PSG) and the enhanced Partnerships for Capability Transformation (PACT) scheme. All of these newly-revamped schemes will provide financial assistance to facilitate innovation.
With respect to IP, the EDG will provide support in areas such as portfolio management, franchising and branding. The PSG will include the Innovation & Capability Voucher – a grant that small businesses may spend on IP management and diagnostics. Finally, the PACT scheme includes measures to assist the implementation of knowledge transfer from large organisations to SMEs.
All of these measures taken in the Budget 2018 suggest that Singapore’s government is seeking to certify its position as an IP hub in Asia.
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