Singapore Productivity and Innovation Credit (PIC) Scheme
The Singapore Productivity and Innovation Credit (PIC) Scheme aims to motivate businesses to upgrade their capabilities through innovation and productivity-enhancing activities. A tax deduction of 400% is claimable on the first S$400,000 spent for each of the qualifying PIC activities.
Changes in the PIC Cash Payout Scheme
From 1 Aug 2016, the following changes to PIC Cash Payout Scheme will take effect:
- Reduction of cash payout rate for qualifying expenditure incurred on or after 1 Aug 2016 from 60% to 40% (the cash payout rate is not determined by the date of submission of the cash payout application); and
- Compulsory e-Filing of cash payout applications. Hardcopy applications will not be accepted from 1 Aug 2016.
PIC+ Scheme (YA 2015 – 2018)
As announced in the 2014 Singapore Budget statement, small to medium sized businesses that make substantial investments in PIC activities to transform their businesses will be eligible for benefits under the PIC+ Scheme.
If they spend more than S$1,200,000 from YA 2013 – 2015 or YA 2016 – 2018, they will enjoy 400% tax deduction on the first S$600,000 invested in every qualifying PIC activity.
PIC Bonus (YA 2013 – 2015)
To encourage more firms to undertake productivity improvement initiatives, the government will match dollar-for-dollar a minimum investment of $5,000 on qualifying PIC activities for a period of 3 years, from Year of Assessment (YA) 2013 to YA 2015. Eligible businesses will receive a cash bonus capped at $15,000 for the 3-year-period, over and on top of existing PIC benefits of:
- 400% PIC tax deductions up to $400,000 in expenditure for each PIC qualifying activity; or
- Cash payout at 40% on up to $100,000 of the qualifying expenditure.
It Pays to be Productive in Singapore
If companies plan their PIC strategies well, they stand to save up to S$9.6 million in taxes annually. This is possible by estimating a firm’s taxable income and making provisions for PIC investments in its annual budget. Companies can invest in any of the following 6 categories to take advantage of PIC.
- Purchase / lease of PIC Automation Equipment
- Training of Employees
- Acquisition and In-Licensing of Intellectual Property
- Registration of Intellectual Property
- Research & Development
- Approved Design Projects
Option 1: Cash Payout of up to $40,000
Businesses can choose to convert their PIC-qualifying expenditures into a non-taxable cash payout. Under this option, firms can convert up to $100,000 (subject to a minimum of S$400) of their total expenditure in all six of the qualifying PIC activities into cash payouts. Eligible companies may opt to convert 40% of PIC expenditures (capped at $100,000) into a non-taxable cash payout amounting to $40,000 year of assessment.
This is claimable at any time after the end of each financial quarter, but no later than the due date for the filing of its income tax returns for the relevant year.
Companies that can opt for the cash payout are sole-proprietorships, partnerships, companies (including registered business trusts) that:
- Have contributed at least 3 employees CPF in the last year
- Are currently engaged in active business operations in Singapore
- Have invested in any of the 6 qualifying PIC areas
Option 2: Tax Credit for Up to $400,000 for each Qualifying Activity
The PIC cash payout has been doubled from 30% to 60% for up to S$100,000 of qualifying expenditure, from YA 2013 to YA 2015.
|Qualifying activities||Gist of qualifying expenditure under the PIC scheme||Total deductions under the PIC|
|Acquisition or Leasing of Prescribed Automation Equipment||Costs incurred to acquire/lease prescribed automation equipment. Automation equipment that are bought on hire purchase and are to be repaid over 2 year-installments or more will be eligible for PIC cash payouts.||400% allowance or deduction for qualifying expenditure subject to the expenditure cap, 100% allowance or deduction for the balance expenditure exceeding the cap.|
|Training Expenditure||Costs incurred on inhouse training (i.e. WDA certified or ITE certified); as well as all external training. Qualifying inhouse training expenditure of up to $10,000 per YA will not require certification.Expenses incurred by training agents may qualify for PIC claims if they meet stated conditions.|
|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)|
|Registration of Intellectual Property Rights (“IPRs”)||Costs incurred to register patents, trademarks, designs and plant variety.|
|Design Expenditure||Costs incurred to create new products and industrial designs where the activities are primarily done in Singapore.|
|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. R&D expenditure on cost-sharing agreements will be eligible for PIC claims.The multiple sales criteria will be removed to facilitate R&D in software development that is not intended for sale.||400% tax deduction for qualifying expenditure subject to the expenditure cap*. For 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%|
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.
Total expenditure cap for YA 2016 to YA 2018 – $1,800,000 for each of the six qualifying activities.