IRAS | How the Productivity & Innovation Credit (PIC) Scheme Benefits You

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.