Acquisition & Leasing of PIC IT & Automation Equipment

View examples of IT and automation equipment that qualify for PIC benefits listed by industry (PDF, 104KB). This list contains examples of equipment approved for PIC on a case-by-case basis and is not exhaustive.

IRAS evaluates each application based on certain qualifying criteria. Applications for items on this list must still be submitted to IRAS for case-by-case approval, as we need to evaluate if the qualifying criteria are met in each company's circumstances. The outcome of our evaluation may differ entity to entity, depending on the existing level of automation or mechanisation in the business.

Others (Website, Software, Cloud Computing)

1. Can website development costs and web hosting fees qualify for PIC?

   Website Development Costs from YAs 2014 to 2018
   PIC benefits may be claimed on development costs incurred on the provision of a new website, including costs incurred for the one-time registration of a domain name for the website. You cannot claim PIC benefits (both cash payout and enhanced allowances) if the website is under development. The claim can only be made when the website is functional i.e. accessible over internet.

   Subsequent changes or enhancements (e.g. routine updating, re-writing of contents, maintenance and support) are considered as a revamp of an existing website and do not qualify for PIC as they do not involve a provision of a new website. However, if there are costs incurred on the addition of e-commerce functions to the website or any enhancement to make the website mobile responsive, these costs are eligible for PIC as these enhancements are regarded as software development (category 4 of the PIC IT and Automation Equipment Prescribed List).

   Website Development Costs from YAs 2011 to 2013
   Website development costs do not qualify for PIC benefits. However, if you are able to give a breakdown of the website development costs, PIC benefits may be granted on costs incurred for software application and hardware such as servers, which are included in the PIC list.

   Web Hosting Fees
   Fees paid for web hosting services do not qualify for PIC benefits. However, if you are able to provide a breakdown of the web hosting fees, PIC benefits may be granted on costs incurred for the acquisition/ leasing of PIC IT and automation equipment such as software and servers.

2. What are some examples of qualifying and non-qualifying website development costs?

   Examples of qualifying website development costs include:

   • One-time registration of domain name
   • Cost of developing or purchasing the website, including design fees
   • Software application development costs
   • Hardware and server costs
   
   

   Examples of non-qualifying costs include:

   • Renewal or purchase of domain name
   • Web hosting services
   • Online advertising/ marketing services (e.g. providing Search Engine Optimisation (SEO) services, Search Engine Marketing (SEM) services)
   • Routine updates
   • Maintenance and support services

3. Does expenditure incurred on upgrading of software qualify for PIC?

   Yes, expenditure incurred on software upgrades qualifies for PIC.

4. Does expenditure incurred on leasing of office system software qualify for PIC?

   Yes, expenditure incurred on leasing of office system software qualifies for PIC.

5. Does purchase of software (e.g. shrink-wrap software) qualify for PIC?

   Yes, the cost of purchase qualifies for PIC.

6. Do fees paid for maintenance of software qualify for PIC?

   No. Payments for maintenance of software (e.g. debugging, helpdesk support) do not qualify for PIC. You can continue to claim deduction of such maintenance fees under the current tax rules.

7. Can my business claim PIC benefits on the development of software in Singapore?

   If the software is developed for business use, PIC benefits can be claimed on the development costs.

   Qualifying development costs include fees paid to external software developers.

8. Must my software development be completed before I can make PIC claims?

   For PIC cash payout claims:
   You cannot claim PIC cash payout if the software is under development. The claim can only be made when the software is fully developed. However, if the development is by modules and the completed module can function independently, you can claim PIC cash payout after each module is completed.

   From YA 2016, to qualify for cash payout on PIC IT and automation equipment, businesses need to show that the equipment is in use by the business at the point when they elect for cash payout. This condition reinforces the objective of encouraging businesses to increase their productivity by using automation equipment in their businesses. For businesses with genuine cashflow difficulties and that are not able to secure the delivery of the equipment before payment is made, IRAS may waive the requirement for the equipment to be 'in use' on a case-by-case basis.

   For enhanced allowance claims:
   To claim enhanced allowances over 1 year under Section 19A(2), the software must be fully developed and installed before the enhanced allowances can be claimed. However, if the development is by modules and the completed module can function independently, you can claim enhanced allowances after the module is completed.

   To claim enhanced allowances over 3 years under Section 19A(1), the software does not need to be fully developed and installed before the enhanced allowances can be claimed. The cost incurred in the related YA qualifies for enhanced allowances to be claimed over 3 years.

9. I am a cloud computing vendor. Does my expenditure incurred on PIC IT and automation equipment used in the provision of cloud computing services to my customers qualify for PIC?

   Expenditure incurred to acquire/ lease hardware
   The expenditure you incurred to acquire/ lease PIC IT and automation equipment (hardware) qualifies for PIC.

   Expenditure incurred to acquire/ lease software
   Your expenditure to acquire/ lease software that is onward leased to your customers does not qualify for PIC. Only the cloud computing customers, who are the end users of the software, can claim PIC benefits on such expenditure. However, if you acquire/ lease software for your own business use, you can claim PIC benefits on the software.

Equipment Qualifying for Investment Allowances

1. Can I claim PIC for equipment that qualifies for investment allowances?

   Yes, but you cannot claim both investment allowances and enhanced allowances on the same dollar of the asset cost incurred. Investment allowances can be claimed on the portion of the asset cost that does not qualify for enhanced allowances (e.g. remaining cost of the equipment exceeding the expenditure cap).

Enhanced CA is generally granted on the full cost of the equipment. Any claim for enhanced CA (300%) must be made together with the base CA (100%) for automation equipment purchased in the basis period relating to the YA of concern.

If the total costs incurred exceed the expenditure cap, you can claim enhanced CA only on the partial cost of 1 piece of equipment.

The table below shows the period over which the base and enhanced CA can be written down:

* Low-value assets can be written off in 1 year subject to a maximum cap of $30,000 per YA. For PIC qualifying equipment costing $5,000 or less, both the base and enhanced allowances are used to determine whether the cap of $30,000 has been reached.

Learn how to claim CA.

You may also refer to Section 3 (Page 18) of the e-Tax Guide on Productivity and Innovation Credit (Fifth Edition) (PDF, 1016KB).

Expenditure on equipment under a sale and lease-back arrangement does not qualify for enhanced CA if CA had previously been allowed for that equipment prior to the sale and lease-back arrangement.

From YA 2016, you may qualify for cash payout on PIC IT and automation equipment if the equipment is used by your business at the point of electing for cash payout. This condition reinforces the objective of encouraging businesses to increase their productivity by using automation equipment in their businesses.

For businesses with genuine cashflow difficulties and that are not able to secure the delivery of the equipment before payment is made, IRAS may waive the requirement for the equipment to be 'in use' on a case-by-case basis.

If you opt to convert the qualifying expenditure into a cash payout, the conversion must be done on a 'per equipment basis' on the full cost of the automation equipment, subject to the relevant expenditure cap. Partial conversion is not allowed.

If the qualifying expenditure of the equipment is greater than the amount qualifying for a cash payout conversion, the excess expenditure incurred is forfeited and is not available for capital allowance claims against business income.

Cash Payout for PIC IT and Automation Equipment under a Hire-Purchase (HP) Agreement

Businesses can opt for cash payout on PIC IT and automation equipment purchased under HP agreements signed during the basis periods for YAs 2012 to 2018, where the repayment schedule straddles 2 or more financial years. The cash payout option is not available for assets purchased under HP agreements (with repayment schedule straddling 2 or more basis periods) signed during the basis period for YA 2011.

For PIC IT and automation equipment acquired on hire purchase, the cash payout conversion rate to be applied is based on the date on which the HP agreement is signed. For example, the cash payout conversion rate for an equipment acquired via a HP agreement signed on 1 Jul 2016 is 60%. If the HP agreement is signed on or after 1 Aug 2016, the cash payout conversion rate is 40%. Businesses can continue to claim for principal repayments that straddle beyond YA 2018 if the HP agreement is signed in the basis periods for YAs 2012 to 2018. If the HP agreement is signed in the basis period for YA 2019 or after, the expenditure incurred does not qualify for cash payout.

The amount of cash payout for each YA is computed based on the principal amount paid during the basis period for that YA, even if the repayment schedule extends beyond the period for the last qualifying YA (i.e. YA 2018).

Businesses claiming cash payout on PIC IT and automation equipment acquired under a HP agreement entered into during the basis periods for YAs 2013 to 2018 must submit the completed Hire Purchase Template (XLSX, 301KB) together with their PIC cash payout application.

When IT and automation equipment is purchased, additional items may be bundled with it. Such bundled items could include a cash discount/ rebate, cash vouchers, maintenance services or warranty fees. An example is a business that purchases an offset printing press and also receives free prints or the trade-in of the old machine as bundled items.

PIC benefits are only available on the purchase cost or lease payments applicable to PIC IT and automation equipment. Bundled or additional items must be deducted from your PIC claim as only the net amount incurred qualifies for PIC benefits.

Examples of Bundled Deals and How PIC Should Be Claimed

As a concession, IRAS will accept the bundled items as part of the qualifying expenditure only when the bundled items are incidental costs.

Bundled items are regarded as incidental when the value of the bundled non-qualifying items is:

1. Less than or equal to 10% of total value of sales/ lease package; and
2. Less than or equal to $3,000

1. For automated equipment bought on hire purchase, how do I compute the enhanced allowances under PIC?

   The enhanced allowances are computed up-front based on the full cost of equipment. The full cost of the equipment (instead of repayments made during the basis period) is used for the purpose of computing the expenditure cap for the relevant YA. Thereafter, the enhanced allowances are allowed proportionately to the business based on the actual principal repayments made during the year. This does not include interest cost incurred for the hire purchase.

   For a computation of the enhanced allowances on equipment acquired on hire purchase, refer to Annex A-1 of the Productivity & Innovation Credit e-Tax Guide (Fifth Edition) (PDF, 1016KB).

2. What if the repayment schedule of a hire purchase agreement straddles more than 1 basis period or extends beyond the basis period for the last qualifying YA i.e. YA 2018?

   You can continue to claim enhanced allowances on the PIC IT and automation equipment based on the repayment schedule.

   Cash payout option is only available for assets purchased under hire purchase agreements signed during the basis periods for YAs 2012 to 2018, with repayment schedules straddling 2 or more financial years.