DFG Advisory
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SUTE, PTE, Budget 2026 relief, EIS, and the new AI adoption deduction — what companies in Singapore actually need to know
↓ Download PDF| Tax Benefit | Qualifying New Company — First 3 YAs | Established Company — From 4th YA |
|---|---|---|
| Headline CIT Rate | 17% | 17% |
| Tax Exemption Scheme | Start-Up Tax Exemption (SUTE) | Partial Tax Exemption (PTE) |
| First Band | 75% exemption on first S$100,000 of normal chargeable income | 75% exemption on first S$10,000 of normal chargeable income |
| Second Band | 50% exemption on next S$100,000 of normal chargeable income | 50% exemption on next S$190,000 of normal chargeable income |
| Maximum Income Exempted | Up to S$125,000 per qualifying YA | Up to S$102,500 per YA |
| Budget 2026 Relief | 50% CIT rebate for YA 2026, subject to overall benefit cap* | 50% CIT rebate for YA 2026, subject to overall benefit cap* |
* Overall benefit from the YA 2026 CIT rebate and any CIT Rebate Cash Grant (if eligible) is capped at S$40,000 per company.
SUTE and PTE follow the same core principle: Both are exemptions applied to normal chargeable income for that YA. If the company has less income than the exemption bands, the unused portion of the bands is not carried forward. Actual unutilised trade losses are different — they may generally be carried forward, subject to the shareholding test.
YA2027 and YA2028 — Current Position
No general CIT rebate currently announced for YA2027 and YA2028. Headline CIT rate remains 17%; SUTE/PTE continue to apply where applicable. Enhanced AI deduction (400% on up to S$50k qualifying AI expenditure per YA) is available for YA2027 and YA2028 under the Enterprise Innovation Scheme (EIS), subject to qualifying conditions.
The Enterprise Innovation Scheme (EIS) is the umbrella innovation tax scheme available from YA 2024 to YA 2028. R&D is one of its qualifying activities, and qualifying AI expenditure becomes a new EIS activity for YA 2027 and YA 2028.
Qualifying activities include:
A start-up may claim SUTE/PTE and EIS together if the respective conditions are met.
For qualifying R&D undertaken in Singapore (YA 2024–YA 2028):
A qualifying R&D project must:
Typical qualifying expenditure:
Routine testing, market research and routine/cosmetic modifications generally do not qualify.
Simple illustration:
Current IRAS Position
IRAS has confirmed the 400% deduction and S$50,000 annual cap. The current EIS guidance does not yet set out detailed qualifying AI cost categories. Do not assume general AI subscriptions, consultancy, hardware or development costs qualify unless detailed rules confirm them.
Plan Early. Claim Confidently.
Tax incentives depend on the nature and timing of expenditure, whether the project qualifies, and whether supporting documentation has been maintained from the start. The tax analysis should be considered before the investment is committed, not only when the return is filed.
EIS enhanced deductions that cannot be fully offset against current-year income are treated as unutilised trade losses or allowances.
Loss-Making Company — R&D Example
Most common presentation: the accounting/tax loss already includes the normal 100% R&D expense.
The loss may generally be carried forward subject to the shareholding test and other applicable rules.
What Happens If the Deduction Cannot Be Used?
We help businesses understand not only what they need to pay, but also the reliefs and incentives relevant to their business and stage of growth.
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