The Inland Revenue Authority of Singapore (IRAS) has updated the Enterprise Innovation Scheme (EIS) e-Tax Guide (Third Edition) and its EIS webpage to incorporate enhancements announced in Singapore Budget 2026.
The principal development is the introduction of artificial intelligence (AI) adoption as a new qualifying activity under the EIS. The update also expands the list of qualifying partners, clarifies the treatment of research and development (R&D) expenditure and revises certain administrative references.
Businesses considering investments in AI adoption, innovation and R&D should review the updated guidance to determine the applicable tax benefits and eligibility requirements.
Key Changes and Tax Implications
1. AI Adoption Introduced as a New Qualifying Activity
The EIS has been expanded to include qualifying expenditure relating to the adoption of AI.
A new Annex F has been introduced in the e-Tax Guide to explain the qualifying activities and applicable conditions.
This enhancement recognises the increasing importance of AI in improving business productivity, operational efficiency and innovation.
However, businesses should not assume that all expenditure on AI software, systems, consultancy or implementation automatically qualifies for EIS benefits. Eligibility depends on the specific conditions prescribed by IRAS.
2. Expansion of Qualifying Partners
The list of qualifying partners has been expanded to include the Sectoral AI Centre of Excellence for Manufacturing.
This addition supports qualifying AI-related activities undertaken through recognised partners.
Businesses should verify the eligibility of their projects and the relevant qualifying partner before claiming enhanced tax deductions.
3. Cash Payout Option Not Available for AI Adoption
The updated Annexes A to E clarify that the EIS cash payout option does not apply to the new qualifying activity involving AI adoption.
This is an important distinction because the EIS generally provides a cash conversion option for certain qualifying expenditure, subject to the relevant conditions.
Businesses undertaking qualifying AI adoption activities should therefore evaluate the available tax deduction benefits separately and should not include such expenditure in applications for the EIS cash payout.
4. Clarification of Enhanced R&D Deduction
IRAS has clarified that the additional 150% tax deduction continues to apply to qualifying R&D expenditure exceeding S$400,000 incurred during the basis period of the relevant Year of Assessment (YA).
This clarification is relevant to businesses undertaking substantial qualifying R&D activities.
The applicable deduction must be determined by reference to the relevant expenditure thresholds, statutory requirements and EIS provisions.
Businesses should maintain appropriate supporting documentation to substantiate the nature and amount of qualifying R&D expenditure.
5. Administrative and Terminology Updates
The Third Edition also updates references from “SkillsFuture Singapore” to “Skills and Workforce Development Agency”.
This is an administrative terminology update and should be reflected in relevant tax compliance documentation and internal guidance.
Practical Implications
The revised EIS guidance presents several considerations for companies planning innovation-related expenditure.
- Review AI adoption projects: Assess whether proposed AI initiatives fall within the qualifying activities described in Annex F.
- Verify qualifying partners: Confirm that the relevant institution or organisation is recognised under the EIS framework.
- Distinguish tax deductions from cash payouts: Ensure that AI adoption expenditure is not incorrectly included in cash payout claims.
- Review R&D expenditure: Apply the relevant enhanced deduction rates and thresholds when computing qualifying R&D claims.
- Maintain supporting records: Retain project documentation, agreements, invoices and expenditure analyses to support EIS claims.
- Update tax computations: Reflect the revised EIS provisions in corporate income tax computations and supporting schedules.
- Assess commercial benefits: Consider the after-tax cost of qualifying innovation projects when evaluating investment decisions.
Recommended Action
Companies planning to invest in AI adoption or undertake qualifying R&D activities should review the Third Edition of the EIS e-Tax Guide before finalising their tax computations or making EIS claims.
Particular attention should be given to the eligibility requirements for AI adoption, the expanded list of qualifying partners and the restriction on using the cash payout option for the new AI activity. Finance and tax teams should also ensure that qualifying expenditure is properly identified, supported by documentation and reported in the appropriate Year of Assessment.
Technical note
The most significant development is the inclusion of qualifying AI adoption activities under the EIS. The article distinguishes the new category from existing qualifying activities and emphasise that the cash payout option is unavailable for AI adoption expenditure.
For tax computations, businesses should also distinguish the enhanced deduction applicable to qualifying expenditure within the S$400,000 threshold from the additional 150% deduction applicable to qualifying R&D expenditure exceeding that threshold. The precise qualifying conditions, applicable Years of Assessment and deduction limits should be checked against Annex F and the relevant legislation before making a claim.
This article provides general tax information and does not constitute specific tax advice. Eligibility for EIS benefits depends on the relevant statutory provisions, qualifying activities, expenditure limits and IRAS requirements.
Sources: IRAS, 31 August 2026.