Productivity And Innovation Credit

What can my business organisation claim under PIC*?

My company has just purchased colour printers, smart hand phones and upgraded some computer software? Are they claimable under PIC?

Many business owners are too busy to care about  taxation matters. But who then, is looking out for your business by minimizing your tax exposure? Are you in danger of losing out on tax benefits because you are too busy with other aspects of your business?

Let Team 361 assist you!

Team 361 has an experienced pool of consultants to take care of your taxation needs. We understand that PIC claims can be a tedious affair for business owners, most of whom do not have time to spare, or the knowledge to successfully make these claims that can be substantial enough to improve their cash flow.

361′s PIC Advisory Solution (fee starting from $800)

  • We provide you classroom training in identifying items that are claimable under PIC
  • Assist your organisation in computing the PIC to be claimed (we can interact with IRAS on your behalf)
  • * Your company or business entity must have at least 3 employees (Singapore citizens/PRs with CPF contribution) at the last month of the previous financial year.
  • E-mail us at enquiry@sgvip4.noc401.com or call 6515-7906 to talk to our friendly consultants to get details on our PIC advisory service.

What is PIC?

The Productivity and Innovation Credit (“PIC”) was introduced in the Singapore Budget 2010.

PIC has been enhanced in Budget 2011 to provide tax benefits for investments by businesses in a broad range of activities along the innovation value chain. The tax benefits under PIC will be effective from Years of Assessment (YA) 2011 to YA 2015.

The six activities along the innovation value chain that will qualify for PIC benefits are:

  • Acquisition or leasing of  PIC Automation Equipment* 
  • Training of employees
  • Acquisition of Intellectual Property Rights;
  • Registration of patents, trademarks, designs and plant varieties;
  • Research and development activities; and
  • Investment in approved design projects

* PIC Automation Equipment are equipment that are prescribed under the new PIC Automation Equipment List.

Businesses that invest in specialised equipment not in the PIC Automation Equipment List, to automate their processes and to enhance productivity may apply to IRAS to have their equipment approved for PIC on a case-by-case basis.

Tax Benefits under PIC

1) 400% Tax Deduction/Allowances

For YA 2011 to YA 2015, all businesses can enjoy deduction/allowances at 400% on up to $400,000 of their expenditure per year on each of the six qualifying activities instead of the 100%/150% tax deduction/allowances under the existing tax rules.
To enable businesses to enjoy maximum PIC benefits, the annual expenditure cap of $400,000 for each activity are pooled to give a combined cap for the period YA 2011 and YA 2012 and the period YA 2013 to YA 2015.  With the pooling, deduction/allowances are subject to the following expenditure cap:

  • Total expenditure cap for YAs 2011 and 2012 – $800,000 for each of the six qualifying activities; and
  • Total expenditure cap for YAs 2013 to 2015 – $1,200,000 for each of the six qualifying activities

Businesses would therefore be able to enjoy a total tax deduction of up to $3.2 million for YAs 2011 and 2012 and up to $4.8 million for YAs 2013 to 2015 as summarised here:

Year of Assessment (YA)

  • 2011 and 2012 (Combined)

Expenditure Cap per Qualifying Activity

  • $800,000

Tax Deduction per Qualifying Activity

  • $3,200,000 (400% x $800,000)

Year of Assessment (YA)

  • 2013 to 2015 (Combined)

Expenditure Cap per Qualifying Activity

  • $1,200,000

Tax Deduction per Qualifying Activity

  • $4,800,000 (400% x $1,200,000)

For newly incorporated/registered businesses whose first YA is YA 2012, the expenditure cap per qualifying activity for YA 2012 is $400,000.
In computing the deduction/allowances, the expenditure is the amount net of grant or subsidy by the Government or any statutory board.

You may refer to the Summary of Deductions/Allowances on Qualifying Activities for more details on the expenditure qualifying for deduction/allowances by activity.

2) Cash Payout Option

To support small and growing businesses which may be cash-constrained, to innovate and improve productivity, businesses can exercise an option to convert their expenditure into a non-taxable cash payout. They can convert up to $100,000 (subject to a minimum of $400) of their total expenditure in all the six qualifying activities into a cash payout. The rate of conversion is 30% which means a maximum cash payout of $30,000 per year.

This PIC cash payout option is available for the first three years of PIC, i.e. YA 2011 to YA 2013.

For YA 2011 and YA 2012, businesses can opt to convert up to a combined cap of $200,000 qualifying expenditure for all six qualifying activities, into a cash payout. The total cash payout for YA 2011 and YA 2012 is therefore a maximum of $60,000 ($200,000 x 30%). For YA 2013, the maximum cash payout is $30,000 ($100,000 x 30%).

For newly incorporated/registered businesses whose first YA is YA 2012, the expenditure cap for all six qualifying activities is $100,000 and the maximum cash payout is $30,000 for YA 2012.

Eligibility for Cash Payout Option

Businesses eligible to opt for the cash payout are sole-proprietorships, partnerships, companies (including registered business trusts) that have:

  • incurred qualifying expenditure and are entitled to PIC during the basis period for the qualifying YA;
  • active business operations in Singapore; and
  • at least three local employees (Singapore citizens or PRs with CPF contributions excluding sole-proprietors, partners under contract for service and shareholders who are directors of the company). A business is considered to have met this three-local-employees eligibility if it contributes CPF on the payrolls of at least three local employees in the last month of its basis period for the qualifying YA.

Summary of Deductions/Allowances on Qualifying Activities

Acquisition or Leasing of PIC Automation Equipment

  • Costs incurred to acquire/lease PIC Automation Equipment
  • 400% allowance/deduction for qualifying expenditure subject to the expenditure cap*, 100% allowance/deduction for the balance expenditure exceeding the cap*Please see worked examples
  • Cost/Lease expenses of IT equipment such as fax machine, laser printer, computer, lap-tops and software**;Cloud computing payment (refer to Q23 of FAQs)
Training Expenditure

  • Costs incurred on:
    • In-house training (i.e. Singapore Workforce Development Agency (“WDA”) certified, Institute of Technical Education (“ITE”) certified); or
    • All external training
  • 400% tax deduction for qualifying expenditure subject to the expenditure cap*, 100% deduction for the balance expenditure exceeding the cap*Please see worked examples
  • External course fees for staff; Costs incurred on internal Workforce Skills Qualification (“WSQ”) courses for employees’ skills upgrading
Acquisition of Intellectual Property Rights (“IPRs”)

  • Costs incurred to acquire IPRs for use in a trade or business (exclude EDB approved IPRs and IPRs relating to media and digital entertainment contents)
  • 400% allowance for qualifying expenditure subject to the expenditure cap*, and 100% allowance for the balance expenditure exceeding the cap*
  • Payment to buy a patented technology for use in manufacturing process;Price paid for trademark
Registration of Intellectual Property Rights (“IPRs”)

  • Costs incurred to register patents, trademarks, designs and plant variety^^^^For information on Plant Varieties Protection, please refer to IPOS website 
  • 400% tax deduction for qualifying expenditure subject to the expenditure cap*, 100% deduction for the balance expenditure exceeding the cap*
  • Fees paid to Intellectual Property Office of Singapore (“IPOS”) to register trademark
Research & Development (“R&D”)

  • Costs incurred on staff costs and consumables for qualifying R&D activities carried out in Singapore or overseas if the R&D done overseas is related to the taxpayer’s Singapore trade or business
  • 400% tax deduction for qualifying expenditure subject to the expenditure cap*. For the balance of qualifying expenditure exceeding the cap for R&D done in Singapore, deduction will be 150%. For balance of all other expenses, including expenses for R&D done overseas, deduction will be 100%
  • Salaries for R&D personnel and fees to R&D institute for creating a novel product
Design Expenditure

  • Costs incurred to create new products and industrial designs where the activities are primarily done in Singapore. More details can be found on DesignSingapore Council  website.
  • 400% tax deduction for qualifying expenditure subject to the expenditure cap*, 100% deduction for the balance expenditure exceeding the cap*
  • Fees to engage in-house eligible designers or outsourced to eligible design service providers to carry out approved design activities

*Total expenditure cap for YA 2011 and YA 2012 – $800,000 for each of the six qualifying activities.
Total expenditure cap for YA 2013 to YA 2015 – $1,200,000 for each of the six qualifying activities.

**For lease payment of software, the lessee must be the end user having only the right to use the software and not the right to reverse engineer, decompile, or disassemble the software, or exploit the copyright to the software.

The above was copied from IRAS website, more details can be obtained from:

https://www.iras.gov.sg/irashome/PIcredit.aspx#About_Productivity_and_Innovation_Credit

Should you interested to find out more information on the above scheme, please contact

Brian Ng / Kenny Ng / Soon Chye

361 Degree Consultancy Pte Ltd

Email: enquiry@sgvip4.noc401.com

Tel: 3152 3000   Fax: 6515 7908

Need help?