• PIC Claim Eligibility in Singapore

    Productivity and Innovation Credit (PIC) scheme, known as PIC in short, is an initiative by the Inland Revenue Authority of Singapore (IRAS) to encourage small and medium enterprises (SMEs) in Singapore to improve productivity and innovation in their field. Under this scheme, an SME can claim a maximum of 400% tax deduction/allowances or get reimbursement for 40% of their investment in selected business and upskilling activities. This scheme is available only until Year of Assessment (YA) 2018. So any expenditure incurred after 31 December 2017 cannot be claimed for PIC benefits.

    The eligibility for PIC tax deductions and PIC cash payout are slightly different.

    Who is eligible for PIC tax deductions?

    If you want to claim for tax deductions or allowances under PIC, these are the criteria you ought to meet:

    • The business can be a sole proprietorship, partnership, company, registered branch and subsidiary of a foreign company.
    • The business should be actively functioning in Singapore.
    • It has to invest in at least one of the six activities authorized by IRAS. These are:
      • Acquisition and leasing of PIC IT and automation equipment
      • Research and development (R&D)
      • Acquisition and licensing of Intellectual Property Rights (IPR)
      • Registration of trademarks, designs, patents and plant varieties
      • Design projects approved by Design Singapore Council
      • Employee training
    • The maximum annual expenditure of the company that is eligible for tax deductions is S$400,000 (up to assessment year 2014) and S$600,000 (between assessment years 2015 and 2018) on any of the six approved activities. The higher cap is allowed under the PIC+ scheme.
    • The maximum annual expenditure for each qualifying activity to claim a tax allowance or deduction is as given in the table below:
    Assessment year Maximum expense per activity Tax deduction per activity
    2016 to 2018 cumulatively (PIC) S$1.2 million S$4.8 million
    2016 to 2018 cumulatively (PIC+) S$1.8 million S$7.2 million
    2013 to 2015 cumulatively (PIC) S$1.2 million S$4.8 million
    2015 (PIC+) S$1.4 million S$5.6 million
    2011 and 2012 cumulatively S$800,000 S$3.2 million

    Who is eligible for PIC cash payout?

    Instead of the tax deduction, you can also claim a cash payout for your eligible expenses. You don’t have to pay tax on this cash payout received. The cash payout for eligible expenses between YA 2013 and 31 July 2016 is 60%, while from 1 August 2016 to YA 2018, it is 40%.

    To be able to make a PIC cash payout claim, a business should meet the following parameters:

    • The business can be a sole proprietorship, partnership, company, registered branch and subsidiary of a foreign company.
    • The business should be active in Singapore.
    • The business should have at least 3 local Singaporean employees – either citizens or permanent residents who make CPF contributions. Proprietors, partners or shareholding directors of the company cannot be included in this employee count.
    • Between YAs 2011 and 2015, CPF contributions for a minimum of 3 local employees should be made in the last month of the relevant financial quarter or combined financial quarters.
    • Between YAs 2016 and 2018, the CPF contributions should be made in the last three months of the relevant financial quarter or combined financial quarters.
    • It has to invest in at least one of the six activities authorised by IRAS.
    • The equipment bought for IT and automation should be under use by the business at the time of claiming PIC benefits.

    Six qualifying activities for PIC

    Let us see in detail what the six eligible business activities for PIC are:

    1. Acquisition and leasing of PIC IT and automation equipment

    2. If you have spent any money on buying or leasing PIC IT and automation gadgets/machinery, you can claim PIC benefits on the expenditure. The list of equipment approved for claims in this category are listed in https://www.iras.gov.sg/irashome/uploadedFiles/IRASHome/Quick_Links/PIC Automation Equipment List (as at 270911).pdf . IRAS also allows you to apply for addition of relevant equipment used for automation or mechanisation of businesses to the eligible equipment list. If your application is approved, you can claim benefits for those equipment.

    3. Research and development (R&D)

    4. If you spend money on staff costs and consumables for eligible R&D activities in Singapore or overseas, you can claim cash payout under PIC for them. Any grant or subsidy received for R&D activities should be subtracted from the cash claim you’re making under PIC.

      According to Section 2, Income Tax Act R&D is defined as "any systematic, investigative and experimental study involving novelty or technical risk carried out in the field of science or technology" aimed at "acquiring new knowledge or using the results of the study for the production or improvement of materials, devices, products, produce, or processes". So expenses such as salaries of employees in the R&D team, or fees paid to a research firm for creating a new product can be considered eligible for Pic cash payout claim. The following activities are not considered R&D:

      • Regular testing of products, materials or devices as quality control measures
      • Regular data gathering
      • Market research and sales promotion
      • Surveys and management studies
      • Regular changes to products, materials, processes, gadgets, or ways of production
      • Cosmetic alterations or stylistic amendments to products, materials, processes, devices or production methods
      • Research in the social sciences or the humanities
    5. Acquisition and licensing of Intellectual Property Rights (IPR)

    6. Expenses on buying IPRs for business purposes (as per Section 19B, Income Tax Act) and IPR licensing on your own, qualify for PIC cash payout claims. Purchase of IPRs is eligible only for companies and partnerships, not for sole proprietors.

      IPR acquisition is allowed for copyrights, trademarks, geographical indications, plant varieties, patents, layout designs of integrated circuit, registered designs, and trade secrets or information with commercial value. IPR licensing is allowed for all of the above barring trademarks. The business should own the relevant IPRs for at least 5 years.

    7. Registration of trademarks, designs, patents and plant varieties

    8. This condition is separate from the IPR acquisition and licensing activity, and includes the cost of registering designs, trademarks, patents and plant varieties. Official and professional fees and money spent on revocation, invalidation or opposition processes that happen during the registration – not before or after – are eligible for PIC claims. You should have the legal and financial ownership of the relevant IPRs to make a claim under this condition. These IPRs should be owned by the business and have been registered for at least 1 year to make a successful claim.

    9. Design projects approved by DesignSingapore Council

    10. If you’re creating new industrial designs or products for activities mainly in Singapore, and these designs are approved by the DesignSingapore Council (DSg), then you can claim PIC benefits on the cost of the creations. You cannot make a claim if your key business is creating and providing design services. In-house design projects are eligible for a payout of 100% of the staff costs incurred – the design professional employed should have a tertiary academic qualification in an industrial or product design approved by DSg. Outsourced design activities are eligible for a payout of 60% of the payments done to the authorised design service provider.

    11. Employee training

    12. If you have spent money on training your employees for business or trade, either internally or through external mentors, can be claimed as PIC expenses. The training need not be authorised by the SkillsFuture Singapore Agency or the Institute of Technical Education (ITE), but the maximum claim you can make for such training is S$10,000.

      Since the scheme expires at the end of YA 2018, you need to make all your pending claims as soon as possible. You need to ensure that you are not faking your eligibility for PIC by employing unnecessary local staff, fudging documents to show higher expenditure, or employing any other fraudulent means. IRAS is liable to punish not only the businesses involved in such deceitful practices, but also vendors/agents and other intermediaries who willingly assist in such malpractices.

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