Clause 19

Subject to this section, for the purpose of ascertaining the income of a person carrying on any trade or business during the basis period for any year of assessment between the year of assessment 2009 and the year of assessment 2015 (both years inclusive), there shall be allowed in respect of all his trades and businesses, in addition to the deductions allowed under section 14D, a deduction for expenditure or payments for research and development undertaken by him, of an amount computed in accordance with the following formula:where Uis the amount of qualifying expenditure incurred during the basis period on research and development undertaken in Singapore directly by the person (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); andVis the amount of payments made during the basis period by the person to a research and development organisation for undertaking research and development in Singapore on his behalf, ascertained as follows:

if more than 60% of all such payments made are qualifying expenditure, the actual amount of the qualifying expenditure;

in all other cases, 60% of all such payments.(2) Subject to this section, for the purpose of ascertaining the income of a person carrying on any trade or business during the basis period for any year of assessment between the year of assessment 2011 and the year of assessment 2015 (both years inclusive), there shall be allowed in respect of all his trades and businesses, in addition to the deductions allowed under subsection (1) and section 14D, a deduction for expenditure or payments for research and development undertaken by him, of —

an amount computed in accordance with the formula(b)if the aggregate of U, V, W and X exceeds the specified amount for the year of assessment, an amount computed in accordance with the formulawhereU and V have the same meanings as in subsection (1);Wis the amount of qualifying expenditure incurred during the basis period on research and development undertaken outside Singapore —

directly by the person (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); and

that is related to his trade or business;Xis the amount of payments made during the basis period by the person to a research and development organisation for undertaking research and development outside Singapore on his behalf that is related to his trade or business, ascertained as follows:

where more than 60% of all such payments made are qualifying expenditure, the actual amount of the qualifying expenditure;

in all other cases, 60% of all such payments;Yis the whole or any part of the sum of U and V which the person has elected for inclusion in the computation of the deduction under this paragraph, which when aggregated with Z does not exceed the specified amount; andZis the whole or any part of the sum of W and X which the person has elected for inclusion in the computation of the deduction under this paragraph, which when aggregated with Y does not exceed the specified amount.(3) The election under subsection (2)(b) shall be made at the time of lodgment of the return of income for the year of assessment or within such further time as the Comptroller may, in his discretion, allow.(4) The specified amount referred to in subsection (2)(b) is —

for the year of assessment 2011, $800,000;

for the year of assessment 2012, the balance after deducting from $800,000 the subsection (2) amount for the year of assessment 2011;

for the year of assessment 2013, $1,200,000;

for the year of assessment 2014, the balance after deducting from $1,200,000 the subsection (2) amount for the year of assessment 2013; or

for the year of assessment 2015, the balance after deducting from $1,200,000 the subsection (2) amount for the year of assessment 2013 and the subsection (2) amount for the year of assessment 2014.(5) In subsection (4) —

the amount under paragraph (a) of that subsection shall be substituted with “$400,000” if the person does not carry on any trade or business during the basis period for the year of assessment 2012;

the balance under paragraph (b) of that subsection shall be substituted with “$400,000” if the person does not carry on any trade or business during the basis period for the year of assessment 2011;

if the person does not carry on any trade or business during the basis period for any one year of assessment between the year of assessment 2013 and the year of assessment 2015 (both years inclusive), the references to “$1,200,000” in the paragraphs of that subsection applicable to the other 2 years of assessment shall be substituted with “$800,000”;

if the person does not carry on any trade or business during the basis periods for any 2 years of assessment between the year of assessment 2013 and the year of assessment 2015 (both years inclusive), the reference to “$1,200,000” in the paragraph of that subsection applicable to the remaining year of assessment shall be substituted with “$400,000”; and

for the avoidance of doubt, no deduction shall be made from the substituted amount in subsection (4)(d) or (e) of the subsection (2) amount for the year of assessment 2013 if the person does not carry on any trade or business during the basis period for that year of assessment, and no deduction shall be made from the substituted amount in subsection (4)(e) of the subsection (2) amount for the year of assessment 2014 if the person does not carry on any trade or business during the basis period for that year of assessment.(6) For the purposes of subsections (4) and (5), “subsection (2) amount”, in relation to a year of assessment, means —

if the deduction allowed under subsection (2) for that year of assessment is the amount referred to in subsection (2)(a), the aggregate of U, V, W and X referred to in that subsection; or

if the deduction allowed under subsection (2) for that year of assessment is the amount referred to in subsection (2)(b), the aggregate of Y and Z referred to in that subsection.(7) For the purpose of subsection (2)(b), where an individual carrying on a trade or business through 2 or more firms (excluding partnerships) has, during the basis period for any year of assessment between the year of assessment 2011 and the year of assessment 2015 (both years inclusive), incurred qualifying expenditure or made payments in respect of such firms entitling him to a deduction under subsection (2), the deduction that may be allowed to him for those expenditure or payments in respect of all his trades and businesses shall not exceed the amount computed in accordance with subsection (2)(b) for that year of assessment.(8) For the purpose of subsection (2)(b), where a partnership carrying on a trade or business has, during the basis period for any year of assessment between the year of assessment 2011 and the year of assessment 2015 (both years inclusive), incurred qualifying expenditure or made payments entitling the partners of the partnership to a deduction under subsection (2), the aggregate of the deductions that may be allowed to all the partners of the partnership for the expenditure or payments in respect of all the trades and businesses of the partnership shall not exceed the amount computed in accordance with subsection (2)(b) for that year of assessment.(9) Section 14D(4) and (5) shall apply in relation to the deduction for expenditure and payments for which a deduction is allowed under subsection (1) or (2) for research and development that is not related to the trade or business carried on by the person, as they apply in relation to the deduction for the expenditure and payments referred to in section 14D(1)(aa) and (c), subject to the following modifications:

a reference to 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 37I) in section 14D(4) is a reference to the remaining amount of the deduction under subsection (1) or (2) (as the case may be) after deducting the amount of the deduction under that subsection that corresponds to the qualifying expenditure or payments in respect of which an election for a cash payout has been made under section 37I;

a reference to the specified amount of the expenditure or payments is a reference to an amount computed in accordance with the formulawhere Ais the remaining amount of the deduction under subsection (1) or (2) (as the case may be) after deducting the amount of the deduction under that subsection that corresponds to the qualifying expenditure or payments in respect of which an election for a cash payout has been made under section 37I;Bis the rate of tax specified in section 43(1)(a); andCis —

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

in a case where the concessionary income derived by the person from the trade or business carried on by him is subject to tax at 2 or more concessionary rates of tax, the higher or highest of those rates.(10) No deduction shall be allowed to a company under subsection (2) for any year of assessment if a deduction for any expenditure has been allowed under section 37G for that year of assessment.(11) In this section —“consumables” means any materials or items used in the research and development which, upon such use, are consumed or transformed in such a manner that they are no longer useable in their original form, but does not include utilities;“qualifying expenditure” means any expenditure attributable to the research and development that is incurred on —

staff costs;

consumables; or

such other matter as the Minister may prescribe by regulations;“staff costs” means any salary, wages and other benefits paid or granted in respect of employment (excluding director’s fees), whether in money or otherwise, to any employee for carrying out the research and development, and includes ––

expenses incurred for training or certifying the employee for the purpose of carrying out the research and development; and

such other expenses as may be prescribed.(12) In this section —

a reference to a person undertaking research and development includes a reference to a research and development organisation undertaking research and development on his behalf; and

a reference to qualifying expenditure or to payment made by a person to a research and development organisation for undertaking research and development on his behalf excludes any such expenditure or payment, as the case may be, to the extent that it is subsidised by grants or subsidies from the Government or a statutory board.”.