And check out two other things Singapore can do to scale up innovation.
Ahead the Budget 2017, groups have proposed different ways on how to ensure that Singapore economy can thrive even in the midst of tough times. One such proposal is for Singapore government to encourage firms to look at innovation as a source of growth.
In its wishlist, global leader in assurance, tax, transaction, and advisory services EY said there are five ways how Singapore can push enterprises to innovate. One way is by introducing a patent box scheme or similar tax regime. In recent years, a number of jurisdictions such as the UK and Belgium, has introduced patent box regimes. Such regimes usually offer preferential tax rates on income derived from intellectual property, and their key objective is to attract R&D or innovative activities into the country.
Ernst & Young Solutions LLP partner in business Incentives Advisory Tan Bin Eng said this will complement existing tax incentives that promote R&D and improve the country’s overall attractiveness as a destination to conduct R&D and commercialise the resulting IP.
“The introduction of a patent box or similar tax regime in Singapore that provides lower effective tax rate to IP-related income, and is tied to the performance of R&D activities and commercialisation of the output of these activities, can drive the proliferation of value creation activities in Singapore," she said.
Another way to encourage firms is by enhancing writing down allowance for IP rights.
Tan Ching Khee, Partner, Tax Services, Ernst & Young Solutions LLP said when a Singapore-based company acquires IP rights, such costs can be eligible for a writing down allowance only if the company acquires both the economic and legal rights to the IP. For companies that create IP in Singapore, such costs can only be deductible if they fall within the R&D criteria.
“A review and enhancement of various types of IP will go a long way in ensuring that the Singapore IP tax regime is aligned with other jurisdictions. The definition of IP can be broadened and at the same time, the government may wish to consider whether there continues to be a need to require both legal and economic ownership of IP rights before writing down allowance can be made available," he noted.
Meanwhile, Eng pinted out that MAS could introduce and administer a targeted tax incentive. She says this is to "offer a preferential tax rate of 10% or lower to promote financial innovation-related activities by financial services companies in areas such as digital and mobile payments, authentication and biometrics, block chain, cloud computing, big data or robotics.”
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