EIS AI adoption deduction for YA 2027 and YA 2028

The EIS AI adoption deduction can give a business a 400% tax deduction on the first S$50,000 of qualifying expenditure for each of YA 2027 and YA 2028. It covers qualifying subscriptions or licences for artificial intelligence systems and qualifying AI business services. It does not cover physical infrastructure or hardware, and this new activity does not qualify for the EIS cash payout.

A sound claim starts with the commercial use of the AI, not the product label. Keep the contract, invoice, payment, user list, business purpose, period of use and any grant support together. Where an invoice includes both qualifying and non-qualifying items, use a reasonable basis to split the cost and retain the calculation.

Confirm that the activity falls within the new EIS treatment

The current IRAS Enterprise Innovation Scheme page includes AI adoption as a qualifying activity for YA 2027 and YA 2028. The published examples cover subscriptions or licences to AI systems and the procurement of AI business services.

Start by recording what the system or service does. A customer-service tool may classify enquiries and suggest replies. A finance tool may extract invoice data and identify exceptions. A professional service may configure a model, redesign a workflow or train staff to use an AI solution. The file should explain the work in ordinary business language.

Do not assume that every technology invoice qualifies. General software, data storage, computers, network equipment and physical infrastructure need their own tax analysis. A supplier’s use of the term AI is not proof that the customer’s expenditure meets the published conditions.

Separate subscriptions, services and hardware

Review each invoice line. Mark qualifying AI subscriptions or licence charges separately from implementation, training, support, hardware and other software. Then connect every marked amount to the signed order, service description and period of use.

For an AI business service, identify the deliverable and the business process being improved. Keep the statement of work, acceptance record and evidence that the service was actually provided. If a consultant also supplies ordinary process work, divide the fee on a supportable basis instead of treating the whole engagement as AI adoption.

Physical servers, laptops, devices and other hardware are outside the new AI activity described by IRAS. They may have separate business-expense or capital-allowance treatment. Keep that analysis outside the EIS AI schedule so the enhanced claim remains traceable.

Use the correct cap and Years of Assessment

The enhanced deduction applies to the first S$50,000 of qualifying AI adoption expenditure for each relevant Year of Assessment. At 400%, S$50,000 of qualifying expenditure produces a deduction of S$200,000 before considering the business’s wider tax position. It is a deduction, not a S$200,000 cash payment.

Map expenditure to the correct basis period. A multi-year subscription can cross accounting periods, so the invoice date alone may not settle the amount for one Year of Assessment. Apply the company’s accounting and tax treatment consistently, then preserve the allocation.

Keep YA 2027 and YA 2028 schedules separate. Show the qualifying cost, non-qualifying cost, grant adjustment, enhanced-deduction cap and amount claimed for each year. This prevents a two-year contract from being counted twice.

Net off grants and other assistance

IRAS states that qualifying expenditure is net of grants or subsidies from the Government or a statutory board. Match assistance to the cost it supports. A grant approval does not always equal the amount eventually disbursed, so reconcile the approved, claimed and received amounts.

If a S$60,000 AI project receives S$20,000 of support that relates to the same qualifying scope, the starting point is not the gross S$60,000. Determine the net qualifying expenditure and document any part of the grant that relates to non-qualifying work. Do not subtract assistance from an unrelated project.

Keep the letter of offer, claim submission, disbursement advice and accounting entry with the tax schedule. If the final grant amount changes after the tax return is prepared, assess whether an adjustment or disclosure is required.

Apportion mixed expenditure reasonably

A bundled contract may include an AI licence, cloud capacity, data preparation, ordinary software integration, devices and staff training. Ask the supplier for a line-item breakdown where possible. If none is available, use a reasonable method linked to the contract and work performed.

The basis might use supplier pricing, implementation hours or another objective measure. Avoid a percentage selected only to maximise the enhanced deduction. Record who prepared the apportionment, the documents used and why the method fits the commercial arrangement.

Apply the same approach to credit notes and rebates. A later price reduction should follow the original allocation unless the credit clearly relates to one item. Keep both the first calculation and the revised amount.

Build one claim schedule

Keep the deduction separate from the cash payout

The new AI adoption activity does not qualify for the EIS cash payout. A business should not include it in a payout election merely because other EIS activities may offer a cash option. The tax file should state that distinction clearly.

Model the actual tax effect before committing to a purchase. A deduction has value when it can be used under the company’s tax position. Losses, group relief and other deductions may affect timing. Commercial approval should still rest on the system’s expected benefit, security and implementation risk.

The Singapore business support decision guide is the pillar cornerstone. The EIS deduction and payout guide explains the wider scheme. The EDGE transition guide covers grant timing. The Enterprise Support and Grants hub connects the library.

The best claim file is easy to audit months later. It shows what was bought, why it qualifies, how mixed costs were split, what public support was deducted and which Year of Assessment received the claim.