Businesses must check that an expenditure falls within the 6 qualifying activities under PIC before making a claim.
Acquisition & Leasing of PIC IT & Automation Equipment
This refers to costs incurred in acquiring or leasing PIC IT and automation equipment.
Only equipment in the prescribed PIC IT and Automation Equipment List (PDF, 227KB) qualify for PIC under the activity 'Acquisition and Leasing of PIC IT and Automation Equipment'. Businesses that invest in equipment that are not in the prescribed list but serve to automate or mechanise their business processes and enhance productivity may apply to IRAS to have their equipment approved for PIC benefits on a case-by-case basis.
To find out whether your equipment qualifies for PIC, use our Equipment Search Function (XLSX, 3.45MB).
Learn more about the acquisition and leasing of PIC IT and automation equipment.
Training of Employees
This refers to costs incurred to provide training to employees for purposes of the trade and business, and can include both training conducted by the business' personnel or by external trainers.
For YAs 2012 to 2018, qualifying training expenditure incurred on in-house training not accredited by SkillsFuture Singapore Agency (prior to 3 Oct 2016, the accreditation was by Workforce Development Agency) or approved/ certified by the Institute of Technical Education (ITE) also qualifies for PIC, subject to a cap of $10,000 for each YA.
There is no need to obtain prior approval from IRAS for training expenditure to qualify for PIC.
Learn more about training expenditure that qualifies for PIC.
Acquisition & Licensing of Intellectual Property Rights (IPRs)
This refers to costs incurred in:
- Acquiring IPRs for use in a trade or business, as set out in Section 19B of the Income Tax Act
Only companies and partnerships are allowed to claim PIC benefits on costs incurred to acquire IPRs, as provided in Section 19B. The transferee (i.e. the acquirer of the IPR) must acquire the legal and economic ownership of the IPR from the transferor (i.e. the seller of the IPR). Legal ownership means that the legal assignment of the IPR is granted to the transferee. Economic ownership means that the future economic benefits attributable to the IPR will accrue to the transferee.
- IPR licensing from YA 2013
All businesses are allowed to claim PIC benefits on costs incurred to license IPRs for use in their trade or business, subject to the other PIC conditions.
Some examples of qualifying expenditure are:
- Payment to buy a patented technology for use in manufacturing process
- Price paid for copyright
There is no need to obtain prior approval from IRAS for costs incurred on the acquisition or leasing of IPR to qualify for PIC.
Scope of IPRs under PIC
The scope of acquiring IPRs under PIC covers:
- Registered designs
- Geographical indications
- Lay-out designs of integrated circuit
- Trade secrets or information that has commercial value1
- Plant varieties
The scope of IPR licensing under PIC covers all of the above, except (c) trademarks.
The following are excluded from the scope of IPR acquisition/ licensing for the purpose of PIC:
- IPRs that are granted waiver of the legal ownership condition by the Singapore Economic Development Board (EDB)
- IPRs pertaining to films, television programmes, digital animations or games, or other media and digital entertainment contents approved by EDB for writing-down allowances over 2 years
1 Exclusions from the Expressions 'Trade Secret', 'Information that has Commercial Value' and 'Copyright'.
In line with the policy intent of Section 19B, in the definition of IPR, the expressions 'trade secret' and 'information that has commercial value', and any work or subject matter to which the expression 'copyright' relates, exclude the following:
- Information of customers of a trade or business, such as a list of those customers and requirements of those customers, gathered in the course of carrying on that trade or business;
- Information on work processes (such as standard operating procedures), other than industrial information, or technique, that is likely to assist in the manufacture or processing of goods or materials;
- Compilation of any information as described in paragraph (1) or (2); and
- Such other matter as the Minister may by regulations prescribe.
Minimum Ownership Period
Companies and partnerships must own the IPRs for a minimum period of 5 years, failing which, claw-back provisions may apply. Learn more about the minimum ownership period of IPRs.
Registration of Patents, Trademarks, Designs & Plant Varieties
This refers to costs incurred to register patents, trademarks, designs and plant varieties. You can claim PIC benefits on costs incurred to register patents, trademarks, designs and plant varieties (‘qualifying IPRs’) on the condition that you acquire the legal and economic ownership of the qualifying IPRs.
There is no need to obtain prior approval from IRAS for such costs to qualify for PIC.
Claiming Cash Payout
Partial conversion is not allowed if you opt to convert the qualifying expenditure into a cash payout. Instead, conversion must be done on a 'per registration basis' on the full cost of the IPR registration, subject to the expenditure cap.
If the qualifying expenditure of the registration is greater than the amount qualifying for a cash payout conversion, the excess expenditure incurred is forfeited and is not available for deduction claims against business income.
Learn about the treatment for straddled items (PDF, 373KB) if you incur expenditure to register an intellectual property over 2 or more YAs.
Registration costs are broadly divided into 2 categories:
Official fees refer to payments made to the Registry of Patents, Registry of Trade Marks, Registry of Designs or the Registry of Plant Varieties in Singapore or elsewhere for:
- Filing of an application for a patent, registration of a trademark or design, or for grant of the protection of a plant variety
- Search and examination report on the application for a patent
- Examination report on the application for grant of protection for a plant variety
- Grant of a patent
For example, fees paid to the Intellectual Property Office of Singapore (IPOS) to register a trademark are considered as qualifying expenditure.
Professional fees must be incurred in relation to the registration of the qualifying IPRs and cover payments made to any person acting as an agent for:
- Applying for any patent, registration of a trademark or design, or for the grant of protection of a plant variety, in Singapore or elsewhere
- Preparing specifications or other documents for the purpose of the Patents Act (Cap. 221), the Trade Marks Act (Cap. 332), the Registered Design Act (Cap. 266), the Plant varieties Protection Act (Cap. 232A) or the intellectual property law of any other country in respect of patents, trademarks, designs or plant varieties
- Giving advice on the validity or infringement of any patent, trademark, design or plant variety
Examples of allowable costs include prior art searches and translation costs where overseas intellectual property offices require documentation or specifications to be submitted in their native languages.
The following costs also qualify for PIC provided that they are incurred in the course of the IPR registration process:
- Costs incurred in trademark oppositions, invalidations and revocations in attempts to overcome citations by the Registrar
- Costs incurred in defending the trademark application in an opposition after acceptance
- Costs incurred in ex parte hearings
However, costs incurred on opposition, invalidation and revocation proceedings do not qualify for PIC if they are incurred:
- Prior to the application for registration of the IPR
- After the application for registration has proceeded to registration or has been refused by the Registrar
Learn more about registration costs at IPOS' website.
Minimum Ownership Period
Businesses must own the IPRs registered for a minimum period of 1 year, failing which, claw-back provisions may apply. Learn more about the minimum ownership period of IPRs.
Research & Development (R&D) Activities
This refers to costs incurred on staff costs and consumables for qualifying R&D activities carried out in Singapore or overseas. Only taxpayers who are beneficiaries of the R&D activities can claim PIC benefits on R&D expenditure.
There is no need to obtain prior approval from IRAS for expenditure incurred on R&D activities to qualify for PIC.
Definition of R&D
Under Section 2 of the Income Tax Act, R&D means any systematic, investigative and experimental study that involves novelty or technical risk carried out in the field of science or technology with the object of acquiring new knowledge or using the results of the study for the production or improvement of materials, devices, products, produce, or processes, but does not include:
- Quality control or routine testing of materials, devices or products
- Research in the social sciences or the humanities
- Routine data collection
- Efficiency surveys or management studies
- Market research or sales promotion
- Routine modifications or changes to materials, devices, products, processes or production methods
- Cosmetic modifications or stylistic changes to materials, devices, products, processes or production methods
The qualifying R&D expenditure for the purpose of claiming PIC benefits is:
- R&D expenditure incurred on R&D projects carried out in Singapore or overseas
- R&D expenditure related to the taxpayer's Singapore trade or business
Qualifying expenditure refers to staff costs, consumables and any such expenditure prescribed by the Minister. The R&D expenditure also has to be computed net of subsidy and grant received from the Government or statutory board.
Some examples of qualifying expenditure are:
- Salaries for in-house R&D personnel
- Up to 60% of fees* paid to an R&D institute for creating a novel product
- Costs incurred in an R&D cost sharing arrangement from YA 2012
* Where more than 60% of the fees actually relate to such qualifying R&D expenditure, the business may claim base deduction and additional deduction based on such actual qualifying R&D expenditure incurred if it is able to substantiate the claim.
Design Projects Approved by DesignSingapore Council
This refers to costs incurred to create new products or industrial designs where the activities are primarily in Singapore.
You can claim PIC benefits if you are the beneficiary of the design activities primarily carried out in Singapore. You should not be in the trade of providing design services and the design project must have been approved by DSg. To claim PIC benefits, the design or trademark must be registered in the company's/ partnership's/ sole-proprietorship's capacity.
Businesses have to obtain prior approval from the DesignSingapore Council (DSg) for their design projects.
The qualifying design costs are:
- For in-house design projects - 100% of staff costs incurred on qualified design professional(s) carrying out the approved design activities. A qualified design professional is one with tertiary academic qualification (at least a diploma) in industrial or product design approved by DSg
- For out-sourced design activities - 60% of the total payments made to the approved design service provider are deemed as staff costs of qualified designers and allowed for enhanced deductions
Where more than 60% of such payments are made up of staff costs of qualified designers, enhanced deductions based on the actual percentage of staff costs incurred are allowed. Copies of invoices issued by the design service provider which identify the amount relating to staff costs of qualified designers must be retained for verification purposes.
The qualifying design costs are computed net of any grant or subsidy received from the Government or statutory board.
Learn more about design projects at DSg's website.
Acquisition of IPRs
If I have obtained EDB’s agreement to waive the legal ownership condition, can I claim enhanced Writing-Down Allowance (WDA) for IPRs under PIC?
Under PIC, an eligible taxpayer can claim WDA on the cost incurred to acquire an IPR as follows:
- 100% of the cost, referred to as 'base WDA’; and
- An additional 300% of the cost as PIC enhanced allowances, referred to as 'enhanced WDA'.
If you have obtained EDB's agreement to waive the legal ownership condition (i.e. you have acquired only the economic ownership but not the legal ownership of the IPR from the transferor), you can only claim base WDA and not enhanced WDA under the PIC scheme.
Learn more about WDA for IPRs.
Does a sole-proprietorship qualify for enhanced allowances or cash payout for IPR acquisition?
No. Claims of allowance for IPR acquisitions are made under Section 19B of the Income Tax Act, which allows a company and a partnership to claim WDA on capital expenditure incurred in acquiring IPRs for use in its trade or business. Section 19B does not allow sole-proprietorships to qualify for such claims, and hence, the cash payout option is also not applicable to them.
Can the amount of enhanced WDA on IPRs acquired be claimed in 1 year?
No. The base WDA and enhanced WDA relating to the acquisition of the IPRs have to be written down over 5 years for IPRs acquired before YA 2017 and over 5/ 10/ 15 years for IPRs acquired from YA 2017.
Must I claim enhanced WDA/ cash payout on the full cost of the IPR on a 'per IPR basis'?
Generally, enhanced WDA is granted on the full cost of the IPR. However, if the total expenditure incurred on the acquisition of the IPR exceeds the cap, you can claim enhanced WDA on the partial cost of that IPR.
If you opt to convert the qualifying expenditure into a cash payout, partial conversion is not allowed. Conversion has to be done on a 'per IPR basis' up-front in the year of IPR acquisition (notwithstanding that the writing-down period of the WDA can be 5/ 10/ 15 years, whichever is applicable) on the full cost of the IPR. Where the qualifying expenditure of the IPR is greater than the cash payout cap, the excess expenditure is forfeited and is not available for deduction against business income.
For example, Company A acquired an IPR from a third party for $450,000 during its financial year that ended in Dec 2016 (YA 2017) and made the election to convert it into cash under the PIC cash payout option. Company A received $40,000 (cash payout cap of $100,000 x 40% conversion rate with effect from 1 Aug 2016), notwithstanding that the qualifying expenditure is $450,000. The excess expenditure of $350,000 ($450,000 - $100,000) is forfeited and is not available for deduction against its business income.
Licensing of IPRs
What is the rationale behind the enhancement to include IPR licensing from YA 2013?
The enhancement is aimed at helping businesses, especially small and medium enterprises (SMEs) that license IP rights rather than acquire the IP for innovation or productivity improvements. Allowing IP licensing as a PIC qualifying cost assists SMEs to source for IPs to develop and grow their businesses.
What are the qualifying IPR licensing costs?
Qualifying costs are license fees incurred on the licensing of qualifying IPRs.
Expenditure incurred for the transfer of ownership of any of those rights and legal fees and other incidental costs arising from the licensing of such rights do not qualify for PIC.
Why is trademark excluded from the scope of IPR licensing expenditure?
Trademarks are mainly for the identification of products and services. The licensing of trademarks is therefore not in line with the policy objective of encouraging businesses to achieve productivity and innovation in their product development and service offering.
Why are franchising, selling and distributorship excluded from IPR licensing?
Franchising, selling and distributorship are established business models. When entering into such an arrangement, the business is basically leveraging on another business' model and this is not in line with the policy objective of encouraging businesses to innovate on their product development and service offering.
Can the licensee claim PIC benefits if it licenses a qualifying IPR from a related party?
No. The licensee cannot claim PIC benefits if it licensed the IPR from a related party:
- Who carries on a trade or business in Singapore; and
- The qualifying IPR is acquired or developed (in whole or in part) by the related party during the basis period relating to YA 2011 or any subsequent YA.
Will licensing of software qualify as IPR licensing for the purpose of claiming PIC benefits?
No. Lease payments for the right to use the software qualify for enhanced deduction under the 'Acquisition or Leasing of PIC IT and Automation Equipment' category.
Registration of Patents, Trademarks, Designs and Plant Varieties
If I am not successful in my application to get the trademark or patent registered, can I still qualify for PIC?
Yes. PIC benefits are granted regardless of the outcome of the application as long as the business has incurred the registration cost.
Do renewal costs for trademarks qualify for enhanced deductions under PIC?
No. Only the cost of registration allowable under Section 14A qualifies for enhanced deductions. Renewal costs for trademarks are allowable deductions under Section 14(1) if they are wholly and exclusively incurred in the production of income.
Research & Development (R&D)
My business undertakes a number of R&D projects. Is the expenditure cap applied on each of the R&D projects or on the entire R&D amount incurred for the YA?
The cap is on the total amount incurred on qualifying R&D expenditure for the YA, regardless of the number of projects handled by the business.
Are costs incurred under R&D cost-sharing arrangements eligible for PIC benefits?
Yes. Effective from YA 2012, costs incurred under R&D cost-sharing arrangements are eligible for PIC benefits. The qualifying expenditure is deemed to be 60% of the shared costs, similar to outsourced R&D. The R&D cost-sharing expenditure is still subject to the overall expenditure cap for R&D activities.
What are consumables?
Consumables refer to any materials or items used in the research and development which upon such use are consumed or transformed in such a manner that they are no longer useable in their original form.
Consumables exclude utilities.
For out-sourced R&D, how are the PIC benefits computed?
For out-sourced R&D activities, 60% of the total payments made to the R&D organisation are deemed as qualifying staff costs and consumables allowed for enhanced deductions.
Where more than 60% of such payments are made up of staff costs and consumables, enhanced deductions based on the actual percentage of staff costs and consumables incurred are allowed. Copies of invoices issued by the R&D organisation which identify the amount relating to staff costs and consumables must be retained for verification purposes.
If my business conducts R&D in Singapore and overseas, how are the enhanced deductions under PIC computed?
You can decide on the order of claim for enhanced deductions. For example, you may claim enhanced deductions on qualifying overseas R&D expenditure first, before claiming qualifying local R&D expenditure.
The expenditure cap for R&D is applied to expenditure for R&D activities conducted in Singapore and overseas.
Approved Design Projects
Do I need to submit the Letter of Approval issued by DSg to IRAS when applying for tax deduction or cash payout?
No, you can keep the Letter of Approval issued by DSg and submit it only upon IRAS’ request.
What should I do if I fail to meet the conditions specified by DSg?
You must inform DSg immediately if you fail to meet the conditions specified under the approved project so that DSg can review the approval status of the project.
What happens if I subsequently fail to satisfy any of the conditions set out by DSg?
The enhanced deductions claimed will be deemed as income chargeable to tax while the cash payout claimed will be recovered.