Applying for Cash Payout
Mr Lee runs a retail sole-proprietorship business and the business' relevant financial period is from Jan 2016 to Dec 2016 (YA 2017). He bought computers for his business which were delivered in Jun 2016. In addition, he paid training cost for his staff in Jul 2016 but his staff only attended the training in Sep 2016. Mr Lee met the relevant qualifying conditions for PIC and decided to elect for the cash payout option.
|Description ||Date Incurred ||Qualifying Cost 2||Qualify for PIC expenditure? || PIC Cash Payout 3|
| Computers 1|| 14 June 2016|| $8,000||Yes || $8,000 x 60% 4 = $4,800|
|Industrial Training (Attended by his staff)|| 10 Sept 2016|| $4,000|| Yes|| $4,000 x 40% 5 = $1,600|
|Total cash payout || $6,4006|
1: Computers is a qualifying equipment on the prescribed list of PIC IT and automation equipment and has been put to use by the business at the point of electing for PIC cash payout.
2: The qualifying cost of $12,000 ($8,000 + $4,000) cannot be claimed as capital allowance / tax deduction against Mr Lee's income in his income tax return.
3: As compulsory e-Filing is required from 1 Aug 2016, taxpayer will need to submit the PIC cash payout application form via mytax.iras.gov.sg anytime after the end of the relevant financial quarter(s), but not later than 14 Apr / 18 Apr 2017 (if he e-Files Form B).
4: The PIC cash payout conversion rate is 60% as expenditure is considered incurred before 1 Aug 2016 as the equipment was delivered before 1 Aug 2016.
5: The PIC cash payout conversion rate is 40% as expenditure is considered incurred only when the staff attended the training on 10 Sep 2016. The payment made in July 2016 is considered as prepayment.
6: Mr Lee will receive a non-taxable cash payout of $6,400 ($4,800 + $1,600).His chargeable income without deducting the qualifying cost of $12,000 is $28,000 and his tax payable is $160. Tax payable is calculated based on the progressive individual income tax rates. Thus, his net cash received will be $6,240 ($6,400 - $160).
Claiming Tax Allowance/ Deduction
Mr Tan runs a manufacturing sole-proprietorship business and the business' relevant financial period is from Jan 2016 to Dec 2016 (YA 2017). He bought computers in Jul 2016 and a Computer Numerical Control (CNC) cutting machine in Nov 2016 for his business. Mr Tan met the relevant qualifying conditions for PIC and decided to elect for PIC enhanced allowance / deduction in its income tax return for YA 2017.
|Description || Date Incurred|| Qualifying Cost|| Qualify for PIC expenditure||PIC Base Allowance/ Deduction|| PIC Enhanced Allowance/ Deduction|
| Computers 1|| 10 Jul 2016||$8,000|| Yes|| $8,000 x 100% = $8,000||
$8,000 x 300% = $24,000
|CNC cutting machine 1|| 16 Nov 2016|| $3,000|| Yes|| $3,000 x 100% = $3,000|| $3,000 x 300% = $9,000|
|Total allowance/ deduction || $11,000|| $33,000|
|Total tax savings (Tax payable is calculated based on the progressive individual income tax rates) || $7,800 2|
1: Computers and CNC cutting machine is on the prescribed list of PIC IT and automation equipment.
2: Before electing for PIC enhanced allowance, his chargeable income (CI) is $200,000 and his tax payable is $21,150. Mr Tan's total allowance will be $44,000 ($33,000 + $11,000) which is deductible against the business income. His CI will be reduced to $156,000 ($200,000 - $44,000) and his revised tax payable is $13,350. Thus, his total tax savings will be $7,800 ($21,150 - $13,350).