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For companies

400% Tax Deductions/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 Deductions/Allowances

How it works

Businesses can enjoy 400% tax deductions/allowances on up to $400,000 of their expenditure per year in each of the six qualifying activities, instead of the 100% deductions/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)

2016 to 2018
(Combined)

$1,200,000

$4,800,000
(400% x $1,200,000)

PIC+ Scheme

As announced in Budget 2014, from YAs 2015 to 2018, qualifying businesses can enjoy 400% tax deductions/allowances on up to $600,000 (instead of $400,000 as mentioned above) of their expenditure per year in each of the six qualifying activities under the PIC+ scheme.

The annual expenditure cap of $600,000 may be combined as follows:

Year of Assessment (YA) Expenditure Cap per Qualifying Activity* Tax Deduction per Qualifying Activity

2013 to 2015
(Combined)

$1,400,000#

$5,600,000
(400% x $1,400,000)

2016 to 2018
(Combined)

$1,800,000

$7,200,000
(400% x $1,800,000)

Find out more about the PIC+ Scheme for SMEs

* Only if you are carrying on a trade or business for the relevant YAs. Otherwise, the combined cap is reduced accordingly.

# The combined expenditure cap of $1,400,000 is only applicable for YA 2015 as the additional expenditure cap of $200,000 ($600,000 - $400,000) is not available for YAs 2013 and 2014.

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 deductions/allowances in their income tax return 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 return.

Cash Payout Option

How it works

Eligible businesses can apply to convert up to $100,000 of their total expenditure for each YA in all the six qualifying activities into a non-taxable cash payout. The cash payout rate is at 60% of the expenditure incurred.

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)

2016 to 2018
(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(s).

From YA 2014, for the purpose of fulfilling the 3-local employee condition, individuals deployed under a centralised hiring arrangement* will be regarded as employees of the business where these individuals are deployed, subject to the following qualifying conditions:

  • The claimant is able to produce supporting documents on the recharging of employment costs by a related entity, in respect of employees working solely in the claimant entity;
  • The corporate structure and centralised hiring practices are adopted for bona fide commercial reasons; and
  • The employee whose cost has been recharged will not contribute to the requisite headcount of the related party (which bore the upfront manpower costs).

* Some examples of centralised hiring arrangements include deployments where the HR function of a group of companies is centralised in a single entity, with the staff costs (including training expenditure) allocated to the respective entities, or a secondment, where employees are seconded to work for a related company. Once seconded, the staff costs are fully recharged to the related company.

What to note when applying for cash payout

  • Once the qualifying expenditure is converted to cash, it cannot be claimed as tax deductions/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 can apply for cash payout according to these timelines:

Year of Assessment (YA) When to Submit Relevant month(s) 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.

Please see Worked Examples for YAs 2013 to 2015.

2016 to 2018

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:
All three months in the quarter or last three months of the combined consecutive quarters to which the cash payout option relates.

Please see Worked Examples for YAs 2016 to 2018.

* Income tax return filing due date - 15 Apr for sole-proprietorship and partnership; 30 Nov for company.

To apply for cash payout, please complete our new PIC Cash Payout Application Form. If you are claiming cash payout on PIC IT and Automation Equipment acquired under a hire-purchase agreement entered into during the basis period for YAs 2013 to 2018, please also complete the Hire-Purchase Template (297KB) .

The new PIC Cash Payout Application Form is an online form with validation checks to minimise errors in form completion and ensure that all relevant information is provided. It also has an iHelp facility < clip_image001.png> to provide guidance on how to fill up the form. This is to facilitate faster processing of the application forms as it minimises the need for IRAS to seek clarification on the application forms. In turn, this will allow the claimants to receive the cash payout more quickly.

To align with the changes to the PIC scheme as announced in Budget 2014, and as part of our efforts to streamline the application process, the old excel PIC Cash Payout Application Form (Form 33000, Annex A1 and Annex A2) will be discontinued from 1 May 2014. From 1 May 2014, all PIC Cash Payout applications must be made using the Online PIC Cash Payout Application Form. There will be a 3-month transition period, meaning between 1 May and 31 Jul 2014, where IRAS will continue to process PIC Cash Payout applications made using the old excel form. From 1 Aug 2014, only the Online PIC Cash Payout Application Form will be accepted.

Please read the Essential Information to Note (135KB) before completing the online PIC Cash Payout Application Form. You may also wish to view the user guide (1.84MB) for this form.

How to Submit PIC Cash Payout Application Form
After completing the form online, please print and submit the original signed form (i.e. not photocopied copy), together with the hire-purchase template (where applicable), to IRAS at the following address:

      Inland Revenue Authority of Singapore
      55 Newton Road
      Revenue House
      Singapore 307987

After Submitting PIC Cash Payout Application Form
The cash payout will generally be made by IRAS within three months of receipt of the properly completed application form, relevant annexes and hire-purchase template.

In instances where the application forms are incomplete, IRAS will reject the application forms with reasons stated, and the claimants will be requested to re-submit a properly completed application form. Examples of incomplete applications are forms that are not signed by authorised persons, forms submitted without the relevant annexes, photocopied/ faxed copies of the forms (i.e. we need the original copies) and forms with missing information. Please exercise due care when completing and submitting the cash payout application.

Please also note that IRAS may select PIC applications for further review, even after the cash payout has been made.

IRAS takes a serious view of any abuse of PIC scheme  

IRAS takes a serious view of taxpayers who defraud the government.  Offenders convicted of PIC fraud will have to pay a penalty of up to four times the amount of cash payout fraudulently obtained, and a fine of up to $50,000 and/or imprisonment of up to five years.

List of offenders convicted of PIC abuse:

 S/N Date Summary

1

Sep 2013

2

Feb 2014

 

 

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Last Updated on 18 July 2014


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