§ 14C — Expenditure on research and development

14C.—(1) For the purpose of ascertaining the income of any person carrying on any trade or business and subject to subsection (4), the following expenditure incurred (other than any amount which is allowable as a deduction under section 14) by that person is allowed as a deduction:(a)

expenditure incurred on research and development undertaken directly by that person and related to that trade or business (except to the extent that it is capital expenditure on plant, machinery, land or buildings or on alterations, additions or extensions to buildings or in the acquisition of rights in or arising out of research and development);

(aa)

expenditure incurred during the basis period for any year of assessment between the year of assessment 2009 and the year of assessment 2028 (both years inclusive) on research and development undertaken in Singapore directly by that person and not related to that trade or business (except to the extent that it is capital expenditure on plant, machinery, land or buildings or on alterations, additions or extensions to buildings or in the acquisition of rights in or arising out of research and development);[Act 30 of 2023 wef 30/10/2023]

(b)

payments made by that person to a research and development organisation for undertaking on that person’s behalf in Singapore research and development related to that trade or business;

(ba)

payments made by that person to a research and development organisation for undertaking on that person’s behalf, partly in Singapore and partly outside Singapore, research and development related to that trade or business;

(c)

payments made during the basis period for any year of assessment between the year of assessment 2009 and the year of assessment 2028 (both years inclusive) by that person to a research and development organisation for undertaking on that person’s behalf in Singapore research and development not related to that trade or business;[Act 30 of 2023 wef 30/10/2023]

(d)

payments made by that person to a research and development organisation for undertaking on that person’s behalf outside Singapore research and development related to that trade or business;

(e)

payments made by that person under any cost-sharing agreement during the basis period for a year of assessment between the years of assessment 2012 and 2017 (both years inclusive), in respect of research and development that is related to that trade or business, regardless of who undertakes the research and development so long as it is undertaken wholly or partly for that person or on that person’s behalf;

(f)

payments made by that person during the basis period for any year of assessment between the year of assessment 2012 and the year of assessment 2017 (both years inclusive), under any cost‑sharing agreement in respect of research and development that is undertaken in Singapore and is not related to that trade or business, regardless of who undertakes the research and development so long as it is undertaken wholly or partly for that person or on that person’s behalf;

(g)

payments made by that person under any cost‑sharing agreement during the basis period for the year of assessment 2018 or a subsequent year of assessment in respect of any research and development, regardless of who undertakes the research and development so long as it is undertaken wholly or partly for the person or on the person’s behalf.[37/2014; 39/2017]

(1A) The expenditure or payment referred to in subsection (1) does not include any such expenditure or payment to the extent that it is or is to be subsidised by grants or subsidies from the Government or a statutory board.

(2) For the purposes of this section, any expenditure incurred by a person prior to the commencement of that person’s trade or business is deemed to have been incurred by that person on the first day on which that person carries on that trade or business but a deduction for this is subject to section 14X.[34/2016]

(2A) Subsection (2) does not apply to any expenditure if a deduction has already been allowed for that expenditure under subsection (1) in a previous year of assessment.[45/2018]

(3) For the purposes of subsection (1)(ba) or (d), a claim for deduction is allowed to a person only if —(a)

there is an undertaking by the person that any benefit which may arise from the conduct of the research and development must accrue to the person; and

(b)

the claim is made by the person in such manner and subject to such conditions as the Comptroller may require.

(3A) For the purposes of subsection (1)(e) or (g) in respect of research and development that is undertaken wholly or partly outside Singapore, a claim for deduction is allowed to a person only if —(a)

there is an undertaking by the person that any benefit which may arise from the conduct of the research and development must accrue, wholly or partly, to the person; and

(b)

the claim is made by the person in such manner and subject to such conditions as the Comptroller may require.[39/2017]

(4) The deduction of the expenditure and payments referred to in subsection (1)(aa), (c) and (f) must be made in accordance with the following provisions:(a)

if the person derives from the trade or business carried on by the person both normal income and concessionary income, the amount of the expenditure or payments (after deducting any amount in respect of which an election for a cash payout has been made under section 37G or 37R) must so far as possible be deducted against the normal income, and any remaining balance of the amount is treated as part of the unabsorbed losses in respect of the normal income to be deducted against the concessionary income in accordance with section 37A;[Act 30 of 2023 wef 30/10/2023]

(b)

if the concessionary income referred to in paragraph (a) is subject to tax at 2 or more concessionary rates of tax, the deduction under section 37A of the remaining balance referred to in that paragraph must so far as possible be made against the part of the concessionary income that is subject to tax at the higher or highest concessionary rate of tax, and the deduction under section 37A of any remaining balance must so far as possible be made against the part of the concessionary income that is subject to tax at the lower or next lowest concessionary rate of tax, and so on;

(c)

if the person derives from the trade or business only concessionary income which is subject to tax at a single concessionary rate of tax, a specified amount of the expenditure or payments must be deducted against the concessionary income;

(d)

if the person derives from the trade or business only concessionary income which is subject to tax at 2 or more concessionary rates of tax, a specified amount of the expenditure or payments must so far as possible be deducted against the part of the concessionary income that is subject to the higher or highest concessionary rate of tax, and any remaining balance of the specified amount is treated as part of the unabsorbed losses in respect of that part of the concessionary income that is subject to the higher or highest concessionary rate of tax, to be deducted in accordance with section 37A against the rest of the concessionary income;

(e)

if the rest of the concessionary income referred to in paragraph (d) is subject to tax at 2 or more concessionary rates of tax, then paragraph (b) applies, with the necessary modifications, to the last mentioned deduction in paragraph (d).

(4A) Where a person to whom deductions have been allowed for payments referred to in subsection (1)(e), (f) or (g) becomes entitled to any royalty or other payments (in one lump sum or otherwise) for the use of or right to use any technology or know‑how developed from the research and development activities conducted under the cost‑sharing agreement, such royalty or payments are deemed to be income of that person that is derived from Singapore for the year of assessment which relates to the basis period in which that person becomes entitled to the royalty or payments.[39/2017]

(5) In this section —“concessionary income” means income that is subject to tax at a concessionary rate of tax;

“concessionary rate of tax” means the rate of tax in accordance with —(a)

any order made under section 13(12);

(b)

section 43C, 43D, 43E, 43F, 43G, 43H, 43I, 43J, 43K, 43L, 43M, 43N, 43O, 43P, 43Q, 43R, 43S, 43T, 43U, 43V, 43W or 43X, or the regulations made under any of those sections, as the case may be; or

(c)

section 21(9) or (13) or 23(1)(b) (as the case may be) of the Economic Expansion Incentives (Relief from Income Tax) Act 1967;

“cost‑sharing agreement” means any agreement or arrangement made by 2 or more persons to share the expenditure of research and development activities to be carried out under the agreement or arrangement;

“normal income” means income that is subject to tax at the rate of tax specified in section 43(1)(a);

“specified amount”, in relation to any expenditure or payments, means an amount computed in accordance with the formula

where A

is the amount of the expenditure or payments (after deducting any amount in respect of which an election for a cash payout has been made under section 37G or 37R);

B

is the rate of tax specified in section 43(1)(a); and

C

is —

(a)

in a case where the concessionary income derived by the person from the trade or business carried on by the person is subject to tax at a single concessionary rate of tax, that rate; or

(b)

in a case where the concessionary income derived by the person from the trade or business carried on by the person is subject to tax at 2 or more concessionary rates of tax, the higher or highest of those rates.

[34/2016; 39/2017; 45/2018; 27/2021]

[Act 30 of 2023 wef 30/10/2023]

(6) In this section —(a)

a reference to a payment made by a person under a cost‑sharing agreement is a reference to the expenditure that is allocated to the person for the person to bear under the cost‑sharing agreement, and the time the payment for any part of the expenditure becomes payable by the person or (if no such payment is needed) the time of the allocation, is treated as the time the payment is made; and

(b)

a reference to a payment made by a person under a cost‑sharing agreement excludes any payment for the right to be a party to the cost‑sharing agreement.[39/2017]

(7) Subsection (6) is deemed to have effect for the year of assessment 2012 and every subsequent year of assessment.[14D

[39/2017]

—(1) For the purpose of ascertaining the income of any person carrying on any trade or business and subject to subsection (4), the following expenditure incurred (other than any amount which is allowable as a deduction under section 14) by that person is allowed as a deduction:(a)

expenditure incurred on research and development undertaken directly by that person and related to that trade or business (except to the extent that it is capital expenditure on plant, machinery, land or buildings or on alterations, additions or extensions to buildings or in the acquisition of rights in or arising out of research and development);

(aa)

expenditure incurred during the basis period for any year of assessment between the year of assessment 2009 and the year of assessment 2028 (both years inclusive) on research and development undertaken in Singapore directly by that person and not related to that trade or business (except to the extent that it is capital expenditure on plant, machinery, land or buildings or on alterations, additions or extensions to buildings or in the acquisition of rights in or arising out of research and development);[Act 30 of 2023 wef 30/10/2023]

(b)

payments made by that person to a research and development organisation for undertaking on that person’s behalf in Singapore research and development related to that trade or business;

(ba)

payments made by that person to a research and development organisation for undertaking on that person’s behalf, partly in Singapore and partly outside Singapore, research and development related to that trade or business;

(c)

payments made during the basis period for any year of assessment between the year of assessment 2009 and the year of assessment 2028 (both years inclusive) by that person to a research and development organisation for undertaking on that person’s behalf in Singapore research and development not related to that trade or business;[Act 30 of 2023 wef 30/10/2023]

(d)

payments made by that person to a research and development organisation for undertaking on that person’s behalf outside Singapore research and development related to that trade or business;

(e)

payments made by that person under any cost-sharing agreement during the basis period for a year of assessment between the years of assessment 2012 and 2017 (both years inclusive), in respect of research and development that is related to that trade or business, regardless of who undertakes the research and development so long as it is undertaken wholly or partly for that person or on that person’s behalf;

(f)

payments made by that person during the basis period for any year of assessment between the year of assessment 2012 and the year of assessment 2017 (both years inclusive), under any cost‑sharing agreement in respect of research and development that is undertaken in Singapore and is not related to that trade or business, regardless of who undertakes the research and development so long as it is undertaken wholly or partly for that person or on that person’s behalf;

(g)

payments made by that person under any cost‑sharing agreement during the basis period for the year of assessment 2018 or a subsequent year of assessment in respect of any research and development, regardless of who undertakes the research and development so long as it is undertaken wholly or partly for the person or on the person’s behalf.[37/2014; 39/2017]

(1A) The expenditure or payment referred to in subsection (1) does not include any such expenditure or payment to the extent that it is or is to be subsidised by grants or subsidies from the Government or a statutory board.

(2) For the purposes of this section, any expenditure incurred by a person prior to the commencement of that person’s trade or business is deemed to have been incurred by that person on the first day on which that person carries on that trade or business but a deduction for this is subject to section 14X.[34/2016]

(2A) Subsection (2) does not apply to any expenditure if a deduction has already been allowed for that expenditure under subsection (1) in a previous year of assessment.[45/2018]

(3) For the purposes of subsection (1)(ba) or (d), a claim for deduction is allowed to a person only if —(a)

there is an undertaking by the person that any benefit which may arise from the conduct of the research and development must accrue to the person; and

(b)

the claim is made by the person in such manner and subject to such conditions as the Comptroller may require.

(3A) For the purposes of subsection (1)(e) or (g) in respect of research and development that is undertaken wholly or partly outside Singapore, a claim for deduction is allowed to a person only if —(a)

there is an undertaking by the person that any benefit which may arise from the conduct of the research and development must accrue, wholly or partly, to the person; and

(b)

the claim is made by the person in such manner and subject to such conditions as the Comptroller may require.[39/2017]

(4) The deduction of the expenditure and payments referred to in subsection (1)(aa), (c) and (f) must be made in accordance with the following provisions:(a)

if the person derives from the trade or business carried on by the person both normal income and concessionary income, the amount of the expenditure or payments (after deducting any amount in respect of which an election for a cash payout has been made under section 37G or 37R) must so far as possible be deducted against the normal income, and any remaining balance of the amount is treated as part of the unabsorbed losses in respect of the normal income to be deducted against the concessionary income in accordance with section 37A;[Act 30 of 2023 wef 30/10/2023]

(b)

if the concessionary income referred to in paragraph (a) is subject to tax at 2 or more concessionary rates of tax, the deduction under section 37A of the remaining balance referred to in that paragraph must so far as possible be made against the part of the concessionary income that is subject to tax at the higher or highest concessionary rate of tax, and the deduction under section 37A of any remaining balance must so far as possible be made against the part of the concessionary income that is subject to tax at the lower or next lowest concessionary rate of tax, and so on;

(c)

if the person derives from the trade or business only concessionary income which is subject to tax at a single concessionary rate of tax, a specified amount of the expenditure or payments must be deducted against the concessionary income;

(d)

if the person derives from the trade or business only concessionary income which is subject to tax at 2 or more concessionary rates of tax, a specified amount of the expenditure or payments must so far as possible be deducted against the part of the concessionary income that is subject to the higher or highest concessionary rate of tax, and any remaining balance of the specified amount is treated as part of the unabsorbed losses in respect of that part of the concessionary income that is subject to the higher or highest concessionary rate of tax, to be deducted in accordance with section 37A against the rest of the concessionary income;

(e)

if the rest of the concessionary income referred to in paragraph (d) is subject to tax at 2 or more concessionary rates of tax, then paragraph (b) applies, with the necessary modifications, to the last mentioned deduction in paragraph (d).

(4A) Where a person to whom deductions have been allowed for payments referred to in subsection (1)(e), (f) or (g) becomes entitled to any royalty or other payments (in one lump sum or otherwise) for the use of or right to use any technology or know‑how developed from the research and development activities conducted under the cost‑sharing agreement, such royalty or payments are deemed to be income of that person that is derived from Singapore for the year of assessment which relates to the basis period in which that person becomes entitled to the royalty or payments.[39/2017]

(5) In this section —“concessionary income” means income that is subject to tax at a concessionary rate of tax;

“concessionary rate of tax” means the rate of tax in accordance with —(a)

any order made under section 13(12);

(b)

section 43C, 43D, 43E, 43F, 43G, 43H, 43I, 43J, 43K, 43L, 43M, 43N, 43O, 43P, 43Q, 43R, 43S, 43T, 43U, 43V, 43W or 43X, or the regulations made under any of those sections, as the case may be; or

(c)

section 21(9) or (13) or 23(1)(b) (as the case may be) of the Economic Expansion Incentives (Relief from Income Tax) Act 1967;

“cost‑sharing agreement” means any agreement or arrangement made by 2 or more persons to share the expenditure of research and development activities to be carried out under the agreement or arrangement;

“normal income” means income that is subject to tax at the rate of tax specified in section 43(1)(a);

“specified amount”, in relation to any expenditure or payments, means an amount computed in accordance with the formula

where A

is the amount of the expenditure or payments (after deducting any amount in respect of which an election for a cash payout has been made under section 37G or 37R);

B

is the rate of tax specified in section 43(1)(a); and

C

is —

(a)

in a case where the concessionary income derived by the person from the trade or business carried on by the person is subject to tax at a single concessionary rate of tax, that rate; or

(b)

in a case where the concessionary income derived by the person from the trade or business carried on by the person is subject to tax at 2 or more concessionary rates of tax, the higher or highest of those rates.

[34/2016; 39/2017; 45/2018; 27/2021]

[Act 30 of 2023 wef 30/10/2023]

(6) In this section —(a)

a reference to a payment made by a person under a cost‑sharing agreement is a reference to the expenditure that is allocated to the person for the person to bear under the cost‑sharing agreement, and the time the payment for any part of the expenditure becomes payable by the person or (if no such payment is needed) the time of the allocation, is treated as the time the payment is made; and

(b)

a reference to a payment made by a person under a cost‑sharing agreement excludes any payment for the right to be a party to the cost‑sharing agreement.[39/2017]

(7) Subsection (6) is deemed to have effect for the year of assessment 2012 and every subsequent year of assessment.[14D

[39/2017]