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.

Businesses must:

  • For Acquisition of PIC IT and Automation Equipment - own the equipment for at least 1 year from the date of purchase to the date of disposal/ lease
  • For Acquisition of Intellectual Property Rights (IPRs) - own the IPR for at least 5 years from the date of acquisition of IPR
  • For Registration of IPRs - own the IPR for at least 1 year from the date of filing of IPR

Claw-back provisions apply to the enhanced deductions/ allowances, cash payout and PIC bonus if the minimum ownership requirement is not met.

Disposal of PIC IT and Automation Equipment before the Minimum Ownership Period

If the 1-year ownership period is not met, the enhanced allowances or cash payout made may be clawed back or recovered. Similarly, any PIC bonus granted may be recovered.

PIC benefits Equipment disposed of within 1 yearEquipment disposed of after 1 year
Claim allowances - base Compute balancing adjustments based on current rules Compute balancing adjustments based on current rules
Claim allowances - enhanced Deemed as income chargeable to tax in the year of disposal Adjustments not required
Convert qualifying expenditure into cash Claw-back of cash payout No claw-back of cash payout
PIC bonus Claw-back of PIC bonus No claw-back of PIC bonus

Learn more about the minimum ownership period for equipment (PDF, 1016KB) (refer to Annex A).

Waiver of Claw-Back Provisions

The claw-back/ recovery provisions can be waived under the following circumstances:

  1. Automatic Waiver

If in the year of disposal, the cost of remaining qualifying equipment (excluding cost of the equipment disposed of) acquired in the same basis period as the equipment disposed of is more than or equal to the expenditure cap applicable for the period, the waiver is given automatically. You only need to make this declaration in your tax return. There is no need to apply or get prior approval of the waiver.

Example

Company A acquired $1,300,000 worth of qualifying equipment during its financial year that ended on 31 Dec 2015. It claimed enhanced allowances on equipment cost of $1,200,000 (which is the combined expenditure cap for YAs 2016 to 2018) in its return for YA 2016.

In Oct 2016 (YA 2017), it disposed of a piece of qualifying equipment that it had acquired for $80,000 in 2015 and claimed enhanced allowances of $240,000 (300% x $80,000) on in YA 2016.

As the cost of the remaining qualifying equipment is $1,220,000 ($1,300,000 - $80,000) which is higher than the expenditure cap of $1,200,000, the enhanced allowances of $240,000 is not clawed back i.e. $240,000 is not deemed as income chargeable to tax in the year of disposal.

  1. Case-by-Case Waiver

Where, in the year of disposal, the cost of remaining qualifying equipment acquired in the same basis period as the equipment disposed of is less than the expenditure cap applicable for the period, you may apply to IRAS for a case-by-case waiver of the claw-back provision. For this waiver, you will need to provide the commercial reasons for such disposal for IRAS' consideration. You will be granted the waiver if IRAS accepts the commercial reasons for the disposal.

  • Where Enhanced Allowances have been Claimed

You may apply to IRAS for a case-by-case waiver by submitting the Disposal of Qualifying Assets Form (XLS, 43KB) together with your Income Tax Return for the YA in which the asset was disposed of by the filing due date (15 Apr for sole-proprietorship and partnership; and 30 Nov for company). State clearly the commercial reasons for the disposal in the Form.

  • Where Cash Payout and/or PIC Bonus have been Granted

You may apply to IRAS for a case-by-case waiver by submitting the Disposal of Qualifying Assets Form (XLS, 43KB) to IRAS within 30 days from the date of disposal. State clearly the commercial reasons for the disposal in the Form.

Disposal of Intellectual Property Rights (IPRs) before the Minimum Ownership Period

If the minimum ownership period is not met, the enhanced deductions or cash payout made may be clawed back or recovered. Similarly, any PIC bonus granted may be recovered.

The IPR ceases when any of the following events occurs:

  • The company or partnership sells, transfers or assigns all or any part of the IPR
  • The IPR acquired comes to an end without being subsequently revived
  • The company/ partnership permanently ceases to carry on the trade or business for which the IPR was acquired

Company or partnership sells, transfers or assigns all or any part of the IPR

PIC benefits Event occurred within 1st yearEvent occurred within the 2nd - 5th year# or before the end of the elected writing down period*Event occurred after the 5th year# or end of the elected writing-down period*
Claim writing-down allowances (WDA) - base

If the sale price is more than the tax written down value (TWDV), balancing charge (capped at the amount of allowance granted previously) is brought to tax.

If the sale price is less than TWDV, balancing allowance is not allowed.

If the sale price is more than TWDV, balancing charge (capped at the amount of allowance granted previously) is brought to tax.

If the sale price is less than TWDV, balancing allowance is not allowed.

Balancing charge (capped at the amount of allowance granted previously) is brought to tax
Claim WDA - enhanced Any enhanced WDA granted previously is deemed as income in the year of disposal; balance of enhanced WDA is forfeited No claw-back of enhanced WDA previously granted; balance of enhanced WDA is forfeited No claw-back of enhanced WDA previously granted

# 5 years for capital expenditure incurred on acquiring the IPR before YA 2017

* 5/ 10/ 15 years for capital expenditure incurred on acquiring the IPR from YA 2017 as elected in the Declaration Form (PDF, 93KB)

PIC benefits Event occurred within 1st yearEvent occurred within the 2nd - 5th yearEvent occurred after the 5th year
Convert qualifying expenditure into cash Claw-back of cash payout Claw-back of proportionate amount of cash payout in the year of disposal No claw-back of cash payout
PIC bonus Claw-back of PIC bonus Claw-back of proportionate amount of PIC bonus in the year of disposal No claw-back of PIC bonus

Learn more about the minimum ownership period for IPRs (PDF, 831KB) (refer to Annex B).

IPR acquired comes to an end without being subsequently revived or
Company/ partnership permanently ceases its trade or business for which the IPR was acquired

PIC benefits Event occurred within 1st yearEvent occurred within 2nd - 5th year# or before the end of the elected writing-down period*Event occurred after the 5th year# or end of the elected writing-down period*
Claim writing-down allowances (WDA) - baseFrom YA 2011, balancing charge will not be computed on the base allowance of 100%; balancing allowance will not be made From YA 2011, balancing charge will not be computed on the base allowance of 100%; balancing allowance will not be made From YA 2011, balancing charge will not be computed on the base allowance of 100%; balancing allowance will not be made
Claim WDA -enhanced Any enhanced WDA granted previously is deemed as income in the year of disposal; balance of enhanced WDA is forfeited No claw-back of enhanced WDA previously granted; balance of enhanced WDA is forfeited No claw-back of enhanced WDA previously granted

# 5 years for capital expenditure incurred on acquiring the IPR before YA 2017

* 5/ 10/ 15 years for capital expenditure incurred on acquiring the IPR from YA 2017 as elected in the Declaration Form (PDF, 93KB)

PIC benefitsEvent occurred within 1st yearEvent occurred within the 2nd - 5th yearEvent occurred after the 5th year
Convert qualifying expenditure into cashClaw-back of cash payoutClaw-back of proportionate amount of cash payout in the year of disposalNo claw-back of cash payout
PIC bonusClaw-back of PIC bonusClaw-back of proportionate amount of PIC bonus in the year of disposalNo claw-back of PIC bonus

Learn more about the minimum ownership period for IPRs (PDF, 831KB) (refer to Annex B).

When to File the Disposal of Qualifying Assets Form

Businesses have to submit the Disposal of Qualifying Assets Form if they have claimed enhanced deductions/ allowances/ cash payout/ PIC bonus and if any of the following events occur:

  • The PIC IT and automation equipment is disposed of/ leased out within 1 year from the date of purchase (unless automatic waiver applies)
  • The IPR is disposed of within 1 year from the date of filing of the IPR
  • The company or partnership sells, transfers or assigns all or any part of the acquired IPR within 5 years from the date of acquisition of the IPR
  • The IPR acquired comes to an end without being subsequently revived within 5 years from the date of acquisition of the IPR
  • The company/ partnership permanently ceases to carry on the trade or business for which the IPR was acquired, within 5 years from the date of acquisition of the IPR
PIC benefits When to submit Disposal of Qualifying Assets Form
Enhanced allowances and PIC bonus claimed Within 30 days of disposal
Enhanced allowances claimed; PIC bonus not claimed Together with the Income Tax Return for the YA in which disposal of PIC IT and automation equipment occurred (15 Apr for sole proprietor and partnership; 30 Nov for company)
Cash payout granted and PIC bonus claimed Within 30 days of disposal

Penalties may apply if the 30-day notification period as above is not complied with.

Businesses have to repay the cash payout and/or PIC bonus within 30 days from the date of the PIC Cash Payout Recovery notice and/or PIC Bonus Recovery notice, otherwise, late payment penalties may apply.

FAQs

How do I inform IRAS if I dispose of an equipment/ IPR in respect of which a cash payout was claimed within the 1-year holding period?

You should complete the Disposal of Qualifying Assets Form (XLS, 43KB) and provide the details of the equipment/ IPR disposed.

The completed form should be submitted to IRAS within 30 days from the date of disposal of the equipment/ IPR.

How is the recovery of cash payout on disposed IPRs computed?

For acquired IPRs disposed within 1 year from the date of acquisition of the IPR, the full amount of cash payout claimed will be recovered. For IPRs disposed within 2 to 5 years from the date of acquisition of the IPR, the amount of cash payout to be recovered will be apportioned as follows:

Amount to be recovered = [(5 - No. of complete years which the IPR was held) / 5] x cash payout

Is there a penalty for disposing a piece of equipment for which cash payout was claimed within the holding period?

Besides the recovery of cash payout, no penalty will be imposed if you inform IRAS of the disposal within 30 days from the date the equipment is disposed. However, penalties will be imposed for late notification, non-compliance or fraud.