Businesses must have:
- For Acquisition of PIC IT and Automation Equipment – owned the equipment for at least one year from the date of purchase to the date of disposal/ lease*.
- For Acquisition of Intellectual Property Rights (IPRs) – owned the IPR for at least five years from the date of acquisition of IPR.
- For Registration of IPRs – owned the IPR for at least one year from the date of filing of IPR.
Claw-back provisions will apply to the deduction/ allowances and cash payout if the minimum ownership requirement is not met.
* The claw-back provisions can be waived for PIC IT and automation equipment under certain circumstances (refer to Q26 of FAQs).
Disposal of PIC IT and Automation Equipment/ IPRs before the Minimum Ownership Period
Where Enhanced Tax Deduction/ Allowance has been Claimed
- Disposal of PIC IT and automation equipment
For equipment that is disposed of within a year with enhanced allowance claim, balancing adjustments will be computed as per the current tax rules on the base allowance of 100%. The enhanced allowance of 300% granted will be deemed income and taxed in the year of disposal, unless the claw-back provisions have been waived (refer to Q26 of FAQs).
Businesses have to submit the Disposal of Qualifying Assets Form (35KB) together with the income tax return for the Year of Assessment in which the PIC IT and automation equipment was disposed of/ leased out, unless the disposal/ lease comes within the auto-waiver from claw-back provisions (refer to Q26 of FAQs).
The form and income tax return must be submitted by the filing due date (15 Apr for sole-proprietor and partnership; 30 Nov for company).
- Disposal of IPR acquired
For IPR disposed of within a year with enhanced allowance claim
Balancing charge will be computed on the base allowance of 100%. Balancing allowance will not be made. The enhanced allowance of 300% granted will be deemed income and taxed in the year of disposal. Any unclaimed enhanced allowance will be forfeited.
Businesses are required to reflect the claw-back of the enhanced allowance granted in its income tax return and tax computation for the Year of Assessment in which the IPR was disposed of.
For IPR disposed of within 2 to 5 years with enhanced allowance claim
Balancing charge will be computed on the base allowance of 100%. Balancing allowance will not be made. The enhanced allowance of 300% granted will not be deemed income and therefore, will not be taxed. However, any unclaimed enhanced allowance will be forfeited.
- Disposal of IPR for which registration cost was claimed
The lower of the sale price of the IPR or the deduction granted previously will be deemed income in the year of disposal as per current tax rules. The enhanced allowance of 300% granted will be deemed income and taxed in the year of disposal.
Businesses are required to reflect the claw-back of the enhanced deduction granted in its income tax return and tax computation for the Year of Assessment in which the IPR was disposed of.
Where Cash Payout has been Claimed
Businesses have to submit the Disposal of Qualifying Assets Form (35KB) within 30 days:
- from the date the PIC IT and automation equipment is disposed of/ leased out (unless auto-waiver applies)
- from the date the IPR is disposed of/ rights in any software acquired is licensed out.
Penalties may apply if the 30-day notification period as above is not complied with.
Businesses have to repay the cash payout within 30 days of receiving a PIC Cash Payout Recovery notice, otherwise, late payment penalties may apply.