About Productivity and Innovation Credit
The Productivity and Innovation Credit (referred hereafter as “the PIC”) was introduced in the Singapore Budget 2010 to provide enhanced tax deductions, for investments in a broad range of activities along the innovation value chain: automation equipment; training of employees; acquisition of intellectual property rights; registration of intellectual property rights; research and development; and design.
Specifically, enhanced deductions available under PIC comprise the following:
- Enhanced capital allowance or deduction for acquisition or leasing of prescribed automation equipment;
- Enhanced deduction of qualifying training expenditure;
- Enhanced writing-down allowance for acquisition of Intellectual Property Rights;
- Enhanced deduction of costs for registering certain Intellectual Property Rights;
- Enhanced deduction of qualifying research and development expenditure; and
- Enhanced deduction of qualifying design expenditure.
Refer to the e-tax guide on Productivity and Innovation Credit (432KB) and FAQs on Productivity and Innovation Credit and Cash Payout (278KB) for more details of the scheme.
Eligibility for the PIC
All businesses will be eligible for the PIC, from Years of Assessment ("YAs") 2011 to 2015, based on the amount they invest in any of the above six activities.
Deductions/Allowances under PIC
Businesses can deduct a total of 250% of their expenditure on each of these activities from their income, subject to:
a) For YA 2011 and YA 2012 - a combined cap of $600,000 of expenditures for each activity; and
b) For YA 2013 to YA 2015 - a cap of $300,000 of expenditure for each activity for each YA.
A combined cap of $600,000 is set for the first two YAs, so that small and medium enterprises which may require more time to phase in their investments, can benefit from the scheme.
The qualifying expenditure are computed net of the grant or subsidy by the Government or any statutory board.
Qualifying Period
The PIC will be available for 5 years (from YA 2011 to YA 2015). The qualifying expenditure must be incurred during the basis periods for YA 2011 to YA 2015.
Basis period refers to the accounting year ending in the year preceding the YA. For example, for a business with an accounting year ending on 30 Sep, the basis period for YA 2011 would be 1 Oct 2009 to 30 Sep 2010.
The qualifying activities are as follows:
| Qualifying activities |
Brief description of qualifying expenditures under the PIC |
Total deductions/ allowances under the PIC (as a % of qualifying expenditure) |
Examples of qualifying
expenditures |
| Acquisition or Leasing of Prescribed Automation Equipment |
Costs incurred to acquire/lease prescribed automation equipment |
250% allowance/deduction for the first *$300,000 of qualifying expenditure, 100% allowance/deduction for the balance expenditure |
Cost/Lease expenses of IT equipment such as fax machine, laser printer, computer and lap-tops |
| Training Expenditure |
Costs incurred on:
|
250% tax deduction for the first *$300,000 of qualifying expenditure, 100% deduction for the balance expenditure |
External course fees for staff; Costs incurred on internal Workforce Skills Qualification ("WSQ") courses for employees' skills upgrading |
| Acquisition of Intellectual Property Rights ("IPRs") |
Costs incurred to acquire IPRs for use in a trade or business (exclude EDB approved IPRs and IPRs relating to media and digital entertainment contents) |
250% allowance for the first *$300,000 of qualifying expenditure, and 100% allowance for the balance expenditure |
Payment to buy a patented technology for use in manufacturing process;
Price paid for trademark |
| Registration of Intellectual Property Rights ("IPRs") |
Costs incurred to register patents, trademarks, designs and plant variety |
250% tax deduction for the first *$300,000 of qualifying expenditure, 100% deduction for the balance expenditure |
Fees paid to Intellectual Property Office of Singapore ("IPOS") to register trademark |
| Research & Development ("R&D") |
Costs incurred in Singapore on staff costs and consumables for qualifying R&D activities under Section 14DA |
250% tax deduction for the first *$300,000 of qualifying expenditure, and up to 150% deduction for the balance expenditure |
Salaries for R&D personnel in Singapore and fees to R&D institute in Singapore for creating a novel product |
Design Expenditure
|
Costs incurred in Singapore to create new products and industrial designs
For details on the qualifying conditions and application procedure, please refer to DesignSingapore Council.
|
250% tax deduction for the first *$300,000 of qualifying expenditure, 100% deduction for the balance expenditure |
Fees to engage in-house eligible designers or outsourced to eligible design service providers to carry out approved design activities. |
*For YA 2011 and YA 2012 - a combined cap of $600,000 of expenditures for each activity.
Untilised Trade Loss and/ or Allowance Arising from PIC
Any enhanced deduction given under PIC that could not be fully utilised in any YA will form part of the unutilised trade loss and/or allowance of a business.
The unutilised trade loss and/or allowance can be set-off against other income of the business. The amount of unutilised trade loss or allowance, can be:
- carried forward to set-off against the business income for future YAs subject to shareholding test and the business continuity test as per current tax rules;
- carried back to the immediate preceding YA to be offset against the prior year income under the loss carry-back relief system;
- transferred to and set-off against the income of a related Singapore company under the group relief system or a spouse in the case of sole-proprietor or partner.
Conversion to Cash Payout
To support small but growing businesses which, may be cash-constrained and require more time to phase in their investments, businesses will have the option to convert up to $300,000 (but not less than $1,500) of the qualifying deductions for all six qualifying activities under the PIC at a rate of 7% into a cash payout of up to $21,000 each year. The cash payout option is available for the first three years of the PIC, i.e. YA 2011 to YA 2013.
For the YA 2011 and YA 2012, businesses can convert up to a combined total of $600,000 for all six qualifying activities at a rate of 7% for the two YAs. This means businesses can opt for a total cash payout of up to $42,000 ($600,000 x 7%) for YA 2011 and YA 2012.
Eligibility for Conversion to Cash Payout
Businesses eligible to opt for the cash payout are sole-proprietorships, partnerships, companies (including registered business trusts). They must have:
a) incurred qualifying expenditure and are entitled to the PIC during the basis period for the qualifying YA;
b) active business operations; and
c) at least 3 local employees (Singapore citizens or PRs 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 this 3-local-employees eligibility requirement if it contributes CPF on the payrolls of at least 3 local employees in the last month of its basis period for the qualifying YA.
Minimum Ownership Period of Prescribed Automation Equipment and IPRs
To avail of the enhanced allowance/deduction or the option to convert qualifying allowance/deduction into cash under PIC, businesses must:
For Acquisition of Prescribed Automation Equipment – owned the equipment for at least 1 year from the date of purchase to the date of lease/disposal;
For Registration of IPRs – owned the IPR for at least 1 year from the date of filing of IPR to the date of disposal of IPR;
For Acquisition of IPRs – owned the IPR for at least 5 years from the date of acquisition of IPR to the date of disposal of IPR.
Otherwise, claw-back provisions shall apply if the ownership requirement is not met.
Administrative Procedure
Claim for Enhanced Deduction
Other than design projects which businesses would need to obtain prior approval from the DesignSingapore Council, no approval is required for claiming the enhanced deduction for the other 5 qualifying activities. Businesses can make the claim for enhanced deduction in their income tax returns for the relevant qualifying YA.
Option for Cash Payout Conversion
Application for Cash Payout
Businesses opting for the cash payout will have to complete and submit the PIC Cash Payout Application Form (177KB) and relevant annexes to IRAS. They can submit the application anytime after the business’ accounting year-end but no later than the filing due date of income tax return for that YA.
Generally, the cash payout will be made by IRAS within 3 months from the date of receipt of the original PIC Cash Payout Application Form and applicable annexes. This is provided that complete information is received by IRAS at the time of application.
Disposal of assets before the minimum ownership period
Cash payouts from conversion of qualifying deductions relating to acquisition of prescribed automation equipment and acquisition/registration of IPR are recoverable from the businesses if the minimum ownership period of the equipment/ IPR is not met.
Businesses need to notify IRAS within 30 days from the date the prescribed automation equipment is disposed or leased out; or 30 days from the date the IPR is disposed, by completing and submitting the Disposal of Qualifying Assets Form (34KB) to IRAS. Penalties may apply if the notification requirement is not complied.
IRAS will issue a Productivity and Innovation Cash Payout Recovery notice to the businesses requiring repayment of the cash payouts from the businesses within 30 days from the date of the notice. Late payment penalties may apply if the sum is not received within the specified timeframe.
Things to note when applying for the cash payout
- Election to convert qualifying deduction or allowance into cash once made, is irrevocable.
- Sole-proprietorships and partnerships that have elected for the cash conversion will have to submit certified statement of accounts together with their income tax returns by the filing due date. Otherwise, any cash payout previously granted may be recovered.
- Only the original application form endorsed by authorised person of the business will be accepted. Facsimile and/or photocopy of the form will not be accepted.
- Applicable annexes relating to the expenditure claimed must be submitted together with the application form.
- Businesses with 10 employees or less will also need to submit a copy of the CPF Records of Payment for the last month of the business’ accounting period together with the application form.
- Supporting documents (such as invoices, approval letters) need to be retained for IRAS’ verification.
Illustrations on PIC
Example 1: Computation of enhanced allowance and cash payout conversion
Example 2: Computation of enhanced allowance (Equipment acquired on hire purchase)
Example 3: Application of the claw-back provisions
Example 4: Computation of enhanced deduction (Qualifying training expenditure)
Business Benefits Calculator
Use the Business Benefits Calculator to estimate your benefits under the PIC.
Frequently Asked Questions (FAQs)
For more details, please refer to our FAQs on Productivity and Innovation Credit and Cash Payout (278KB).
Contact Us
Please contact us if you need assistance or clarification on PIC and cash payout.
• Email address:
picredit@iras.gov.sg
• Call us (8 am to 5 pm from Mondays to Fridays):
Companies 1800-356 8622
Self-employed/partnership (+65) 6351 3534