• PIC (Productivity and Innovation Credit Scheme) Claim

    Important Update

    The Productivity and Innovation Credit Scheme is set to expire after Year of Assessment (YA) 2018. Businesses that want to claim cash payout under the qualifying expenditures must incur the same before the last date of YA 2018 basis period.

    The eligibility for the cash payout under this scheme is determined by when the qualifying expenditure has incurred and not when it is submitted to the Inland Revenue Authority of Singapore (IRAS) through the application for cash payout.

    Any expenditure incurred under the PIC scheme starting from 1 January 2018 will not qualify for cash payout.

    6 Qualifying Activities under the PIC Scheme

    • Acquiring and leasing PIC IT and automation equipment.
    • Training employees.
    • Acquiring and licensing of IPR (Intellectual Property Rights).
    • Registering patents, designs, trademarks and plant varieties.
    • R&D (Research and Development) activities.
    • Design projects that are approved by the DesignSingapore Council.

    Benefits and eligibility for cash payout under the PIC Scheme

    Under this scheme, businesses will enjoy tax allowances or deductions of 400% ( up to S$400,000) for incurring expenditures under any of the 6 qualifying activities stated above between YA 2011 and YA 2018.

    Between YA 2013 and 31 July 2016, businesses also have the choice to use an irrevocable option to convert their eligible expenditures into cash up to S$100,000 per YA (conversion rate of 60%).

    Starting from 1 August 2016, the conversion rate for the cash payout under the PIC scheme has been reduced to 40% (from the earlier 60%) until YA 2018 after which this scheme will lapse.

    The following businesses are eligible to benefit from the PIC scheme:

    • Sole proprietorships.
    • Companies.
    • Partnerships.
    • Subsidiaries and registered branches of a foreign parent/holding company.

    Qualifying conditions under the PIC Scheme

    Qualifying conditions for tax allowances and deductions:

    • The business activities of the company must be active in Singapore.
    • The business must incur qualifying expenditures and must be eligible for this scheme during qualifying YA’s basis period.

    Qualifying conditions for cash payout:

    • The business activities of the company must be active in Singapore
    • The business must incur qualifying expenditures and must be eligible for this scheme during qualifying YA’s basis period.
    • The business meets the "three-local-employee-condition" (by making CPF contributions for a minimum of 3 local employees for the applicable months).
    • The minimum eligible expenditure of S$400 must be met per cash payout option application.
    • Starting from YA 2016, businesses claiming cash payout under IT and automation equipment expenditures must be using the said equipment when electing for cash payout.

    Making PIC benefits claims

    Tax allowances and deductions:

    No prior approvals are required from the IRAS with the exception of design projects. You can claim enhanced deductions or allowances in Income Tax Returns starting from YA 2013 and until YA 2018 by your filing due date.

    Cash payouts:

    • Starting from 1 August 2016, PIC Cash Payout applicants must be e-Filed only.
    • You can e-File you Cash Payout Application Form any time after the end of your financial quarter for YAs between 2013 and 2018. However, e-Filing should be done before your Income Tax Return filing due date for the respective Year of Assessment.

    Status updates regarding PIC Cash Payouts

    The IRAS usually disburses the cash payout within a period of 3 months from the date your complete application is received. More often than not, applications are processed within a period of 6 weeks.

    If you wish to check your application status, you can do so through "e-Service" which is the fastest method and easily accessible anytime.

    Please note that a sample of applications will be selected by the IRAS for auditing purposes. In lieu of the same, additional supporting documents or details may be requested at any time for reviewing purposes. The review is usually completed within a period of 3 months but can take up to 6 months depending on how complex the case is.

    Measures taken by the IRAS to curb PIC abuse

    Curbing PIC abuse:

    The IRAS imposes heavy penalties in case of noncompliance or abuse of this scheme. If convicted of PIC fraud, here are the penalties that could be imposed on you:

    • Pay up to 4 times the cash payout amount you have obtained fraudulently +
    • Pay up to S$50,000 as fine and/or
    • Imprisonment of up to 5 years.

    The above-mentioned penalties will also be extended to those who assist another person willingly towards obtaining the PIC cash payout or bonus that they are not eligible to receive.

    Anti-abuse measures:

    The IRAS has implemented certain anti-abuse measures aimed at abusive arrangements and intermediaries facilitating artificial creation or inflation of PIC claims. Here are the measures implemented:

    • Denying any PIC benefits that are a result of abusive arrangements such as:
      • Consisting of/using artificial, fraudulent or contrived means.
      • When the payment of goods and services exceed the OMV (Open Market Value) without a bona fide commercial reason.
      • When an arrangement is entered into without a bona fide commercial reason.
    • Imposing penalties on the intermediaries that include consultants and vendors who are aware of the arrangements to promote such abusive PIC arrangements. If convicted, a fine of up to S$10,000 and/or imprisonment for up to 3 years may be imposed.

    A promoter under a PIC arrangement is any person who facilitates, designs, manages or organises the abusive arrangement. It also refers to a person who disseminates, publishes or communicates information to encourage or induce another person into such abusive arrangements.

    Voluntary disclosure of errors pertaining to PIC for reduced penalties

    The IRAS has introduced the "IRAS’ Voluntary Disclosure Programme" wherein taxpayers who have made errors when filing their Income Tax Returns can come forward and correct those errors and be sentenced to a reduced penalty.

    Errors on PIC cash payout pertaining to the 6 qualifying activities under this scheme can be corrected by disclosing the errors to the IRAS through submission of "PIC Disclosure of Error Form". This form is available for download on the IRAS website under the "Productivity and Innovation Credit Scheme" webpage.

    Errors on PIC claims under enhanced deductions or allowances on the Income Tax Return Forms (C-S or C) can be corrected by submitting the revised computation to the IRAS through "Form for Filing Revised Income Tax Computation(s)". This form is available for download on the IRAS website under the "Productivity and Innovation Credit Scheme" webpage.

    For any further clarifications or information pertaining to the PIC claim or scheme, you can contact the IRAS. To report abuse of this scheme, please email IRAS at ifd@iras.gov.sg.

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