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Productivity & Innovation Credit (PIC) Scheme

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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.

Under the PIC scheme, businesses (sole proprietorships, partnerships, companies (including registered business trusts), registered branches and subsidiaries of a foreign parent or holding company) can enjoy 400% tax deductions/ allowances for qualifying expenditure incurred in any of the 6 qualifying activities from YAs 2011 to 2018. For YA 2013 to 31 Jul 2016, eligible businesses can also exercise an irrevocable
option to convert qualifying expenditure of up to $100,000 for each YA into cash, at a conversion rate of 60%. For qualifying expenditure incurred on or after 1 Aug 2016, the cash payout conversion rate has been reduced from 60% to 40%.

As the PIC scheme has lapsed after YA 2018, any expenditure incurred in the basis period from YA 2019 does not qualify for the PIC benefits.

How the PIC Scheme Benefits You

Tax Deductions/ Allowances Cash Payout

400% tax deductions/ allowances on up to $400,000 of spending per year in each of the 6 qualifying activities.

PIC+ Scheme
From YAs 2015 to 2018, qualifying businesses can enjoy 400% tax deductions/ allowances on up to $600,000 of qualifying expenditure per year in each of the 6 qualifying activities.

Option to convert up to $100,000 of total spending in all 6 activities for each YA into a non-taxable cash payout, in lieu of the tax deductions/ allowances.

For qualifying expenditure incurred from YA 2013 to 31 Jul 2016, the cash payout conversion rate is 60%.

For qualifying expenditure incurred on or after 1 Aug 2016 to YA 2018, the cash payout conversion rate is 40%.

6 Qualifying Activities

Businesses must check that an expenditure falls within the 6 qualifying activities under PIC before making a claim.

Learn more about the 6 qualifying activities.

Qualifying Conditions

Businesses eligible for PIC are sole-proprietorships, partnerships, companies (including registered business trusts), registered branches and subsidiaries of a foreign parent or holding company, that:

Tax Deductions/ AllowancesCash Payout

Carry on active business operations in Singapore
Incurred qualifying expenditure and are entitled to PIC during the basis period of qualifying YA

Carry on active business operations in Singapore
Incurred qualifying expenditure and are entitled to PIC during the basis period of qualifying YA
Meet the 3-local-employee condition
For PIC IT and automation equipment claims relating to YA 2016 onwards, have put the equipment to use at the point of electing for cash payout. This is also known as the ‘in-use’ condition

Details on the Qualifying Conditions for Cash Payout

Incurring Qualifying Expenditure

PIC cash payout is only disbursed when the qualifying expenditure is incurred by the business. An expense is incurred when the legal liability to pay arises, regardless of the date of actual payment of money. The following guides set out examples to determine
the date that the expenditure is incurred:

Reduction in cash payout conversion rate from 60% to 40% on 1 Aug 2016
Expiry of PIC scheme after YA 2018

Meeting the 3-Local-Employee Condition

A business meets the 3-local-employee condition if it makes Central Provident Fund (CPF) contributions for at least 3 local employees in the relevant month(s). However, a business does not qualify for PIC cash payout if the individuals are ’employed’ just for headcount purposes
in claiming PIC cash payout, regardless of whether that individual is ’employed’ on a full-time or part-time basis from the business’ perspective.

From YAs 2011 to 2015, the CPF contributions must be made for 3 local employees in the last month of the relevant financial quarter/ combined financial quarters.

From YAs 2016 to 2018, the CPF contributions must be made for 3 local employees in the last 3 months of the relevant financial quarter/ combined financial quarters.

Local employees refer to Singapore Citizens and Singapore Permanent Residents with CPF contributions but exclude sole-proprietors, partners under contracts for services and shareholders who are directors of the company.

Centralised Hiring Arrangement

From YA 2014, for the purpose of fulfilling the 3-local-employee condition, individuals deployed under a centralised hiring arrangement are regarded as employees of the business where these individuals are deployed, subject to the following qualifying
conditions:

The claimant is able to produce supporting documents on the recharging of employment costs by a related entity, in respect of employees working solely in the claimant entity.
The corporate structure and centralised hiring practices are adopted for bona fide commercial reasons.
The employee whose cost has been recharged does not contribute to the requisite headcount of the related party (which bore the upfront manpower costs).

Some examples of centralised hiring arrangements include:

Deployments where the Human Resources function of a group of companies is centralised in a single entity, with the staff costs (including training expenditure) allocated to the respective entities
Secondments, where employees are seconded to work for a related company. Once seconded, the staff costs are fully recharged to the related company

Meeting the ‘In-Use’ Condition for PIC IT and Automation Equipment Claims

From YA 2016, businesses need to show that the equipment is in use by the business at the point of electing for cash payout to qualify for cash payout on PIC IT and automation equipment.

This condition reinforces the objective of encouraging businesses to increase their productivity by using automation equipment.

For businesses with genuine cashflow difficulties and who 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, subject to
conditions.

How & When to Claim PIC Benefits

Tax Deductions/ AllowancesCash PayoutOther than design projects, no prior approval from IRAS is required. Claim enhanced deductions/ allowances in your Income Tax Return for YAs 2013 to 2018 by the filing due date. e-File the PIC cash payout application for YAs 2013 to 2018 any time after the end of the relevant financial quarter but before the filing due date of the Income Tax Return for the relevant YA.

Claiming Tax Deductions/ Allowances

Businesses claiming tax deductions/ allowances in their Income Tax Return have to claim it by the filing due date for the relevant YA.

Type of Entity Due Date for Paper Filing for YAs 2011 to 2018Due Date for e-Filing for YAs 2011 to 2018Sole-Proprietorships and Partnerships 15 Apr 18 Apr Companies 30 Nov 15 Dec

View an example (PDF, 69KB) on when to claim tax deductions/ allowances for companies and sole-proprietorships.

Claiming Cash Payout

Businesses claiming cash payout must complete and submit the PIC cash payout application and relevant forms after the end of each quarter or combined consecutive quarters in the business’ financial year, but not later than the filing due date of the Income
Tax Return.

View an example (PDF, 69KB) on when to claim cash payout for companies and sole-proprietorships.

Find out how to submit the PIC cash payout application and relevant forms.

Things to Be Aware Of

Minimum Ownership Period for PIC IT and Automation Equipment and Intellectual Property Rights (IPRs)

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

Learn more about the claw-back provisions that apply to the enhanced deductions/ allowances, cash payout and PIC Bonus if the minimum ownership requirement is not met.

Measures to Curb PIC Abuse

IRAS takes a serious view of any non-compliance or abuse of the scheme. Offenders convicted of PIC fraud will have to pay a penalty of up to 4 times the amount of cash payout fraudulently obtained and a fine of up to $50,000 and/or face
imprisonment of up to 5 years. This includes any person who wilfully assists another person to obtain a cash payout or PIC bonus which he is not entitled to.

Learn more about IRAS’ anti-abuse measures.

Common Mistakes to Avoid When Claiming PIC

Take note of the correct procedures and common mistakes to avoid. This will minimise unnecessary delays in the processing of the PIC application and help businesses to keep a clean record with IRAS.

Find out more about the common mistakes made by companies when filing PIC claims.

Voluntary Disclosure of Errors to Qualify for Reduced Penalties

IRAS’ Voluntary Disclosure Programme aims to encourage taxpayers that have made errors in their tax returns to voluntarily come forward to correct their errors and set their tax matters right, in exchange for reduced penalties.

If you have made any errors in claims for PIC cash payout on any of the 6 qualifying activities of the PIC scheme, disclose the errors to IRAS by submitting the PIC Disclosure of Error Form (PDF, 691KB) in an envelope labelled clearly with:

‘PIC – Companies’ for companies
‘PIC – Individuals’ for sole-proprietorships and partnerships

If you have made errors in your claims for PIC enhanced tax deductions/ allowances in the Income Tax Return, file a revised tax computation via the Revise/ Object to Assessment digital service at mytax.iras.gov.sg.

Engaging PIC Consultants/ Vendors

Most businesses file their PIC cash payout claims themselves. If you need assistance from PIC consultants/ vendors when submitting your PIC cash payout claims, you should consider the background of these consultants/ vendors and engage only those who are
competent to provide factual advice.

IRAS has not appointed or endorsed any private consultant/ vendor on PIC matters. Regardless of whether businesses file the PIC cash payout claims on their own or with the help of consultants/ vendors, businesses are ultimately responsible
for the accuracy of the claims.

Learn more about things to note when engaging consultants/ vendors to file PIC claims.

Contact Information

You may contact us for assistance or clarification on PIC:

Type of Entity Helplines Email Companies (e.g. private limited company) 1800 356 8622 For non-confidential enquiries, submit your email enquiries here.
Self-employed (e.g. sole proprietorship)/ Partnership +65 6351 3534 For non-confidential enquiries, submit your email enquiries here.

If your enquiry contains confidential information, email us via myTax Mail for added
security.

FAQs

Eligibility for PIC

Do investment holding companies qualify for PIC?

Investment holding companies do not qualify for PIC as they do not carry on a trade or business for tax purposes. These companies own investments such as properties and shares for long-term investment and derive investment income such as dividend, interest
or rental.

Do service companies qualify for PIC?

A service company renders services to/ on behalf of its related companies.

Service companies that derive arm’s length fees qualify for PIC. These companies need to prepare their tax computations under the normal tax rules. If a service company elects to use the cost plus mark-up basis of assessment, the company does not qualify for PIC. This is because an acceptance of mark-up as the chargeable income of the company is
net of all available deductions and allowances (including PIC).

Do bodies of persons (i.e. clubs, trade associations, management corporations, town councils and co-operatives) qualify for PIC?

The PIC cash payout and PIC bonus are not available to bodies of persons. It is available only to companies, partnerships and sole-proprietorships with at least 3 local employees, as the intention is to focus our help on business enterprises, especially
SMEs with cash-flow needs for their expenditure on innovation and productivity initiatives.

As for PIC enhanced deductions, only bodies of persons deemed to be carrying on business (for tax purposes) can avail themselves of the PIC enhanced deductions/ allowances. Do note that clubs, trade associations and management corporations are normally
not considered as conducting a commercial or profit-making trade or business.

The following paragraphs spell out the eligibility of the various bodies of persons in making claims for PIC deductions/ allowances.

(a) Clubs and Management Corporations

% of receipts from membersDeemed carrying on business?Can claim PIC deductions/ allowances?< 50%YesYes≥ 50%NoNo

(b) Trade associations

% of receipts from Singapore members*Deemed carrying on business?Can claim PIC deductions/ allowances?≤ 50%NoNo> 50%YesYes

(c) Town councils are deemed not to be carrying on a trade or business. As such, they do not qualify for the enhanced tax deductions under PIC.

(d) Co-operatives registered under the Co-operative Societies Act 1979 are exempt from tax under Section 13(1)(f) of the Income Tax Act 1947. As such, they do not qualify for the enhanced tax deductions under PIC.

How long am I required to keep the supporting documents for my claims under PIC?

The existing record keeping requirements for businesses
apply. You are required to maintain all the supporting documents such as invoices for a period of 5 years. For example, if you purchased PIC IT and automation equipment during your financial year 2016 (i.e. the basis period for YA 2017) and made a
claim for cash payout for YA 2017, you are required to keep the relevant documents for the purchase till 31 Dec 2021.

3-Local-Employee
Condition

If my business does not meet the 3-local-employee condition during the relevant financial period for YA 2017 for PIC cash payout, can we make the claim for the expenditure incurred in YA 2017 in YA 2018 when we meet the qualifying conditions?

No. PIC cash payout is given on qualifying expenditure incurred during the basis period of the YA and your business must fulfil the 3-local-employee condition during the relevant month(s) of the YA.

For example, if the business has only 2 local employees in YA 2017 during which the qualifying expenditure was incurred, it is not eligible for PIC cash payout. If your business subsequently has 3 local employees in the relevant month(s) in YA 2018, it
can claim PIC cash payout on qualifying expenditure incurred in YA 2018. However, it cannot claim PIC cash payout for the YA 2017 expenditure. The business may instead claim enhanced tax deductions/ allowances in YA 2017 on the qualifying expenditure
incurred in YA 2017.

I have both full-time and part-time employees. Am I eligible to apply for the cash payout?

Both full-time and part-time employees who are Singapore Citizens and Singapore Permanent Residents are considered when determining the number of qualifying local employees for the purpose of PIC cash payout.

The following groups of people are excluded when determining the number of qualifying local employees for the purpose of PIC cash payout:

Self-employed person (this includes a sole-proprietor and partner under contract for service)
Shareholder who is also a director of the company (as defined in Section 4(1) of the Companies Act 1967)

However, do note that a business does not qualify for PIC cash payout if the individuals are ’employed’ just for headcount purposes in claiming PIC cash payout, regardless of whether that individual is ’employed’ on a full-time or part-time basis from
the business’ perspective.

For YA 2017, my company intends to employ 2 more employees on a part-time basis for only 3 months, and contribute CPF for these employees to qualify for PIC cash payout. The company already has 1 local employee (with CPF contributions). Can the company qualify for PIC cash payout?

No, a company does not qualify for PIC cash payout if ’employees’ are ’employed’ just for headcount purposes in claiming PIC. There must be a genuine employer-employee relationship that was entered into for bona fide commercial reasons.

An example of a bona fide employer-employee relationship is when a company hires 2 additional employees to work in a retail shop from Oct to Dec to cope with the spike in sales volume in those months.

IRAS will take enforcement action against individuals or companies that engage in false/ fraudulent PIC cash payout claims.

I am self-employed and have contributed to my Medisave Account. Am I considered an employee of the business?

No. You are self-employed and the owner of the business. Thus, you cannot be considered as an employee of the business for the purpose of PIC cash payout. The eligibility of a business to claim PIC cash payout is based on the number of employees who are not business owners.

Which are the relevant months for meeting the 3-local-employee condition to qualify for PIC cash payout for PIC IT and automation equipment acquired on hire purchase (HP)?

From YAs 2012 to 2018
Businesses can opt for PIC cash payout on assets purchased under HP agreements signed during the basis periods for YAs 2012 to 2018, with repayment schedules straddling 2 or more financial years.

The cash payout rate to be applied is determined based on the date on which the HP agreement is signed. For example, the cash payout rate for a HP agreement signed on 1 Jul 2016 is 60%. If the HP agreement is signed on 1 Aug 2016, the cash payout rate
is 40%. 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).

To qualify for PIC cash payout, the business must contribute CPF on the payroll of at least 3 local employees:

For YAs 2016 to 2018 – for all 3 months in the quarter or last 3 months of the combined consecutive quarters in which the hire purchase agreement is signed
For YAs 2013 to 2015 – in the last month of the quarter or combined consecutive quarters in which the hire purchase agreement is signed
For YA 2012 – in the last month of the basis period in which the hire purchase agreement is signed

If you are 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, submit the completed Hire-Purchase Template (XLSX, 307KB) together with your PIC cash payout application.

For YA 2011
The cash payout option is not available for assets purchased under HP agreements (with repayment schedules straddling 2 or more basis periods) signed during the basis period for YA 2011.

If a sole-proprietorship is owned by a company (not an individual) and the PIC qualifying expenditure was incurred by the sole-proprietorship, which entity should fulfil the 3-local-employee condition in order to qualify for PIC cash payout: the company or the sole-proprietorship?

The sole-proprietorship business has to fulfil the 3-local-employee condition in order to qualify for the PIC cash payout. This is because the sole-proprietorship incurred the PIC qualifying expenditure.