400% Tax Deduction/Allowances
- How to claim tax deduction
Cash Payout Option
- Conditions for cash payout
- What to note when applying for cash payout
- How to apply for cash payout
400% Tax Deduction/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:
| Year of Assessment (YA) |
Expenditure Cap per Qualifying Activity* |
Tax Deduction per Qualifying Activity |
2011 and 2012
(Combined)
|
$800,000
|
$3,200,000
(400% x $800,000)
|
2013 to 2015
(Combined)
|
$1,200,000
|
$4,800,000
(400% x $1,200,000)
|
* Only if you are carrying on a trade or business for the relevant YAs. Otherwise, the combined cap is reduced accordingly.
PIC benefits are net of grant or subsidy
The expenditure qualifying for PIC benefits (enhanced deduction or cash payout) is the amount net of grant or subsidy by the Government or any statutory board.
How to claim tax deduction
Businesses can make the claim for deduction/allowances in their income tax returns for the relevant YA by the filing due date (15 Apr for sole-proprietorship and partnership; 30 Nov for company).
Sole-proprietors and partnerships also have to submit the PIC Enhanced Allowances/Deduction Declaration Form for Sole-Proprietors and Partnerships (105KB) together with their income tax returns.
Cash Payout Option
How it works
Eligible businesses can apply to convert up to $100,000 of their total expenditure in all the six qualifying activities into a non-taxable cash payout.
The cash payout option is to support small and growing businesses which may be cash-constrained to innovate and improve productivity.
The maximum cash payout is calculated as follows:
| Year of Assessment (YA) |
Expenditure Cap for All Qualifying Activities |
Cash Payout Rate |
Maximum Cash Payout |
2011 and 2012
(Combined)
|
$200,000*
|
30%
|
$60,000
(30% x $200,000)
|
2013 to 2015
(Cap cannot be combined)
|
$100,000 per YA
|
60%
|
$60,000 per YA
(60% x $100,000)
|
* Only if you are carrying on a trade or business for the relevant YAs. Otherwise, the combined cap is reduced accordingly.
Conditions for cash payout
Businesses eligible to apply for the cash payout are sole-proprietorships, partnerships, companies (including registered business trusts) that have:
- incurred qualifying expenditure and are entitled to PIC during the basis period for the qualifying YA;
- active business operations in Singapore; and
- at least 3 local employees (Singapore citizens or Singapore permanent residents with CPF contributions) excluding sole-proprietors, partners under contract for service and shareholders who are directors of the company.
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.
What to note when applying for cash payout
- Once the qualifying expenditure is converted to cash, it cannot be claimed as tax deduction/allowances.
- Election to convert qualifying expenditure to cash is irrevocable.
- The minimum qualifying expenditure for each application is $400.
- Qualifying expenditure to be converted to cash is the amount net of grant or subsidy by the Government or any statutory board, and includes grant or subsidy pending approval.
How to apply for cash payout
Businesses may apply for cash payout as follows:
| Year of Assessment (YA) |
When to Submit |
Relevant month for determining 3-local-employees condition |
2011 and 2012
|
One-time application
After the business’ financial year-end;
Not later than the filing due date of income tax return*.
|
Contributes CPF on the payroll for:
Last month of the basis period for the qualifying YA.
|
2013 to 2015
|
Quarterly applications
After the end of each quarter or combined consecutive quarters in the business’ financial year;
Not later than the filing due date of income tax return*.
|
Contributes CPF on the payroll for:
Last month of the quarter or combined consecutive quarters to which the cash payout option relates.
|
* Income tax return filing due date - 15 Apr for sole-proprietorship and partnership; 30 Nov for company.
Businesses applying for cash payout have to submit the completed PIC Cash Payout Application Form (88KB) and relevant annexes to IRAS. Incomplete applications will be rejected.
The cash payout will generally be made by IRAS within three months of receipt of the application form and relevant annexes if the information is complete.
Please note that IRAS may select PIC applications for further review, even after the cash payout has been made.