The PIC scheme has expired after the Year of Assessment (YA) 2018. Businesses are not allowed to claim PIC benefits on expenditure incurred after the basis period of YA 2018.

Tax Deductions/ Allowances

From YAs 2011 to 2018, businesses can enjoy 400% tax deductions/ allowances on up to $400,000 of their expenditure per YA in each of the 6 qualifying activities, instead of the 100% deductions/ allowances under the existing tax rules. The 100% deductions/ allowances are usually termed 'base deductions/ allowances', while the additional 300% deductions/ allowances are usually termed 'enhanced deductions/ allowances'.

The annual expenditure cap of $400,000 may be combined as follows:

YAExpenditure Cap per Qualifying Activity*Tax Deduction per Qualifying Activity
2016 to 2018
(Combined)
$1,200,000
$4,800,000
(400% x $1,200,000)
2013 to 2015
(Combined)
$1,200,000
$4,800,000
(400% x $1,200,000)
2011 and 2012
(Combined)
$800,000
$3,200,000
(400% x $800,000)

* Only if you are carrying on a trade or business for the relevant YAs. Otherwise, the combined cap is reduced accordingly.

Tax Deductions/ Allowances under the PIC+ Scheme

As announced in Budget 2014, from YAs 2015 to 2018, qualifying businesses can enjoy 400% tax deductions/ allowances on up to $600,000 (instead of $400,000 as mentioned above) of their expenditure per YA in each of the 6 qualifying activities under the PIC+ Scheme.

The annual expenditure cap of $600,000 may be combined as follows:

YAExpenditure Cap per Qualifying Activity*Tax Deduction per Qualifying Activity
2016 to 2018
(Combined)
$1,800,000
$7,200,000
(400% x $1,800,000)
2013 to 2015
(Combined)
$1,400,000#
$5,600,000
(400% x $1,400,000)

* Only if you are carrying on a trade or business for the relevant YAs. Otherwise, the combined cap is reduced accordingly.
# The combined expenditure cap of $1,400,000 is only applicable for YA 2015 as the additional expenditure cap of $200,000 ($600,000 - $400,000) is not available for YAs 2013 and 2014.

Learn more about the PIC+ Scheme.

Unutilised Trade Losses or Allowances Arising from PIC

PIC deductions/ allowances that cannot be fully utilised in any YA will form part of the unutilised trade losses/ allowances of a business, which may be set-off against other income of the business. 

The unutilised trade losses/ allowances may also be:

  • Carried forward to set-off against the business income of future YAs subject to the current tax rules;
  • Carried back to the immediate preceding YA to set-off against the prior year's income under the Loss Carry-Back Relief system; or
  • Transferred to set-off against the income of a related Singapore company under the Group Relief system or a spouse in the case of a sole-proprietor or partner.

 

Cash Payout

Eligible businesses can apply to convert up to $100,000 of their total expenditure for each YA in all the 6 qualifying activities into a non-taxable cash payout, instead of claiming tax deductions/ allowances. The qualifying expenditure to be converted to cash is the expenditure amount minus the grant or subsidy by the Government or any statutory board.

The cash payout rate is 60% of the qualifying expenditure incurred till 31 Jul 2016. For qualifying expenditure incurred on or after 1 Aug 2016, the cash payout rate is 40%. This option may be more beneficial for businesses that may be cash-constrained.

Once the qualifying expenditure is converted to cash, it cannot be claimed as tax deductions/ allowances.

The maximum cash payout is calculated as follows:

YAExpenditure Cap for All Qualifying ActivitiesCash Payout Rate#Maximum Cash Payout
2016 to 2018
(Cap cannot be combined)
$100,000 per YA

60% (for qualifying expenditure incurred up to 31 Jul 2016) 

40% (for qualifying expenditure incurred from 1 Aug 2016) 

$60,000 per YA (60% x $100,000) where all qualifying expenditure is incurred before 1 Aug 2016

$40,000 per YA (40% x $100,000) where all qualifying expenditure is incurred on or after 1 Aug 2016

2013 to 2015
(Cap cannot be combined)
$100,000 per YA60%
$60,000 per YA
(60% x $100,000)
2011 and 2012
(Combined)
$200,000*30%
$60,000
(30% x $200,000)

* Only if you are carrying on a trade or business for the relevant YAs. Otherwise, the combined cap is reduced accordingly. 
# For PIC IT and automation equipment acquired on hire purchase (HP) and intellectual property rights (IPR) acquired on instalments, the cash payout rate to be applied is based on the date on which the HP agreement or IPR instalment agreement is signed.

FAQs

Tax Deductions/ Allowances

 

I incurred qualifying expenditure to purchase PIC IT and automation equipment in the basis period of YA 2018 but chose to defer claiming capital allowances (base and enhanced). Can I claim 400% deferred capital allowances in a subsequent YA (i.e. YA 2019 or after)?

Yes. If you choose to defer your capital allowance claims on PIC IT and automation equipment acquired in the basis period of YA 2018, the 400% base and enhanced capital allowances can be claimed in YA 2019 or a subsequent YA. Learn more about deferring capital allowance claims.

Our business income is taxable at the prevailing rate and concessionary rate. How will enhanced deductions be allowed on qualifying expenditure in relation to income streams taxed at different tax rates?

For a business whose income is taxable at the prevailing rate ('normal income') as well as at 1 or more concessionary rate(s) ('concessionary income'), enhanced deductions are first granted on qualifying expenditure incurred in relation to the normal income.

If the applicable expenditure cap is not exhausted, enhanced deductions are then granted on qualifying expenditure incurred in relation to the concessionary income that is subject to tax at the highest concessionary rate first, followed by the next highest rate, and so on, until the expenditure cap is reached.

Our business income is taxable at the prevailing rate and concessionary rate. How will enhanced deductions be allowed on common expenditure and common assets?

In general, common expenditure incurred for both the normal and concessionary trade is allocated to income derived from each trade for tax purposes. 

Common expenditure
When computing the PIC benefits, enhanced deductions (excluding enhanced deductions arising from IPR registration) are first granted on qualifying common expenditure allocated to the normal income.

If the applicable expenditure cap is not exhausted, enhanced deductions are then granted on qualifying common expenditure allocated to the concessionary income that is subject to tax at the highest concessionary rate first, followed by the next highest rate, and so on, until the expenditure cap is reached.

Where the IPR registration cost is a common expenditure, the base and enhanced deductions are determined first before allocating the deductions to each stream of income.

Common assets
Enhanced allowances on common assets (i.e. qualifying equipment and IPRs) are granted on the full cost of each asset, up to the expenditure cap. The enhanced allowances are then computed for each qualifying common asset before the 100% base and 300% enhanced allowances are allocated to each stream of income.

Cash Payout

How is the cash payout cap applied?

For sole-proprietorships and companies (including registered business trusts), the cap is applied at the individual or company level.

For partnerships, the cap is applied at the partnership level. 

If my business has taxable income, can I convert the qualifying expenditure under PIC into a cash payout instead of claiming enhanced deductions/ allowances?

Yes. However, once you have converted qualifying expenditure into cash payout, the same expenditure is no longer available for PIC allowances/ deductions to be claimed against your income.

Is partial conversion of the qualifying expenditure into cash payout allowed?

Partial conversion is allowed for qualifying expenditure relating to leasing of PIC IT and automation equipment, licensing of qualifying IPRs, training, design project and research and development.

Partial conversion is not allowed for qualifying expenditure relating to the purchase of PIC IT and automation equipment, registration and acquisition of IPRs.

For the purchase of PIC IT and automation equipment as well as the registration and acquisition of IPRs, you have to decide whether to claim the enhanced allowances/ deductions under PIC or to convert such expenditure into a cash payout on a 'per equipment', 'per filing' or 'per IPR' basis respectively subject to a cap of $100,000 for each YA (from YAs 2013 to 2018). The excess expenditure on the same equipment/ IPR exceeding the cap is forfeited and does not qualify for tax allowances/ deductions against your income. 

Example

Equipment A is purchased at a cost of $150,000 in YA 2017.

You can either claim $600,000 as capital allowance against your income or opt to convert the qualifying expenditure of $150,000 into a cash payout:

If You Claim Tax Allowances
If You Claim Cash Payout

 Enhanced capital allowance under PIC = 300% x $150,000 = $450,000

Total capital allowances = base capital allowances of $150,000 + enhanced capital allowances under PIC of $450,000 = $600,000

The cash payout is computed at 60%/ 40% of the qualifying expenditure capped at $100,000.

Total cash payout = 60% X $100,000 = $60,000 if the expenditure was incurred from 1 Jan 2016 to 31 Jul 2016, or 40% X $100,000 = $40,000 if incurred on or after 1 Aug 2016.

You cannot make a partial conversion i.e. you cannot apply for a cash payout on the $100,000 expenditure and claim the remaining $50,000 expenditure as capital allowance of $200,000 (400% x $50,000). If you apply for cash payout, the remaining $50,000 expenditure is forfeited.

Related Content