Good news to all companies that plan to utilise the government's Productivity and Innovation Credit Scheme. Following the release of the Budget 2014, the Inland Revenue Authority of Singapore (IRAS), revised its Productivity and Innovation Credit (PIC) IT and Automation Equipment List to include Website, Automated cover system for open-top containers and Landscaping equipments. 

This means that businesses can now claim enhanced deduction for expenses incurred for the 3 items without the need to write in to apply.

Expenditure for these items incurred from YA 2014 will be eligible for the PIC. If you have already submitted your PIC Cash Payout Application for YA 2014, you could try to write in to IRAS to have any expenditure included.

The Singapore Budget 2014 is announced today at 1530. Below are some of the measures targeted at businesses extracted from the Budget 2014 website. We will be following up with the details shortly.

(A) Supporting Innovation and Skills
(A1) Extension and Enhancement to the Productivity and Innovation Credit (PIC) Scheme ($3.6 billion over three Years of Assessment (YAs))

• PIC Extension. The PIC Scheme, which lapses after YA2015, will be extended for three years (i.e. YA2016 to YA2018) at the current support level^. The expenditure cap for each qualifying activity is combined across the three years, which means businesses can claim enhanced tax deductions of up to $1.2 million ($400,000 x 3 YAs).


• PIC+ scheme. To help firms that are making substantial investments to revamp their businesses, we will raise the expenditure cap for each of the six qualifying activities from the current $400,000 to $600,000 with effect from YA2015. This means that qualifying SMEs# that have hit the combined cap of $1.2 million (across three YAs) can now claim enhanced tax deductions of up to $1.8 million@ in qualifying expenditure.

(A2) Extension of Research & Development (R&D) Tax Deductions Scheme
To continue encouraging R&D in Singapore, the broad-based 50% additional tax deduction on qualifying R&D expenditure, which lapses after YA2015, will be extended for 10 years till YA2025. The further tax deduction for EDB-approved R&D activities, which lapses after 31 March 2015, will also be extended till 31 March 2020.

(A3) Extension of Writing Down Allowance Scheme for Intellectual Property Rights
As part of our ongoing efforts to build Singapore as an IP hub, the Writing Down Allowance Scheme for Intellectual Property Rights, which lapses after YA2015, will be extended for five years till YA2020.

(A4) Extension and Enhancement of the Land Intensification Allowance (LIA) Scheme
To continue encouraging businesses to optimise land use, the LIA Scheme, due to expire next year, will be extended for five years till 30 June 2020. The LIA will also be extended to the logistics sector, as well as to businesses carrying out qualifying activities on airport and port land.

(A5) Top-up to Lifelong Learning Endowment Fund ($500 million)
In line with the long-term commitment to Continuing Education and Training, the Government will top up the Lifelong Learning Endowment Fund by $500 million, bringing the total fund size to $4.6 billion.

(B) Adopting ICT Solutions to Increase Productivity
(B1) ICT for Productivity and Growth (IPG) Programme ($500 million over three years)
To accelerate the adoption of ICT solutions among SMEs, IDA will, over the next three years:

• Promote the adoption of proven ICT-based productivity solutions by subsidising 70% of the qualifying costs, and reimbursing the vendors directly so that SMEs need not apply for the subsidy.


• Encourage SMEs to pilot emerging technology solutions, by funding 80% of the qualifying costs, up to a maximum of $1 million subsidy per firm.


• Provide SMEs that tap on qualifying ICT-based productivity solutions with a 50% subsidy on their fibre subscription plans of at least 100Mbps for up to two years, capped at $120 per month.


• Support SMEs to implement Wireless@SG services at their premises by providing a one-time subsidy of up to $2,400 for them to set up the necessary equipment.


• Overcome installation challenges and ensure that more non-residential buildings have the facilities to bring fibre broadband to their business tenants, by subsidising building owners for up to 80% of the costs of new in-building infrastructure, up to a maximum of $200,000 per qualifying building.

(C) Catalysing Investment in Growth Enterprises
(C1) Co-Investment Programme Phase II (up to $150 million)
Under the second phase of the Co-Investment Programme, the Government will set aside up to $150 million to co-invest with the private sector to catalyse more patient growth capital for Singapore-based enterprises. The additional capital will be allocated to two new funds: i) the SME Co-Investment Fund II which supplies equity capital; and ii) the SME Mezzanine Growth Fund which supplies mezzanine capital.

(C2) Enhancement to the Micro-Loan Programme
To spur further lending to young SMEs, the Government will increase the risk which it shares with participating financial institutions for loans to young SMEs (firms which have been registered for less than three years) under the Micro-Loan Programme, from 50% to 70% for two years.

(D) Seizing Growth Opportunities Overseas
(D1) Enhancement to Internationalisation Finance Scheme
To further help companies make additional asset investments abroad or fund working capital expenses for secured overseas projects, the maximum loan quantum supported by the Internationalisation Finance Scheme will be raised from $15 million to $30 million for two years.

(D2) Enhancement to the Global Company Partnership Programme
The Global Company Partnership will be enhanced by raising the support level for pilot and test-bedding projects from 50% to 70% for two years. The scope of support for staff attachments in overseas markets will also be expanded.

(E) Improving Productivity in the Construction Sector
(E1) Upstream Measures to Tackle Construction Productivity
Mandate use of productive technologies for selected Government Land Sales (GLS) sites.

Stipulate a minimum percentage level of prefabrication as part of tender conditions for industrial GLS sites.

(E2) Increase in Buildability-score and Constructability-score for Private Sector Projects
From September 2014, private projects that are outside of the GLS programme will need to meet the same higher standards as new public sector projects and private sector projects on GLS and industrial GLS sites.

Standardised floor heights and a number of building components such as drywalls will be made mandatory for new projects from September 2014.

(E3) Increase in Foreign Worker Levies
The levy for Basic Skilled (R2) Man-Year-Entitlement Work Permit Holders (WPHs) in the Construction sector will be increased from $600 to $700 in July 2016. Levies for Higher Skilled (R1) WPHs will remain unchanged to further encourage construction firms to opt for higher skilled WPHs.

(E4) Introduction of Market-Based Skills Recognition Framework
To complement the existing upgrading pathway which requires WPHs to pass a skills certifications test to achieve R1 status, a new Market-Based Skills Recognition Framework will be introduced. The new framework will allow Basic Skilled workers who have worked in Singapore for six years and who earn a salary of at least $1,600 to upgrade to Higher Skilled status.

(E5) Extension of Period of Employment for R1 WPH
The maximum period of employment for R1 WPHs from Non-Traditional Sources and the People’s Republic of China will be extended by four years, from 18 to 22 years. This will also apply to the Marine and Process sectors.

(F) Other Measures
(F1) Enhancement to the Early Turnover Scheme
To further incentivise commercial vehicle owners to replace their vehicles early, the Early Turnover Scheme will be enhanced by lengthening the bonus Certificate of Entitlement period for the replacement vehicle*.

(F2) Extension of Carbon Emissions-based Vehicle Scheme
The Carbon Emissions-based Vehicle Scheme will be extended to June 2015, with a view to refining the scheme thereafter.

(F3) Increase in Tobacco Excise Duties ($70 million per year)
Excise duties for cigarettes and other manufactured tobacco products will be increased by 10%. This will take effect from 21 February 2014.

(F4) Increase in Liquor Excise Duties ($120 million per year)
The excise duty rate of all liquor types will be raised by 25%. The duty rate of shandy will also be rationalised to that of beer. These changes will take effect from 21 February 2014.

(F5) Increase in Employer CPF Medisave Contribution Rates
To help Singaporean workers save for their healthcare needs, the employer CPF contribution rate will be increased by 1 percentage point for all workers. This increase will be channelled into the Medisave Account.

To alleviate the impact on businesses, employers will receive a one-year Temporary Employment Credit to offset 0.5 percentage points of wages up to the CPF salary ceiling of $5,000.

These changes will take effect from January 2015.

(F6) Increase in CPF Contribution Rates for Older Workers
To boost the retirement adequacy of older Singaporeans, the Government will raise their CPF contribution rates. These are on top of the increase in employer CPF contribution rates for the Medisave Account for all workers. All increases in employer contributions will be allocated to the Special Account. The 0.5 percentage point increase in contribution rate from employees aged above 50 to 55 years will go to the Ordinary Account.

To help employers adjust to this increase, the Government will provide a one-year increase in the Special Employment Credit of up to 0.5 percentage points. This comes on top of the existing Special Employment Credit of 8% of wages, and will offset the increase in older worker contribution rates.

The changes will take effect from January 2015.

^ Under the PIC scheme, in each YA, businesses can enjoy 400% tax deductions on up to $400,000 of qualifying expenditure in each of the six qualifying activities, or a 60% cash payout on up to $100,000 of qualifying expenditure incurred for all six qualifying activities. 
# An entity is a qualifying SME if (a) its annual turnover is not more than S$100 million or (b) its employment size is not more than 200 workers. This criterion will be applied at the group level if the entity is part of a group.
@ $1.8 million is the combined expenditure cap per qualifying activity for YA2016 to YA2018. The combined cap applicable in YA2015 is $1.4 million ($400,000 for YA2013 and YA2014, and $600,000 for YA2015).
* Under the Early Turnover Scheme, owners who de-register their Pre Euro and Euro I vehicles before the end of statutory life will pay lower, pro-rated Certificate of Entitlement (COE) premium for their replacement vehicle, as they can transfer the unused period of their COE to the replacement vehicle. They will also get a bonus COE period for their replacement vehicle based on the current vehicle’s remaining statutory life.

Astab is proud to announce the relaunch of our Astab Online Accounting website after a facelift for the year of 2014. 

The Astab Online Accounting website is our flagship online accounting service in partnership with Xero, the leading online accounting software in the world. 

With the relaunch, we have also further refined our Online Accounting Services to include the following:

• Xero Online Accounting software subscription
  
• Xero set-up for new companies
• Free Xero invoice template customisation
• Corporate secretary, routine annual return filing with ACRA and annual general meeting preparation
• Compilation of financial report
• Proper tax planning
• Tax computation and tax returns
• Free phone/watsapp/email support for tax and accounting queries
• Regular updates and reminders on tax, compliance and grants
• Productivity and Innovation Credit Cash Payout application preparation for eligible companies

Email us at enquiries@astab.com.sg or call us at 6240 6868 if you are interested to start your Online Accounting Service!

You can now conduct your bank reconciliation on your Android phone and Xero will be further extending the features of the new apps in the near future at a must faster pace.

You can download the new app from the Google Play store right now.

A company director was charged for submitting a false Productivity and Innovation Credit (PIC) claim in order to obtain cash payout of $60,000 for his company.

Director made false PIC claims
Alex Rajan made a false declaration in a PIC cash payout application form that EMTPL had purchased PIC automation equipment for $168,000 and that his company met the qualifying conditions for the cash payout.

IRAS’ investigations revealed that EMTPL did not incur such expenditure on the equipment. The company also did not employ or make CPF contributions for at least three local employees in the relevant period.  In fact, EMTPL had never been in active business operation. 

Mr Alex Rajan s/o Anthony Samy (“Alex Rajan”, 47), director of Exel Mitsui Technologies Pte Ltd (“EMTPL”) which manufactures machine tool accessories, was charged for making false PIC claims by the Courts on the 14 February 2014. Alex Rajan pleaded guilty to the charge and will be sentenced on 21 February for the offence. Meanwhile, the court has ordered EMTPL to pay a fine of $8,000 and a penalty of $180,000. 
 
This is the second case of a director and its company to be charged for making false PIC claims. IRAS had earlier charged Greenit Pte Ltd, a computer equipment and hardware wholesaler and computer memory modules distributor, and its director Khoo Tzyh Shin for fraudulently claiming a PIC cash payout.

IRAS takes a serious view of any abuse of PIC Scheme

IRAS takes a serious view of taxpayers who defraud the government. Offenders convicted of PIC fraud will have to pay a penalty of up to four times the amount of cash payout fraudulently obtained, and a fine of up to $50,000 and/or imprisonment of up to five years.

Examples of what IRAS regards as abuse of the PIC scheme are as follows:

a) Claiming PIC using false records or documents, where no such expenditure was incurred or where the actual amount incurred was lower.

b) Creating a shell company to make PIC claims on purchase of equipment from a related company, where no such purchases were made and where the automation equipment continue to be owned and used by the related company.

c) Claiming PIC based on collusion with a third party to purchase automation equipment, when the selling party is not the legal owner of the equipment and was merely renting or leasing it.

d) Using phantom employees to meet the PIC qualifying condition of having made CPF contributions for three or more local employees.

e) Engaging in arrangements that seek to artificially inflate PIC claims such as purchase/lease arrangements bundled with non-qualifying costs (for example, offering a high cash back for trade-in of an old asset).

f) Artificially inflating the staff cost allocated to software development.

Following up on our previous post: ACRA BizFinx portal launch postponed

Prior to the launch of BizFinx, companies can continue to file their financial statements in the following options:
(a) Full XBRL format (option A) using FS manager,
(b) Partial XBRL format (option B) using FS manager; or
(c) Full PDF format (option C) - select "Other companies which have been approved by ACRA", with the date of approval as "1 December 2013" and reason stated as "Transitional arrangement for BizFinx launch".

With the launch of BizFinx, the above filing options will cease and FS Manager will be phased out. Companies planning to file their Annual Return using any of the above filing options, must complete their Annual Return transaction before 28 February 2014, 2359 hours.