Productivity and Innovation Credit Scheme

PIC Scheme

The Productivity and Innovation Credit Scheme is set to expire post the Year of Assessment (YA) 2018. In case you intend to claim for a cash payout on eligible expenditure, you should have incurred the expenditure within the last date of your basis period for the Year of Assessment 2018. You will qualify for a cash payout under this scheme depending on the date on which you incurred the qualifying expenditure. The cash payout eligibility will not be determined based on the date on which you submit your cash payout application.

6 Qualifying Activities Under the PIC Scheme

  • Acquisition & leasing of Productivity and Innovation Credit Information Technology and Automation Equipment.
  • Employee training.
  • Acquisition & licensing of IPR (Intellectual Property Rights).
  • Registering patents, designs, plant varieties, and trademarks.
  • R&D activities.
  • Design projects that are approved by the DesignSingapore Council.

What Benefits You Can Expect From the PIC Scheme?

Tax Allowances/Deductions

Under this scheme, as a business owner, you will get to enjoy tax allowances/deductions of 400% on spends worth up to S$400,000 for each year through each of the 6 eligible activities.

For PIC+ Scheme: For Years of Assessment between 2015 and 2018, a qualifying business will get 400% tax allowances/deductions on up to S$600,000 of eligible expenditure that is incurred in a year through each of the 6 qualifying activities.

Cash Payout

You can consider converting up to S$100,000 of your entire expenditure from all 6 qualifying activities per Year of Assessment into a cash payout that is non-taxable, instead of tax deduction or allowance.

  • For any eligible expenditure you have incurred between YA 2013 and 31 July 2016, your cash payout conversion rate will be at 60%.
  • For expenses incurred starting from 1 August 2016 to Year of Assessment 2018, the conversion rate for the cash payout has been reduced to 40%.

The following businesses are eligible for the PIC scheme:

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

What are the Qualifying conditions Under the PIC Scheme?

Qualifying conditions for tax allowances and deductions:

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

Qualifying conditions for cash payout:

  • Your company’s business activities should be active in Singapore.
  • Your company should incur eligible expenditures and should qualify for PIC during the eligible YA’s basis period.
  • Your company should have incurred at least S$400 through qualifying expenditure per cash payout application.
  • For any PIC Information Technology & Automation Equipment claim your business makes starting from YA 2016, the said equipment should be in active usage by your company at a point during which you’re nominating your business for a cash payout.
  • Your business should comply with the "three-local-employee-condition" by making CPF contributions for a minimum of 3 local employees in the applicable month(s).

How Do You Claim for Your PIC Benefits?

Tax allowances and deductions:

You do not require an approval beforehand from IRAS Singapore (excludes design projects). You will be able to claim enhanced allowances/deductions in your ITR (Income Tax Return) for Years of Assessment between 2013 and 2018. You need to make your claim within the due date for your income tax return filing.

Cash payouts:

You can e-file your Cash Payout Application Form at any given point of time post your respective financial quarter. This is applicable for YAs between 2013 and 2018. Also, you need to ensure that you’ve e-filed the application form within your tax return filing deadline for the respective Year of Assessment. Starting from 1 August 2016, every PIC Cash Payout application should be e-filed.

How Can You Check the Status of Your PIC Cash Payout Application?

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 is 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 IRAS to Restrict 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 penalties mentioned above 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 organizes 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.

Other Questions Related to PIC Scheme You Might Have

Q. Can I seek help from a PIC consultant to file the PIC cash payout claim?

A. As a business owner you’ll be able to file your PIC cash payout claim on your own. However, in case you intend to seek assistance from a PIC consultant to file your claim, ensure to check the background of the consultant you intend to use, thoroughly. Consider employing a competent consultant who can give you factual advice. A PIC consultant might charge a flat fee or ask for a percentage of the PIC cash payout you receive on account of providing PIC-related services to you.

Note: Since IRAS does not endorse or appoint a private consultant for PIC-related matters, your business will be accountable for the claims made irrespective of whether you made the claim on your own or claims were made with the assistance of a consultant.

Q. Can I seek help from IRAS when I need a clarification on PIC?

A. The helpline details are as follows:

  • For log-in enquiries (myTax Portal) - 1800 356 8015
  • For company-related PIC matters - 1800 356 8622
  • For PIC matters with respect to self-employed individuals - +65 6351 3534

Alternatively, in case of non-confidential enquiries you can submit an email enquiry via the official IRAS website. In case you have a confidential enquiry, you can email it to IRAS through “myTax Mail” for enhanced security.

Q. How do I apply for PIC cash payout?

A. You can apply for it via “myTax Portal”. The steps you need to follow are mentioned below in brief:

  • On behalf of your firm or partnership, on CorpPass you will need to authorise an employee, a third party (example: a tax agent), or a business owner (partner or director) for "PIC Cash Payout".
  • You need to be prepared with the required information that is essential for you to e-file your application and determine the dates on which you’ve incurred the qualifying expenditure.
  • You can e-file your PIC cash payout application form and respective forms online.
Q. What are the common errors companies make while making PIC claims?

A. A few common mistakes that can be avoided include:

  • Making a PIC claim on overpriced expenditure (specifically in the area of mobile application, website development, and training costs).
  • Claiming tax allowance of 400% for expenditure incurred on equipment that are not included in the “PIC IT (Information Technology) and Automation Equipment list.
  • Claiming 400% tax allowances/deductions as well as PIC cash payout on the same qualifying expenditure that has incurred.
  • Claiming more than 400% tax allowances/deductions.
  • Claiming Productivity and Innovation Credit on expenditure that come under the “non-qualifying” category.
  • Have inadequate supporting documents to authenticate the claims made.
Q. How long should I retain my claim-related supporting documents?

A. You need to maintain the supporting documents pertaining to your claim for a period of 5 years.

Q. Are investment holding firms eligible for PIC?

A. An investment holding company is not eligible for PIC. This is because as a company it doesn’t operate a business or trade for taxation purposes. Also, these kind of companies will have long-term investments in the form of shares and properties which earn them income in the form of interest, dividend, or rent.

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