PIC Grant Scheme - PIC Incentive

Productivity and Innovation Credit For Year 2014 - 2017 (Singapore)

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What is The Productivity and Innovation Credit (PIC) Scheme?


It is a business incentive announced by the Singapore Government in 2011 for SMEs to get significant tax deductions or cash payouts for your investments in many areas such as Research & Development, External Training, Trademark, Intellectual Property, IT and Automation Equipment. It encourages SMEs in Singapore to increase productivity and innovation to improve business operations and therefore reduce employee costs.

To be eligible for the PIC grant or bonus, businesses must have:

  1. incurred at least $5,000 in PIC-qualifying expenditure during the basis period for the YA in which a PIC Bonus is claimed
  2. at least 3 local employees (A business is considered to have met the 3-local-employees condition if it contributes CPF on the payroll of at least 3 local employees in the relevant month)
  3. active business operations in Singapore

If you are unclear if your company meets the requirement to be eligible for PIC Scheme, fee free to engage us in a obligation-free consultation by using the PIC eligibility enquiry form right below:

 

Brief Overview of PIC Scheme

Introduced in Budget 2010 - 250% tax deductibles
Enhanced in Budget 2011 – 400% tax deductibles or 30% cash payout
Enhanced in Budget 2012 – 400% tax deductibles or 60% cash payout
Enhanced in Budget 2013 – PIC Bonus dollar to dollar matching capped at $15000
Enhanced in Budget 2014 –  PIC+ scheme introduced where you enjoy 600k tax deductibles per YA per qualifying activity or 60% cash payout with effect of YA2015 till YA2018

 

How to Get Started?

Get a certified accountant (CA) to file your PIC claim on your behalf to ensure efficient and successful claims. Our team of accountants has achieved a track record of 100% success rate in attaining our clients’ claim. Depending on your financial year end this might be the last month for you to claim this PIC Bonus of $15,000, do not miss out on this opportunity!

 

Why was the Productivity and Innovation Credit (PIC) Scheme introduced?

The Singapore government introduced the Productivity and Innovation Credit to encourage businesses to invest in productivity and innovation activities. Being more productive and innovative benefit all businesses - especially SMEs - helping them to grow. PIC Scheme was introduced in the hopes that it will help Singapore companies be more competitive and stay profitable in the market.

 

The following example shows how much you can get back via the PIC Incentive.

Assuming Company X pay YC Capital $10,000 for our Total Business Solutions packages.

IRAS will pay Company X $10,000 (as PIC Bonus, $1 to $1 matching) AND IRAS will pay Company X  an additional 60% of $10,000 which is $6,000.

So in total, Company X will get back $16,000 which is a 160% PIC bonus.

We provide solutions pertaining to areas of accounting, legal matters and brand communications which are essential to all businesses.

 

All of our training and professional services are PIC Incentive claimable.

How do I claim for PIC?

PIC Cash payouts and bonus are given by IRAS. The official form for submission can be found here. Alternatively, our certified accountants can help you with the PIC claiming process to ensure a smooth hassle-free claim. Simply click the link below and we will get back to you as soon as we can.

 


How Much Can My Company Claim For The PIC Incentive?

There are 2 options within the PIC incentive - tax deductions OR a cash payout.

1) 400% Tax Deductions / Allowances

How it works

Businesses can enjoy 400% tax deduction/allowances on up to $400,000 of their expenditure per year in each of the six qualifying activities, instead of the 100% deduction/allowances under the existing tax rules.

The annual expenditure cap of $400,000 may be combined as follows:

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Note: A company claiming can receive a total of 400% tax deductions/allowances (comprising 100% normal deduction and 300% tax deduction) on the qualifying expenditure. Do not claim 400% additional tax deductions on the expenditure which has already been deducted as an expense (100% normal deduction) against the income. This results in an erroneous claim of 500%.

2) Cash Payout Option

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  • Small and growing businesses with cash constraints have the option to convert their qualifying PIC expenditure into a cash payout to invest in technology or upgrade their operations.
  •  The expenditure cap for PIC cash payout will remain at $100,000 of qualifying expenditure per YA.

  • This cash conversion option will be from YAs 2011- 2015.

PIC Cash Bonus

For both options 1 and 2, as long as the qualifying expenditure exceeds $5,000, an additional benefit of dollar for dollar matching will be paid out up to $15,000.

Examples:

  • Qualifying expenditure of $4,000  - $0 bonus paid out
  • Qualifying expenditure of $10,000  - $10,000 bonus paid out
  • Qualifying expenditure of $15,000  - $15,000 bonus paid out
  • Qualifying expenditure of $20,000  - $15,000 bonus paid out

Depending on your financial year end this might be the last month for you to claim this PIC Bonus of $15,000 , do not miss out on this opportunity!

 

All of our training and professional services are PIC Incentive claimable.


When Do I Apply For The PIC Incentive?

To claim for tax deduction or allowances under PIC, the qualifying expenditure must be incurred during the basis period for YAs 2013 – 2015. The basis period refers to your accounting period ending in the year before the YA, e.g.:

My company’s financial year will end on 31 Dec 2012 (YA 2013). When can I apply for the cash payout? If so, when will I receive the cash payout?

As announced in Budget 2012, companies can now opt for PIC cash payout on a quarterly basis. This means that you can now apply for the cash payout by submitting the PIC Cash Payout Application Form anytime after the end of each financial quarter by 30 Nov 2013 (income tax filing due date for YA 2013).

For example, in July 2012, you can claim your cash payout on qualifying expenditure incurred during the financial quarter from 1 Apr 2012 to 30 Jun 2012. If you submit the PIC Cash Payout Application Form on 15 July 2012 and the claim is approved, you will receive the cash payout by 15 Oct 2012. IRAS generally disburses cash payout within 3 months of receipt of application forms.

In Jan 2013, you can submit your cash payout claim again on qualifying expenditure incurred during the financial quarter from 1 Oct 2012 to 31 Dec 2012.

With the introduction of the new PIC+ scheme after the announcement of Budget 2014, you can continue to claim your cash payout on the qualifying expenditure incurred until YA2018. 

Any more questions?
Feel free to start a conversation with us!
 

Frequently Asked Questions

Who in my company can endorse the submission of the Cash Payout application form?

The authorised person is any employee who is authorised by the directors of the Company to endorse the Cash Payout application form e.g. the finance manager.

Which type of companies are eligible for PIC Scheme? Are law corporation and societies applicable?

PIC scheme is applicable to all businesses including sole-proprietorships, partnerships, companies (including registered business trusts) as long as the business are active. Law corporation is no different from a private limited company in this aspect. Societies are generally not income generating so PIC may not be applicable.

Investment holding companies do not qualify for PIC as they are not carrying on a trade or business for tax purposes. These companies own investments such as properties and shares for long term investment and derive investment income such as dividend, interest or rental. 

 

Also, new companies that has yet to commence business operations cannot claim for either of the PIC benefits. 

Can you explain more about the criteria to have 3 local employees on CPF contribution? 

Employees can be full-time or part-time and exclude the following: 

  • sole-proprietors
  • partners under contract for service
  • shareholders who are also directors of companies

The company must also been making CPF contributions to the employees for a consecutive three months within the financial quarter prior to filing of the PIC claim. A detailed breakdown of CPF contribution can be found here

Do I need to make CPF contributions to my local employees for all 12 months of each YA?

No, these contributions do not need to be made back-to-back on consecutive months. To qualify for the PIC Bonus, businesses must have contributed CPF on the payroll of at least 3 local employees: 

  • Where 400% tax deductions/allowances on qualifying PIC expenditure is claimed – in the last month of the basis period for the YA to which the deduction/allowance relates.

  • Where PIC cash payout on qualifying PIC expenditure is claimed – in the last month of the quarter or combined consecutive quarters to which the cash payout option relates. 

My company intends to employ two more employees on part-time basis for only one to two months, and contribute to the CPF for these employees, to qualify for the PIC cash payout. The company already has one local employee (with CPF contributions). Can the company qualify for PIC cash payout? 

No, a company will not qualify for PIC cash payout if “employees” are “employed” just for headcount purposes in claiming PIC. There must be a genuine employer-employee relationship that was entered into for bona fide commercial reasons, for example, when a company hires two additional employees to work in a retail shop in November and December to cope with the spike in sales volume in those two months. 

IRAS will take enforcement action against individuals or companies engaged in false/ fraudulent PIC cash payout claims. 

 

Is the GST or Goods and Service Tax on qualifying expenditure applicable for claims?

No, GST cost are to be borne by the company making the purchase and do not fall under the PIC Scheme.

 

What can be claimed specifically under the PIC Scheme? 

Any business activities promoting innovation and increasing productivity in the following areas:

  1. Research & development (R&D) - including R&D projects conducted outside Singapore
  2. Registration of intellectual property rights – patents, trademarks, designs and plant varieties
  3. Acquisition of intellectual property rights – e.g. when a company buys a patent or copyright for use in its business
  4. Acquisition or leasing of prescribed automation equipment
  5. Training of employees
  6. Approved design projects

 

What type of automaton equipment fall under the PIC Scheme? 

Generally, equipment and software that automates or mechanises the work process are claimable under PIC Scheme. PIC IT and Automation Equipment List can be found here.  However, if the equipment you have purchased do not fall under the categories listed in the list, you can apply for it to be approved on a case-by-case basis before making a claim.

Do take note the following costs incurred while purchasing automaton equipment do not qualify as expenditure for claiming PIC bonus or tax deductions: 

  1. GST paid by a GST registered trader on an item qualifying for PIC
  2. Costs not applicable to the automation equipment such as warranty fees and service maintenance fees
  3. Consulting fees unrelated to the development of the automation equipment

Does website development fall under the PIC Scheme?

After the Budget 2014 announcement, website development expenditure incurred will qualify for PIC from YA 2015. 

 

Is the cash payout taxable?

No, the cash payout is not taxable. 

Is the PIC Bonus taxable?

Yes, the PIC Bonus of $15,000 is taxable. 

 

Can I claim PIC Cash Payout and tax deductions at the same time? 

It is up to the company to decide which mode of claims benefits them the most.  Do note that if the qualifying expenditure item can be claimed only once(either tax deductions or cash payout).

Example:

  •  A company that has claimed PIC Cash Payout (60%) on training cost of $10,000 should not be claiming tax deduction (on $40,000) of the same training cost against its income.

Businesses that claim 400% tax deductions/allowances or 60% cash payout will also be eligible for the PIC Bonus(up to $15,000).

 

Is partial conversion of the qualifying expenditure into cash payout allowed?

Partial conversion is not allowed for qualifying expenditure relating to purchase of PIC IT and Automation Equipment, registration and acquisition of IPRs.

For the purchase of PIC IT and Automation Equipment, registration and acquisition of IPRs, you have to decide whether to claim the enhanced allowance/deduction under PIC or to convert such expenditure into a cash payout on a “per equipment”, “per filing” or “per IPR” basis respectively subject to a cap of $100,000* for each YA. The excess expenditure on the same equipment/IPR exceeding the cap will be forfeited and will not qualify for tax allowance/deduction against your income.

* Expenditure conversion cap for YA 2013, YA 2014 and YA 2015.

The following groups of people are excluded when determining the number of qualifying employees for the purpose of cash payout:

 

Example:

 

Equipment A is purchased at cost of $150,000 in YA 2014

Enhanced allowances under PIC = 300% x $150,000 = $450,000

(Total Capital Allowance = Base Capital Allowance of $150,000 + Enhanced Capital Allowance under PIC of $450,000)

You can either claim $600,000 as capital allowance against your income or opt to convert the qualifying expenditure of $150,000 into a cash payout.

The cash payout is computed at 60% of the qualifying expenditure (i.e. 60% x $150,000 = $90,000), subject to a cash payout cap of $60,000 for YA 2014.

You cannot make a partial conversion, i.e. you cannot apply for a cash payout on the $100,000 expenditure and claim the remaining $50,000 expenditure as capital allowance of $200,000 (400% x $50,000). If only $100,000 expenditure is converted to a cash payout, the remaining $50,000 expenditure will be forfeited.

 

Conversion of qualifying expenditure into a cash payout on a “per equipment” basis does not apply to lease payments for PIC IT and Automation Equipment.

If I have more than one sole-proprietorship, how many claim forms must I submit?

You only need to submit one claim form for all your sole-proprietorships as the cash payout is capped at the sole-proprietor level. However separate annexes for claims relating to each individual sole-proprietorship will need to be submitted together with the claim form. 

 

Can I submit Cash payout applications multiple times as and when I make the purchases?

Only one Cash payout application can be made per financial quarter. It is therefore most effective to submit claims at the end of the financial quarter. A company may also wait for the total qualifying expenditure to hit the minimum amount of $5,000 across several quarters before claiming. Claims should be made before the end of the financial year for purchases made in that year.

 

How do I claim for PIC? 

PIC Cash payouts and bonus are given by IRAS. The official form for submission can be found here.  Alternatively, our certified accountants can help you with the PIC claiming process to ensure a smooth hassle-free claim. Simply click the link below and we will get back to you as soon as we can.

 

How will the payment of the cash payout be made?

The cash payout is paid to the business which incurred the qualifying expenditure. You can expect the cash payout to be credited into your existing Income tax GIRO account (according to IRAS’ records) or receive a cheque otherwise.

If you have received the payment via cheque, please deposit it into your bank account within 3 months from the date of the cheque. 

 

Do I need to make CPF contributions to my local employees for all 12 months of each YA?

No, these contributions do not need to be made back-to-back on consecutive months. To qualify for the PIC Bonus, businesses must have contributed CPF on the payroll of at least 3 local employees: 

  • Where 400% tax deductions/allowances on qualifying PIC expenditure is claimed – in the last month of the basis period for the YA to which the deduction/allowance relates.
     

  • Where PIC cash payout on qualifying PIC expenditure is claimed – in the last month of the quarter or combined consecutive quarters to which the cash payout option relates.  
    Note : Moving forward in FY 2015, you would need to give CPF contributions to the 3 employees for a consecutive of 3 months (in the relevant quarter) prior to filing of the PIC claim.