14 Feb 2014

A company director was charged for submitting a false Productivity and Innovation Credit (PIC) claim in order to obtain cash payout of $60,000 for his company.

Mr Alex Rajan s/o Anthony Samy (“Alex Rajan”, 47), director of Exel Mitsui Technologies Pte Ltd (“EMTPL”) which manufactures machine tool accessories, was charged for making false PIC claims by the Courts today. Alex Rajan pleaded guilty to the charge and will be sentenced on 21 February for the offence. Meanwhile, the court has ordered EMTPL to pay a fine of $8,000 and a penalty of $180,000.

This is the second case of a director and its company to be charged for making false PIC claims. IRAS had earlier charged Greenit Pte Ltd, a computer equipment and hardware wholesaler and computer memory modules distributor, and its director Khoo Tzyh Shin for fraudulently claiming a PIC cash payout.

Objectives of the PIC Scheme

The PIC scheme was introduced to support businesses that invest in innovation and productivity improvements. Businesses can enjoy a 400% tax deduction or 30% cash payout [1] for investments under six qualifying activities. In Budget 2013, the PIC Bonus was introduced to provide businesses a dollar-for-dollar matching cash bonus on top of the existing PIC tax deductions and/or cash payout. To qualify for the PIC cash payout, businesses must have:

  1. Incurred PIC-qualifying expenditure during the basis period of the qualifying YA;
  2. Active business operations in Singapore; and
  3. Employed and made CPF contributions for at least three local employees. These three local employees must not be sole-proprietors, partners and shareholders who are directors of the company.

Director made false PIC claims

Alex Rajan made a false declaration in a PIC cash payout application form that EMTPL had purchased PIC automation equipment for $168,000 and that his company met the qualifying conditions for the cash payout.

IRAS’ investigations revealed that EMTPL did not incur such expenditure on the equipment. The company also did not employ or make CPF contributions for at least three local employees in the relevant period. In fact, EMTPL had never been in active business operation.

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.

Examples of what IRAS regards as abuse of the PIC scheme are as follows:

  1. Claiming PIC using false records or documents, where no such expenditure was incurred or where the actual amount incurred was lower.
  2. Creating a shell company to make PIC claims on purchase of equipment from a related company, where no such purchases were made and where the automation equipment continue to be owned and used by the related company.
  3. Claiming PIC based on collusion with a third party to purchase automation equipment, when the selling party is not the legal owner of the equipment and was merely renting or leasing it.
  4. Using phantom employees to meet the PIC qualifying condition of having made CPF contributions for three or more local employees.
  5. Engaging in arrangements that seek to artificially inflate PIC claims such as purchase/lease arrangements bundled with non-qualifying costs (for example, offering a high cash back for trade-in of an old asset).
  6. Artificially inflating the staff cost allocated to software development.

To guide businesses, IRAS has published on its website a  list of common mistakes to avoid when claiming PIC.

Businesses that wish to report malpractices or potential abuses of the scheme can write to:

Inland Revenue Authority of Singapore
Investigation & Forensics Division
55 Newton Road, Revenue House
Singapore 307987
Email: [email protected]

Find out more about PIC

Businesses that require additional information or assistance in claiming PIC can refer to the following:

  1. Website: www.iras.gov.sg/irashome/picredit.aspx    
  2. Email
  3. Helplines
    • Companies: 1800 356 8622
    • Self-employed/partnership: 6351 3534
  4. PIC seminars
  5. One-to-one PIC clinics

Businesses are encouraged to make full use of these complimentary PIC clinics. There are sessions available from Jan to Jun 2014.

Inland Revenue Authority of Singapore
[1]The PIC cash payout option is available from Year of Assessment (YA) 2011 to YA 2015 at a conversion rate of 30% for YA 2011 and YA 2012, and 60% for YA 2013 to YA 2015.