About Productivity and Innovation Credit (PIC)
Tax Benefits under PIC
Summary of Deductions/Allowances on Qualifying Activities
Unutilised Trade Losses and/or Allowances Arising from PIC
Minimum Ownership Period of PIC Automation Equipment and Intellectual Property Rights (IPRs)
Administrative Procedure
Application for Approval of Automation Equipment for PIC
PIC Tax Deferral Option
Illustrations on PIC
Brochures on PIC
Business Benefits Calculator
Frequently Asked Questions (FAQs)
Seminars on Productivity and Innovation Credit Scheme
Contact Us
About Productivity and Innovation Credit
The Productivity and Innovation Credit (“PIC”) was introduced in the Singapore Budget 2010.
PIC has been enhanced in Budget 2011 to provide tax benefits for investments by businesses in a broad range of activities along the innovation value chain. The tax benefits under PIC will be effective from Years of Assessment (YA) 2011 to YA 2015.
The six activities along the innovation value chain that will qualify for PIC benefits are:
- Acquisition or leasing of PIC Automation Equipment* (188KB);
- Training of employees;
- Acquisition of Intellectual Property Rights;
- Registration of patents, trademarks, designs and plant varieties;
- Research and development activities; and
- Investment in approved design projects.
* PIC Automation Equipment are equipment that are prescribed under the new PIC Automation Equipment List (188KB). Businesses that invest in specialised equipment not in the PIC Automation Equipment List, to automate their processes and to enhance productivity may apply to IRAS to have their equipment approved for PIC on a case-by-case basis.
Tax Benefits under PIC
1) 400% Tax Deduction/Allowances
For YA 2011 to YA 2015, all businesses can enjoy deduction/allowances at 400% on up to $400,000 of their expenditure per year on each of the six qualifying activities instead of the 100%/150% tax deduction/allowances under the existing tax rules.
To enable businesses to enjoy maximum PIC benefits, the annual expenditure cap of $400,000 for each activity are pooled to give a combined cap for the period YA 2011 and YA 2012 and the period YA 2013 to YA 2015. With the pooling, deduction/allowances are subject to the following expenditure cap:
- Total expenditure cap for YAs 2011 and 2012 - $800,000 for each of the six qualifying activities; and
- Total expenditure cap for YAs 2013 to 2015 - $1,200,000 for each of the six qualifying activities.
Businesses would therefore be able to enjoy a total tax deduction of up to $3.2 million for YAs 2011 and 2012 and up to $4.8 million for YAs 2013 to 2015 as summarised here:
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)
|
For newly incorporated/registered businesses whose first YA is YA 2012, the expenditure cap per qualifying activity for YA 2012 is $400,000.
In computing the deduction/allowances, the expenditure is the amount net of grant or subsidy by the Government or any statutory board.
You may refer to the Summary of Deductions/Allowances on Qualifying Activities for more details on the expenditure qualifying for deduction/allowances by activity.
2) Cash Payout Option
To support small and growing businesses which may be cash-constrained, to innovate and improve productivity, businesses can exercise an option to convert their expenditure into a non-taxable cash payout. They can convert up to $100,000 (subject to a minimum of $400) of their total expenditure in all the six qualifying activities into a cash payout. The rate of conversion is 30% which means a maximum cash payout of $30,000 per year.
This PIC cash payout option is available for the first three years of PIC, i.e. YA 2011 to YA 2013.
For YA 2011 and YA 2012, businesses can opt to convert up to a combined cap of $200,000 qualifying expenditure for all six qualifying activities, into a cash payout. The total cash payout for YA 2011 and YA 2012 is therefore a maximum of $60,000 ($200,000 x 30%). For YA 2013, the maximum cash payout is $30,000 ($100,000 x 30%).
For newly incorporated/registered businesses whose first YA is YA 2012, the expenditure cap for all six qualifying activities is $100,000 and the maximum cash payout is $30,000 for YA 2012.
Eligibility for Cash Payout Option
Businesses eligible to opt for the cash payout are sole-proprietorships, partnerships, companies (including registered business trusts) that have:
a) incurred qualifying expenditure and are entitled to PIC during the basis period for the qualifying YA;
b) active business operations in Singapore; and
c) at least three 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 three-local-employees eligibility if it contributes CPF on the payrolls of at least three local employees in the last month of its basis period for the qualifying YA.
Summary of Deductions/Allowances on Qualifying Activities
| 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 PIC Automation Equipment |
Costs incurred to acquire/lease PIC Automation
Equipment
|
400% allowance/deduction for qualifying expenditure subject to the expenditure cap*, 100% allowance/deduction for the balance expenditure exceeding the cap*
Please see worked examples. |
Cost/Lease expenses of IT equipment such as fax machine, laser printer, computer, lap-tops and software**;
Cloud computing payment (refer to Q23 of FAQs) |
| Training Expenditure |
Costs incurred on:
|
400% tax deduction for qualifying expenditure subject to the expenditure cap*, 100% deduction for the balance expenditure exceeding the cap*
Please see worked examples. |
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) |
400% allowance for qualifying expenditure subject to the expenditure cap*, and 100% allowance for the balance expenditure exceeding the cap* |
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 varieties^^
^^For information on Plant Varieties Protection, please refer to IPOS website . |
400% tax deduction for qualifying expenditure subject to the expenditure cap*, 100% deduction for the balance expenditure exceeding the cap* |
Fees paid to Intellectual Property Office of Singapore ("IPOS") to register trademark |
| Research & Development ("R&D") |
Costs incurred on staff costs and consumables for qualifying R&D activities carried out in Singapore or overseas if the R&D done overseas is related to the taxpayer's Singapore trade or business |
400% tax deduction for qualifying expenditure subject to the expenditure cap*. For the balance of qualifying expenditure exceeding the cap for R&D done in Singapore, deduction will be 150%. For balance of all other expenses, including expenses for R&D done overseas, deduction will be 100% |
Salaries for R&D personnel and fees to R&D institute for creating a novel product |
Design Expenditure
|
Costs incurred to create new products and industrial designs where the activities are primarily done in Singapore
More details can be found on DesignSingapore Council website.
|
400% tax deduction for qualifying expenditure subject to the expenditure cap*, 100% deduction for the balance expenditure exceeding the cap* |
Fees to engage in-house eligible designers or outsourced to eligible design service providers to carry out approved design activities |
*Total expenditure cap for YA 2011 and YA 2012 - $800,000 for each of the six qualifying activities.
Total expenditure cap for YA 2013 to YA 2015 - $1,200,000 for each of the six qualifying activities.
**For lease payment of software, the lessee must be the end user having only the right to use the software and not the right to reverse engineer, decompile, or disassemble the software, or exploit the copyright to the software.
Unutilised Trade Losses and/or Allowances Arising from PIC
Any deduction/allowances given under PIC that cannot be fully utilised in any YA will form part of the unutilised trade losses/allowances of a business.
The unutilised trade losses and/or allowances can offset against other income of the business. The amount of unutilised trade losses or allowances, can be:
- carried forward to offset against the business income of 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 offset against the income of a related Singapore company under the group relief system or a spouse in the case of sole-proprietor or partner.
Minimum Ownership Period of PIC Automation Equipment and Intellectual Property Rights (IPRs)
To qualify for the deduction/allowances or the option to convert qualifying expenditure into cash under PIC, businesses must have:
- For Acquisition of PIC Automation Equipment – owned the equipment for at least one year from the date of purchase to the date of lease/disposal.
- For Registration of Intellectual Property Rights (IPRs) – owned the IPR for at least one 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 five years from the date of acquisition of IPR to the date of disposal of IPR.
Claw-back provisions shall apply to the deduction and/or cash payout if the minimum ownership requirement is not met. The claw-back provisions can be waived for PIC Automation Equipment under certain circumstances (refer to Q35 of FAQs) .
Administrative Procedure
Enhanced Tax Deduction/Allowances
Claim for Enhanced Tax Deduction/Allowances
Businesses will need to obtain prior approval from the DesignSingapore Council for design projects. For the other five qualifying activities, no approval is required for claiming the deduction/allowances. Businesses can make the claim for deduction/allowances in their income tax returns for the relevant qualifying YA.
Sole-proprietors and partnerships will also have to submit the PIC Enhanced Allowances/Deductions Declaration Form for Sole-proprietors & Partnerships (91KB)together with their income tax returns.
Disposal of PIC Automation Equipment/IPRs before the Minimum Ownership Period
For Disposal of PIC Automation Equipment
For equipment that is disposed of within a year with enhanced allowance claim, balancing adjustments will be computed as per current tax rules on the base allowance of 100%. The enhanced allowance of 300% granted will be deemed as income chargeable to tax in the year of disposal, unless the claw-back provisions have been waived (refer to Q35 of FAQs).
Businesses are required to complete and submit the Disposal of Qualifying Assets Form (35KB) together with the Income Tax Return for the Year of Assessment in which the PIC Automation Equipment was disposed of/leased out, unless the claw-back provisions have been waived, by the filing due date (15 Apr for sole-proprietorship and partnership and 30 Nov for company).
For Disposal of IPR Acquired
For IPR that is sold within a year of making enhanced allowance claim, balancing charge will be computed on the base allowance of 100% while balancing allowance will not be made. The enhanced allowance granted previously will be deemed as income chargeable to tax in the year of sale. Balance of the unclaimed enhanced allowance will be forfeited.
For IPR that is sold within 2 to 5 years of claiming enhanced allowance, balancing charge will be computed on the base allowance of 100% while balancing allowance will not be made. The enhanced allowance granted previously will not be deemed as income chargeable to tax. However, the balance of the unclaimed enhanced allowance will be forfeited.
For Disposal of IPR for which registration cost is claimed
For IPR that is sold within a year with enhanced deduction claim, the lower of sale price of IPR or deduction granted previously shall be deemed as income in the year of sale as per current practice and the enhanced allowance of 300% granted will be deemed as income chargeable to tax in the year of sale.
Option for Cash Payout
Application for Cash Payout
Businesses opting for the cash payout have to complete and submit the PIC Cash Payout Application Form (92KB) 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.
The cash payout will be made by IRAS within three months from the date of receipt of the original PIC Cash Payout Application Form* and applicable annexes. Submission must be complete (in full) at the time of application.
Disposal of PIC Automation Equipment/IPRs before the Minimum Ownership Period
Cash payouts from conversion of qualifying expenditure relating to acquisition of PIC Automation Equipment and acquisition/registration of Intellectual Property Rights (IPR) are recoverable from the businesses if the minimum ownership period of the equipment/ IPR is not met. The claw-back provisions can be waived for PIC Automation Equipment under certain circumstances (refer to Q35 of FAQs).
Businesses need to notify IRAS within 30 days from the date the PIC Automation Equipment is disposed or leased out, unless the disposal/lease comes within the auto-waiver from claw-back provisions (refer to Q35 of FAQs); or 30 days from the date the IPR is disposed of/rights in any software acquired was licensed out, by completing and submitting the Disposal of Qualifying Assets Form (35KB) to IRAS. Penalties may apply if the notification requirement is not complied with.
IRAS will issue a Productivity and Innovation Credit 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.
To note when applying for Cash Payout
- Election to convert qualifying expenditure 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, IRAS may recover any cash payout previously granted.
- Only the original application form endorsed by an 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.
- Supporting documents (such as invoices, approval letters) need to be retained for IRAS’ verification.
Application for Approval of Automation Equipment for PIC
Businesses applying for case-by-case approval have to complete and submit the Application for Approval of Automation Equipment Form (38KB) to IRAS.
Approval will generally be granted by IRAS if the following criteria are met:
a) The equipment automates current core work processes of the business;
b) The equipment enhances productivity of the principal trade of the business such as reduced man-hours and/or improvement in existing work processes; and
c) The equipment is not a basic tool used in the industry of the business. A basic tool is one which is necessary for carrying out the trade or business, and is commonly used in the industry. Examples of basic tools used in the F&B industry include ovens and blenders and those used in the laundry business include washing machines and dryers.
IRAS will process the application within two months of the receipt of the Form. Submission must be complete (in full) at the time of the application.
Please submit the application two months before the return filing due date or earlier so that the approval could be processed in time for you to apply for PIC Cash Payout or claim PIC deduction/allowances in your income tax return, as applicable. Pending the outcome of your application, the claim for PIC should not be made in your cash payout application form or tax return. Please see the section on Transitional Rules for PIC Claims.
Transitional Rules for PIC Claims
PIC Cash Payout for YA 2011 and YA 2012
Presently, businesses opting for the cash payout can submit the application for Cash Payout (only one application is allowed) anytime after the business’ accounting year-end but no later than the filing due date of income tax return for that YA.
In view of the introduction of the new PIC Equipment List which takes effect from YA 2011, businesses that invest in automation equipment that are prescribed in the new PIC Automation Equipment List or are approved on a case-by-case basis, are allowed to submit an application for Cash Payout on such automation equipment as follows:
1) If your automation equipment are those prescribed in the new PIC Automation Equipment List
The application for Cash Payout has to be made by 29 Feb 2012:
- For all cases for YA 2011;
- For YA 2012 only if you had previously submitted an application for Cash Payout.
2) If your automation equipment require approval from IRAS
The Application for Approval of Automation Equipment for PIC has to be made by 29 Feb 2012:
- For all cases for YA 2011;
- For YA 2012 only if you had previously submitted an application for Cash Payout. Otherwise, the application has to be made two months before the return filing due date or earlier.
You have to submit the Cash Payout application form within one month from the date of approval of the equipment.
PIC deduction/allowances for YA 2011
For businesses which are claiming PIC deduction/allowances on automation equipment that are prescribed in the new PIC Automation Equipment List or are approved on a case-by-case basis and had already submitted their tax returns for YA 2011, they may submit their revised tax computations (or revised 4-line statements for self-employed businesses with revenue of less than $500,000) to include the deduction/allowances for such automation equipment as follows:
1) If your automation equipment are those prescribed in the new PIC Automation Equipment List
The revised tax computation has to be submitted by 29 Feb 2012.
2) If your automation equipment require approval from IRAS
The Application for Approval of Automation Equipment for PIC has to be made by 29 Feb 2012. You have to submit the revised tax computation within one month from the date of approval of the equipment.
PIC Tax Deferral Option
To help businesses, especially SMEs, with their cash flow and investments in productivity, the Minister for Finance has announced on 2 Mar 2011 a Tax Deferral option for businesses to defer a dollar of current YA tax for every dollar of PIC qualifying expenditure incurred for the current financial year, up to a cap of $100,000. The tax will be deferred and is due for payment when the first assessment for the following YA is raised. This tax deferral allows businesses to enjoy their PIC benefits one year in advance.
The election is available for tax payable for YAs 2011 to 2014 based on expenditure incurred in the corresponding financial years 2011 to 2014.
For instance, businesses that invest in PIC activities in financial year 2011 can defer their YA 2011 tax payable immediately based on PIC qualifying expenditure incurred, up to the cap of $100,000. The deferred tax for YA 2011 will only be due for payment when the first assessment for YA 2012 is raised.
Case Illustration:
Company A’s financial year ends on 31 Dec 2011. It purchased computers on 1 Feb 2011 for $80,000 that would qualify for PIC in YA 2012. The company also has a tax payable of $200,000 for YA 2011 which remains unpaid as at Feb 2011.
The company can apply to defer $80,000 of its tax payable for YA 2011, which is based on the amount of qualifying PIC expenditure incurred in its financial year 2011 or $100,000 whichever is lower. Upon approval, the deferred tax for YA 2011 will only be due for payment when the first assessment for YA 2012 is raised. IRAS will notify the company when the deferred tax is due for payment.
How to opt for Tax Deferral
Businesses have to submit the PIC Tax Deferral Form (53KB) to IRAS. They can submit their applications anytime after they have incurred qualifying expenditure but no later than the end of the current financial year-end.
IRAS will process the application within 30 days of the receipt of the Form. Taxpayer will be informed on the amount of tax for the current YA that can be deferred. If the tax to be deferred has been paid, a tax refund will also be made within 30 days of the receipt of the Form.
Illustrations on PIC
Acquisition of PIC Automation Equipment
Example 1: Claim for enhanced allowance
Example 2: Make election for cash payout
Example 3: Claim for enhanced allowance (Equipment acquired on hire purchase)
Training expenditure
Example 1: Claim for enhanced deduction
Example 2: Make election for cash payout
Example 3: Claim for enhanced deduction and make election for cash payout
Brochures on PIC
Brochures in English
• Enhanced Productivity and Innovation Credit (PIC) for Sole Proprietors & Partnerships (878KB)
• Enhanced Productivity and Innovation Credit (PIC) for Companies (549KB)
Brochures in Mandarin
• Enhanced Productivity and Innovation Credit (PIC) for Sole Proprietors & Partnerships (20.8MB)
• Enhanced Productivity and Innovation Credit (PIC) for Companies (916KB)
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 (205KB)
• Cash Payout (160KB)
• Tax Deferral (100KB)
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