PIC (Productivity & Innovation Credit) is a scheme that has been implemented by the Singapore government (IRAS) to help businesses cope with rising operating costs such as rent and wages. For business to claim the PIC Cash Payout, one should fulfill the following 6 qualifications:
- Lease or acquire IT (Information Technology) equipment.
- License/acquire IP (intellectual Property) Rights.
- Training of employees.
- Registering of designs, patents and trademarks.
- Design projects.
- Research and development activities.
Help your business with the use of PIC Grant today. Claim 400% tax deduction or allowances or receive a 40% cash payout.
Tax Deduction – Claiming for a Tax deduction for your business is as simple and doable.
Step 1: You must start by downloading the income tax return forms for the relevant year. You are required to fill out two forms – that is, Form C/Form C-S and the IRIN Form by the due date. Sole-proprietors and partnerships are to submit a separate form together with their Income Tax Return.
Step 2: You will find all the information that you require to fill out to apply for the tax deductions on Section E of the IRIN Form.
Step 3: Keep in mind that the tax deductions application is submitted once every year. In order to make the claim, you must file and submit your company’s income tax return by the due date i.e. 30th November of the Year of Assessment. Alternatively, the partnership or sole proprietor can submit the income tax return before their due date, that is the 15th of April.
Cash Payout – In the event that you opt for the Cash Payout, you must follow the steps summarized below:
Step 1: You must appoint an employee, business owner or a third party agent via e-Services Authorization System (EASY). For more information about this process, refer a suitable guide.
Step 2: Keep the complete information that is required to e-File the application prepared. Make sure you also have your PIC qualifying expenditure incurred dates figured out. In case the expenditure incurring date lies before and after 1 Aug 2016, you will be required to classify your claims into two categories: Expenditure incurred before 1 Aug, 2016 – 60% conversion rate; and Expenditure incurred on or after 1 Aug, 2016 – 40% conversion rate.
Step 3: After you have authorized a person and he has all the required information at hand, he can log in to mytax.iras.gov.sg to e-File cash payout applications. The application can be submitted at any time, once the pertinent financial quarter has ended. However, the submission must be done prior to the filing due date of Income Tax Return for the pertinent year of assessment. You will receive an acknowledgment to confirm that your application has been received, after you have completed the online application process. While the standard period to disburse the cash payout is 3 months as set by IRAS, the applications are processed within 6 weeks in majority of the cases.
What is Cash Payout and is everyone eligible?
Businesses like sole-proprietorships, companies and partnerships are eligible to apply with the request to convert up to $100,000 of their total expenditure for each year of assessment in all the aforementioned qualifying activities into a non-taxable cash payout, rather than filing a claim for tax deduction. This option may be more beneficial for businesses that may suffer from financial constraints.
Conditions that must be met include:
- Incurred expenditure in qualifying activities, and are entitled to PIC during the basis period for the qualifying year of assessment;
- The business must be actively operating in Singapore;
- At least “Three local employee” condition, which states that in order to be eligible, at least three local employees (that is, Singapore Citizens or Singapore Permanent Residents with Central Provident Fund (CPF) contributions) excluding sole-proprietors, partners under contract for service and shareholders who are directors of the company, must be a part of the company.
- Put the PIC IT and Automation equipment to use, for PIC cash payout claims relating to YA 2016 onwards. This only applies to businesses making PIC cash payout claims on such equipment. This is also known as the “in-use” condition.
COMMON MISTAKES TO AVOID WHEN SUBMITTING A PIC CLAIM
Claiming 400% tax deductions/allowances for expenditure on equipment that (does not fall) under the PIC IT and Automation Equipment List
Businesses can only claim for expenditure on prescribed IT and automation equipment, i.e. equipment listed in the PIC IT and Automation Equipment List. The following items are not prescribed IT and automation equipment and cannot be claimed:
- Air-conditioning unit purchased from retail store
- Motor vehicle
- Furniture and fittings
- Renovation and refurbishment cost (e.g. cost paid to install office workstation)
- Digital camera
- Closed circuit TV (CCTV)
- Uninterrupted power supply (UPS)
- Refrigerated display
If an equipment your business has invested in/plans to invest in is not in the prescribed list but automates or mechanizes your business processes, Approval is granted on a case-by-case basis. Upon approval and having incurred the expenditure on that equipment, you may proceed with the PIC claim.
Duplicate claim for both PIC cash payout and 400% tax deductions/allowances on the same expenditure under any of the six PIC activities
Businesses can either convert their qualifying expenditure into a cash payout or claim the 400% tax deductions/allowances against their income. They cannot claim both the cash payout and 400% tax deductions/allowances on the same expenditure. For example, a company that has claimed PIC cash payout on training cost of $1,000 should not claim separately a 400% tax deduction of the training cost (i.e. $4,000) against its income in its tax return.
Claiming 500% instead of 400% tax deductions/allowances under any of the six PIC activities
Businesses can receive a total of 400% tax deductions/allowances (comprising 100% normal deduction and 300% additional tax deduction) on their qualifying expenditure. Please do not claim 400% additional tax deduction on expenditure which has already been deducted as an expense (100% normal deduction) against the income.
Claiming PIC on non-qualifying expenditure
Businesses should check that an expense qualifies for PIC before making a claim.
Non-qualifying expenditure includes:
- course fees on training attended by the business owners
- GST paid by a GST-registered business on an item qualifying for PIC (GST component is not claimable for income tax purpose as the GST-registered business can claim input tax in its GST return)
- cost of PIC IT and Automation Equipment not incurred during the relevant accounting period of the Year of Assessment (YA) of claim
- cost of PIC IT and Automation Equipment (i.e. principal repayments for equipment acquired on hire-purchase terms) not incurred during the relevant accounting period of the YA of claim
- cost that is not applicable to the PIC IT and Automation Equipment such as warranty fee, service maintenance fee or consumable
- consulting fees unrelated to the development of the PIC IT and Automation Equipment
- expenses that have been defrayed by a grant or subsidy received from the Government or any statutory board. Expenses qualifying for PIC benefits must be net of such grant or subsidy
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