§ 37F — Deduction for incremental expenditure on research and development

37F.—(1) Subject to this section, where any company incurs during the basis period for any year of assessment between the year of assessment 2010 and the year of assessment 2016 (both years inclusive) any incremental qualifying research and development expenditure, then there is to be allowed to that company, on due claim, a deduction against its assessable income computed in accordance with this section.(2) For the purposes of this section, the company must keep an account to be known as its research and development account.

(3) If —(a)

the company derives any income chargeable to tax under this Act during the basis period for any year of assessment between the year of assessment 2009 and the year of assessment 2010 (both years inclusive); and

(b)

the amount standing to its research and development account on the last day of that basis period is less than $300,000,

then there must be credited to the research and development account on the last day of that basis period the lowest of —

(c)

an amount computed in accordance with the specified formula;

(d)

the difference between $300,000 and the amount standing to the research and development account on the last day of that basis period; and

(e)

$150,000.

(4) For the purposes of subsection (3), the specified formula means —

where A

is the assessable income of the company for the year of assessment;

B

is the amount of deduction allowed against the assessable income of the company under subsection (5) for the year of assessment (if applicable);

C

is the amount of investment allowance deducted under Part 8 of the Economic Expansion Incentives (Relief from Income Tax) Act 1967 against the chargeable income of the company for the year of assessment, if any;

D

is the amount of qualifying deduction transferred to the company under section 37B (if any) and qualifying deduction allowed to the company under section 37D for the year of assessment, if any; and

E

is the amount of income of the company not charged to tax under section 43(6) or (6C) for the year of assessment.

[45/2018]

(5) Where on the first day of the basis period for any year of assessment between the year of assessment 2010 and the year of assessment 2016 (both years inclusive), the research and development account of the company is in credit, and —(a)

the company has assessable income for that year of assessment; and

(b)

the company has incurred incremental qualifying research and development expenditure during that basis period,

then there is to be deducted from the assessable income of the company for that year of assessment an amount equal to the lowest of —

(c)

the incremental qualifying research and development expenditure incurred by that company during the basis period;

(d)

the amount of credit standing in the research and development account as at the first day of the basis period; and

(e)

the assessable income of the company for that year of assessment.

(6) As soon as an amount is deducted against the assessable income of a company under subsection (5), the research and development account must be debited with such amount.

(7) Any deduction under this section must so far as possible be made against the part of its assessable income that is subject to the highest rate of tax, and any remaining balance of the deduction must so far as possible be made against the part of its assessable income that is subject to the next highest rate of tax, and so on.

(8) For the purpose of this section, the Minister may make regulations to give effect to or for carrying out the purposes of this section.

(9) A company to which a deduction has been given under this section must deliver to the Comptroller a copy of the audited account made up to any date specified by the Comptroller whenever called upon to do so by written notice.

(9A) No deduction is allowed to a company under this section for any year of assessment if a deduction for that expenditure has been allowed under section 14D(2) for that year of assessment.

(10) In this section, unless the context otherwise requires —“assessable income”, in relation to a company for any year of assessment, means the remainder of its statutory income for the year of assessment after making the deductions under sections 37 and 37A;

“base qualifying research and development expenditure” means the amount of qualifying research and development expenditure incurred in the base year;

“base year” —(a)

in relation to a company incorporated in the basis period relating to the year of assessment 2009 or any subsequent year of assessment, means the basis period in which the company is incorporated; or

(b)

in relation to any other company, means the basis period relating to the year of assessment 2008;

“incremental qualifying research and development expenditure”, in relation to the basis period for any year of assessment, means the excess of qualifying research and development expenditure incurred during the basis period relating to the year of assessment over the base qualifying research and development expenditure;

“qualifying research and development expenditure” means any research and development expenditure which ––(a)

qualifies for deduction under section 14C;

(b)

is incurred in respect of research and development activities carried out in Singapore; and

(c)

is not funded by any grant or subsidy from the Government or a statutory board.[37G

—(1) Subject to this section, where any company incurs during the basis period for any year of assessment between the year of assessment 2010 and the year of assessment 2016 (both years inclusive) any incremental qualifying research and development expenditure, then there is to be allowed to that company, on due claim, a deduction against its assessable income computed in accordance with this section.

(2) For the purposes of this section, the company must keep an account to be known as its research and development account.

(3) If —(a)

the company derives any income chargeable to tax under this Act during the basis period for any year of assessment between the year of assessment 2009 and the year of assessment 2010 (both years inclusive); and

(b)

the amount standing to its research and development account on the last day of that basis period is less than $300,000,

then there must be credited to the research and development account on the last day of that basis period the lowest of —

(c)

an amount computed in accordance with the specified formula;

(d)

the difference between $300,000 and the amount standing to the research and development account on the last day of that basis period; and

(e)

$150,000.

(4) For the purposes of subsection (3), the specified formula means —

where A

is the assessable income of the company for the year of assessment;

B

is the amount of deduction allowed against the assessable income of the company under subsection (5) for the year of assessment (if applicable);

C

is the amount of investment allowance deducted under Part 8 of the Economic Expansion Incentives (Relief from Income Tax) Act 1967 against the chargeable income of the company for the year of assessment, if any;

D

is the amount of qualifying deduction transferred to the company under section 37B (if any) and qualifying deduction allowed to the company under section 37D for the year of assessment, if any; and

E

is the amount of income of the company not charged to tax under section 43(6) or (6C) for the year of assessment.

[45/2018]

(5) Where on the first day of the basis period for any year of assessment between the year of assessment 2010 and the year of assessment 2016 (both years inclusive), the research and development account of the company is in credit, and —(a)

the company has assessable income for that year of assessment; and

(b)

the company has incurred incremental qualifying research and development expenditure during that basis period,

then there is to be deducted from the assessable income of the company for that year of assessment an amount equal to the lowest of —

(c)

the incremental qualifying research and development expenditure incurred by that company during the basis period;

(d)

the amount of credit standing in the research and development account as at the first day of the basis period; and

(e)

the assessable income of the company for that year of assessment.

(6) As soon as an amount is deducted against the assessable income of a company under subsection (5), the research and development account must be debited with such amount.

(7) Any deduction under this section must so far as possible be made against the part of its assessable income that is subject to the highest rate of tax, and any remaining balance of the deduction must so far as possible be made against the part of its assessable income that is subject to the next highest rate of tax, and so on.

(8) For the purpose of this section, the Minister may make regulations to give effect to or for carrying out the purposes of this section.

(9) A company to which a deduction has been given under this section must deliver to the Comptroller a copy of the audited account made up to any date specified by the Comptroller whenever called upon to do so by written notice.

(9A) No deduction is allowed to a company under this section for any year of assessment if a deduction for that expenditure has been allowed under section 14D(2) for that year of assessment.

(10) In this section, unless the context otherwise requires —“assessable income”, in relation to a company for any year of assessment, means the remainder of its statutory income for the year of assessment after making the deductions under sections 37 and 37A;

“base qualifying research and development expenditure” means the amount of qualifying research and development expenditure incurred in the base year;

“base year” —(a)

in relation to a company incorporated in the basis period relating to the year of assessment 2009 or any subsequent year of assessment, means the basis period in which the company is incorporated; or

(b)

in relation to any other company, means the basis period relating to the year of assessment 2008;

“incremental qualifying research and development expenditure”, in relation to the basis period for any year of assessment, means the excess of qualifying research and development expenditure incurred during the basis period relating to the year of assessment over the base qualifying research and development expenditure;

“qualifying research and development expenditure” means any research and development expenditure which ––(a)

qualifies for deduction under section 14C;

(b)

is incurred in respect of research and development activities carried out in Singapore; and

(c)

is not funded by any grant or subsidy from the Government or a statutory board.[37G