Refundable Investment Credit
- a22162
- Jul 24
- 6 min read
Singapore's Refundable Investment Credit
Singapore has recently introduced the Refundable Investment Credit (RIC) scheme as a key incentive to attract and retain high-value investments. This scheme was announced in Budget 2024 and aims to enhance Singapore's attractiveness for businesses, particularly in light of the Global Anti-Base Erosion (GloBE) Rules (Pillar Two).
Here's a breakdown of the Refundable Investment Credit in Singapore:
What is it?
The RIC is a refundable tax credit. This means that if the credit amount exceeds the company's Corporate Income Tax (CIT) liability (including Domestic Top-up Tax and Multinational Enterprise Top-up Tax), the unutilized portion can be paid out in cash to the company.
It's designed to be consistent with the GloBE Rules for Qualified Refundable Tax Credits (QRTCs), ensuring that it doesn't negatively impact a company's effective tax rate under Pillar Two.
Objectives:
To encourage companies to make significant new or expanded investments in substantive economic activities in Singapore.
To attract investments in key economic sectors and new growth areas.
To advance Singapore's capabilities in globally leading or new growth industries.
Who can apply?
Companies incorporated in Singapore.
Branches of foreign companies registered in Singapore.
Applicants must be making significant new investments that contribute to Singapore's economy and/or advance its capabilities.
How does it work?
The RIC is awarded on qualifying expenditures incurred during a specified qualifying period (up to 10 years).
The credits can be used to offset Corporate Income Tax (CIT) payable.
Any unutilised credits will be refunded in cash to the company within four years from when the company satisfies the conditions for receiving the credits.
The scheme is administered on an approval basis by the Singapore Economic Development Board (EDB) and Enterprise Singapore (EnterpriseSG).
Qualifying Activities Supported: The RIC supports a range of high-value and substantive economic activities, including:
Investing in new productive capacity (e.g., new manufacturing plants, production of low-carbon energy).
Expanding or establishing the scope of activities in digital services, professional services, and supply chain management.
Expanding or establishing headquarters activities or Centres of Excellence.
Carrying out Research & Development (R&D) and innovation activities.
Implementing solutions with decarbonization objectives.
Setting up or expanding activities by commodity trading firms.
Qualifying Expenditures: The types of expenditures that can qualify for the RIC may include:
Capital expenditure (e.g., building, civil and structural works, plant and machinery, software).
Manpower costs.
Training costs.
Professional fees.
Intangible asset costs.
Fees for work outsourced in Singapore.
Materials and consumables.
Freight and logistics costs.
Support Rates: Companies can receive up to 50% support on qualifying expenditures. The actual support rate depends on the project's profile and its expected economic outcomes, with tiered rates based on investment and employment commitments:
10% support: For projects leading to new or expanded capabilities in high-value-added economic activities (e.g., minimum S$3 million investment, 8 employees).
30% support: For projects that go beyond high-value-added activities, leading to new or expanded qualifying activities or deeper value creation capabilities (e.g., minimum S$5 million investment, 10 employees).
50% support: For projects involving investments in best-in-class facilities, operations, and/or leading to significant value capture in the industry ecosystem (e.g., minimum S$7 million investment, 18 employees).
Assessment Criteria: Proposed projects are assessed on both quantitative and qualitative factors, such as:
Commitments to local business spending, fixed asset investments, and employment.
Development and deepening of capabilities.
Resource efficiency improvements.
Broader economic multiplier effects (e.g., collaborations with other players).
Important Notes:
The RIC is a significant component of Singapore's strategy to remain competitive in the global investment landscape, particularly with the upcoming implementation of the Pillar Two rules.
Companies considering claiming the RIC should engage with EDB or EnterpriseSG early in their investment planning.
For the most up-to-date and detailed information, it's always best to refer to the official resources from Enterprise Singapore, the Economic Development Board (EDB), and the Ministry of Finance (MOF) or consult with a tax professional.
How Bestar can Help
Tax professionals are absolutely vital in helping businesses, particularly multinational enterprises (MNEs), leverage Singapore's Refundable Investment Credit (RIC). The RIC is a sophisticated incentive designed to be compliant with the Global Anti-Base Erosion (GloBE) Rules (Pillar Two), and navigating its intricacies requires specialized expertise.
Here's a breakdown of how Bestar can provide invaluable assistance with the RIC:
I. Strategic Assessment and Pre-Application Phase:
Eligibility Review and Fit Analysis:
Deep Dive into Criteria: Bestar possesses a thorough understanding of the specific eligibility criteria for the RIC, including the types of qualifying activities (e.g., new productive capacity, digital services, R&D, decarbonization), expenditure categories (e.g., capital expenditure, manpower costs, professional fees), and the minimum investment/employment thresholds (S3M,S5M, S$7M tiers). We can assess if a company's planned investment aligns perfectly with these requirements.
Strategic Alignment with Singapore's Objectives: We help companies articulate how their proposed project contributes to Singapore's economic goals, such as advancing capabilities in globally leading or new growth industries, which is a key qualitative factor for EDB/EnterpriseSG.
Comparison with Other Incentives: Singapore offers various tax incentives and grants. Bestar can compare the benefits of the RIC with other existing schemes (e.g., Pioneer Certificate Incentive, Development and Expansion Incentive, various grants) to determine the most advantageous option for a specific project, considering potential "double-incentivization" issues where the RIC might affect the tax value of other allowances or deductions.
Pillar Two Impact Assessment (Crucial for MNEs):
Qualified Refundable Tax Credit (QRTC) Validation: This is perhaps the most critical role. The RIC is designed as a QRTC under Pillar Two. Bestar understands why this distinction is vital: QRTCs are treated as income (increasing the denominator in the ETR calculation), rather than a reduction in covered taxes (which would reduce the numerator). This prevents the RIC from lowering the Effective Tax Rate (ETR) below 15% and inadvertently triggering a top-up tax in another jurisdiction. They can confirm the RIC's QRTC status and its implications.
Multi-Year GloBE Simulations: We conduct sophisticated financial modeling and GloBE simulations to project the impact of receiving the RIC on the MNE's jurisdictional ETR in Singapore and its overall global tax liability under Pillar Two. This helps ensure that the benefit from the RIC isn't eroded by top-up taxes elsewhere.
Addressing Potential Issues: We can identify and advise on any potential interactions with specific country-specific Pillar Two rules or the MNE's broader tax planning strategies, particularly for US-parented MNEs needing to consider US foreign tax credit calculations.
II. Application and Negotiation Support:
Preparation of Robust Applications:
Detailed Documentation: The RIC is awarded on an approval basis by EDB or EnterpriseSG. Bestar is adept at compiling comprehensive application packages, including detailed project descriptions, financial projections, economic impact analyses (quantifying local business spending, fixed asset investments, and employment commitments), and capability development plans.
Justifying Support Levels: We help companies present a compelling case to secure the optimal support rate (10%, 30%, or 50%) based on the project's profile and expected economic outcomes.
Clarity and Compliance: We ensure that all information is presented clearly, consistently, and in compliance with the requirements of the administering agencies.
Liaison and Advocacy:
Engaging with Agencies: Bestar can act as a bridge between the company and the EDB/EnterpriseSG, facilitating communication, responding to queries, and participating in discussions throughout the application process.
Negotiation Support: In some cases, we can assist in negotiating the terms and conditions of the RIC award, ensuring they are favorable and practical for the company.
III. Post-Award Compliance and Optimization:
Accounting Treatment and Recognition:
SFRS(I)s Guidance: We advise on the correct accounting treatment of the RIC under Singapore Financial Reporting Standards (International) (SFRS(I)s), particularly how to recognize the grant income and its impact on the financial statements. This is crucial for accurate financial reporting.
Deferred Income Management: We help manage the recognition of deferred income related to the RIC over the qualifying period.
Claim Submission and Monitoring:
Ongoing Compliance: RIC awards come with milestone conditions and ongoing reporting requirements. Bestar helps establish internal processes to monitor qualifying expenditures, ensure that investment and employment levels are met, and manage any external audit requirements for claims.
Accurate Claim Preparation: We assist in preparing and submitting accurate claim applications to EDB/EnterpriseSG, adhering to the specified timelines and documentation standards. This includes ensuring expenditures claimed truly qualify.
Optimizing Utilization: We advise on the most effective way to utilize the RIC – whether to offset Corporate Income Tax (including Domestic Top-up Tax and Multinational Enterprise Top-up Tax), or to elect for a cash payout, considering the company's cash flow needs and tax liability profile.
Audit and Review Support:
Responding to Queries: Should EDB/EnterpriseSG conduct audits or site visits to verify project implementation and compliance with terms, Bestar can provide support and guidance in responding to queries and presenting necessary documentation.
In essence, for businesses considering or pursuing the Refundable Investment Credit in Singapore, Bestar acts as a strategic advisor, technical expert, and compliance manager, ensuring that companies maximize the benefits of this incentive while navigating the complexities of both local tax laws and the broader international tax landscape shaped by Pillar Two. Our involvement significantly de-risks the process and optimizes the financial outcomes.
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