Singapore AI Tax Deduction: The CEO Checklist

Section 1 — Qualifying vs Non-Qualifying Spend

What is likely to qualify

AI software with genuine AI capability

• AI-integrated HRMS, CRM, finance, or operations platforms
• Document processing, OCR with intelligent extraction, IDP solutions
• Conversational AI deployed in customer or employee workflows
• Computer vision, speech recognition, or predictive analytics tools

Test: does the tool make decisions or extract structured outputs from unstructured data?

AI integration and consultant fees

• Implementation costs for connecting AI to your existing systems
• Workflow redesign fees tied directly to AI deployment
• Solution architecture for AI-on-top-of-legacy-system projects
• Custom AI development for specific business processes

Test: is the spend creating measurable AI capability inside your business operations?

AI literacy training under SkillsFuture

• IMDA-approved AI courses for your staff
• Certified prompt engineering and AI fluency programmes
• Leadership AI strategy programmes from approved providers

Test: is the training delivered by a SkillsFuture-approved provider with a recognised certification outcome?

What will not qualify

Section 2 — PSG and EIS Stacking Decision Tree

You can stack PSG (Productivity Solutions Grant) and EIS (Enterprise Innovation Scheme) — but never on the same dollar. Here is the decision logic.

Step 1 — Does the AI tool have PSG funding available?

→ Yes: continue to Step 2
→ No: skip to Step 3 (claim full EIS on the entire spend)

Step 2 — Apply for PSG first

PSG covers up to 50% of approved AI-enabled solutions for SMEs. Apply through the Business Grants Portal before purchase, not after. The split that follows: PSG portion is subsidised (EIS does not apply on this portion). Out-of-pocket portion is fully eligible for EIS 400% treatment.

Step 3 — Calculate your EIS claim on the qualifying portion

Out-of-pocket spend × 400% = EIS deduction
EIS deduction × 17% corporate tax rate = Tax saved

Worked example: S$50,000 AI tool with 50% PSG

Step 4 — Document the split

In your accounts, separate every PSG-funded AI purchase into two line items: PSG-funded portion (cannot claim EIS) and out-of-pocket portion (claim EIS at 400%). Without this split, IRAS may disallow the entire EIS claim at audit.

Section 3 — Documentation Template for Your Finance Team

Give this exact list to your CFO or accountant. This is the documentation IRAS will expect at audit.

A. Account category setup

Create a dedicated expense category in your chart of accounts named:

Qualifying EIS AI Expenditure — YA [year]

Maintain this as a separate cost centre. Do not commingle with general IT or software expenses. Separate categories for: AI software subscriptions, AI implementation and consulting, AI literacy training, Custom AI development.

B. Vendor invoice requirements

Sample invoice description that works: "AI-powered document intelligence platform — including ML-based data extraction, automated classification, and intelligent workflow routing. Service period: 1 Jan 2026 to 31 Dec 2026."

Sample invoice description that will not pass IRAS scrutiny: "Software subscription — annual fee." Request revised invoices from any vendor whose current invoice looks like this.

C. Supporting documentation file

For every AI investment, keep one folder containing:

• Vendor invoice with AI capability described
• Vendor SOW or contract specifying AI deliverables
• Implementation plan showing how the AI is integrated into business operations
• PSG approval letter if applicable, with portion split
• Internal use case document describing the business problem being solved
• Adoption metrics for the financial year (users, transactions processed, time saved)

When IRAS asks for proof, you produce one folder per investment. Not loose receipts.

D. Quarterly reviews with your tax adviser

• March 2026 — confirm setup and approach
• July 2026 — review against IRAS qualifying list once published
• December 2026 — pre-filing check for YA 2027
• December 2027 — final pre-filing check for YA 2028 before window closes

Section 4 — Three Things to Do This Week

Monday — Brief your CFO
Send your CFO the CFO Briefing Pack. Ask one question: Are we set up to capture the 400% deduction on every qualifying AI purchase from FY2026 onwards?

Wednesday — Audit your AI spend
List every AI-related subscription and project in your business right now. Mark each as: likely qualifies / probably qualifies / unlikely qualifies. Use the test from Section 1.

Friday — Contact your AI vendors
Ask them to issue revised invoices that explicitly describe the AI components of their product. Most vendors will do this on request when they understand it helps you claim a tax benefit.