Productivity and Innovation Credit
The Productivity and Innovation Credit (PIC) was introduced in the Singapore Budget 2010 with further enhancement announced in the Singapore Budget of subsequent years. The objective of the PIC is to encourage Singapore businesses to invest in innovation and productivity with support from the Singapore government with the Inland Revenue Authority of Singapore being the administrator of the scheme. Support is provided in the form of 400% tax deduction/allowances and/or Cash Payout for expenditure in any of the six qualifying activities from Years of Assessment (YAs) 2011 to 2015. In the Singapore Budget 2014, the PIC is further extended to YA 2018 and further enhanced.
From YAs 2013 to 2015, business may also enjoy a PIC Bonus, a dollar-for-dollar matching cash bonus given on top of the existing 400% tax deductions/allowances and/or cash payout.
The grant has ended for all companies financial year ending 2017 and is no longer available.
From YAs 2013 to 2015, business may also enjoy a PIC Bonus, a dollar-for-dollar matching cash bonus given on top of the existing 400% tax deductions/allowances and/or cash payout.
The grant has ended for all companies financial year ending 2017 and is no longer available.
Businesses can enjoy 400% tax deduction/allowances on up to $400,000 of their expenditure per year in each of the six qualifying activities, instead of the 100% deduction/allowances under the existing tax rules.
Combined Expenditure Cap
To give businesses greater flexibility, IRAS allows the annual expenditure cap of $400,000 to be combined in the following way:
Combined Expenditure Cap
To give businesses greater flexibility, IRAS allows the annual expenditure cap of $400,000 to be combined in the following way:
| Year of Assessment (YA) | Expenditure Cap per Qualifying Activity* | Tax Deduction per Qualifying Activity |
|---|---|---|
2011 and 2012 |
$800,000 |
$3,200,000 |
2013 to 2015 |
$1,200,000 |
$4,800,000 |
2016 to 2018 |
$1,200,000 |
$4,800,000 |
However the expenditure cap is only available if the a trade or business is being carried on for the relevant YAs. Otherwise, the combined cap is reduced accordingly. For example, a company which commences business in 2011 (i.e. basis period relating to YA 2012) should compute its PIC enhanced deduction based on the annual expenditure cap of $400,000 instead of the combined expenditure cap of $800,000. If the company winds up its business in 2013 (i.e. basis period relating to YA 2014) and therefore does not carry on any business in 2014 (i.e. basis period relating to YA 2015), the combined expenditure cap applicable for YA 2013 and YA 2014 is $800,000 and not $1,200,000.
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 year in each of the six qualifying activities under the PIC+ scheme.
The annual expenditure cap of $600,000 may be combined as follows:
The annual expenditure cap of $600,000 may be combined as follows:
| Year of Assessment (YA) | Expenditure Cap per Qualifying Activity* | Tax Deduction per Qualifying Activity |
|---|---|---|
2013 to 2015 |
$1,400,000# |
$5,600,000 |
2016 to 2018 |
$1,800,000 |
$7,200,000 |
# 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.
PIC benefits are net of grant or subsidy
The expenditure qualifying for PIC benefits (enhanced deduction or cash payout) is the amount net of grant or subsidy by the Government or any statutory board.
How to claim tax deduction
Businesses can make the claim for deduction/allowances in their income tax returns for the relevant YA by the filing due date (15 Apr for sole-proprietorship and partnership; 30 Nov for company).
The expenditure qualifying for PIC benefits (enhanced deduction or cash payout) is the amount net of grant or subsidy by the Government or any statutory board.
How to claim tax deduction
Businesses can make the claim for deduction/allowances in their income tax returns for the relevant YA by the filing due date (15 Apr for sole-proprietorship and partnership; 30 Nov for company).
Eligible businesses can apply to convert up to $100,000 of their total expenditure in all the six qualifying activities into a non-taxable cash payout.
The cash payout option is to support small and growing businesses which may be cash-constrained to innovate and improve productivity.
The maximum cash payout is calculated as follows:
The cash payout option is to support small and growing businesses which may be cash-constrained to innovate and improve productivity.
The maximum cash payout is calculated as follows:
| Year of Assessment (YA) | Expenditure Cap for All Qualifying Activities | Cash Payout Rate | Maximum Cash Payout |
|---|---|---|---|
2011 and 2012 |
$200,000* |
30% |
$60,000 |
2013 to 2015 |
$100,000 per YA |
60% |
$60,000 per YA |
2016 to 2018 |
$100,000 per YA |
60% |
$60,000 per YA |
Eligibility for Cash Payout Option
Businesses eligible to apply for the cash payout are sole-proprietorships, partnerships, companies (including registered business trusts) that have incurred qualifying expenditure and are entitled to PIC during the basis period for the qualifying YA active business operations in Singapore and have at least 3 local employees (Singapore citizens or Singapore permanent residents with CPF contributions) excluding sole-proprietors, partners under contract for service and shareholders who are directors of the company.
From YA2016, companies must contribute CPF on the payroll for all three months in the quarter or last three months of the combined consecutive quarters to which the cash payout option relates.
Things to note when applying for cash payout
Once the qualifying expenditure is converted to cash, it cannot be claimed as tax deduction/allowances. Election to convert qualifying expenditure to cash is irrevocable. The minimum qualifying expenditure for each application is $400. Qualifying expenditure to be converted to cash is the amount net of grant or subsidy by the Government or any statutory board, and includes grant or subsidy pending approval.
The productivity improvement activities covered under PIC are:
- Acquisition and leasing of PIC Information Technology (IT) and Automation Equipment;
- Training of employees;
- Acquisition and In-licensing of Intellectual Property Rights;
- Registration of patents, trademarks, designs and plant varieties;
- Research and development activities; and
- Design projects approved by DesignSingapore Council.
The PIC Bonus gives businesses a dollar-for-dollar matching cash bonus for YAs 2013 to 2015, subject to an overall cap of $15,000 for all 3 YAs combined.
This is given on top of the existing 400% tax deductions/allowances and/or cash payout under the PIC scheme. To enjoy the PIC Bonus, businesses must have made a claim for the 400% tax deductions/allowances and/or the PIC cash payout.
The PIC Bonus is taxable.
Qualifying Conditions
Businesses eligible for the PIC Bonus are sole-proprietorships, partnerships and companies that have:
This is given on top of the existing 400% tax deductions/allowances and/or cash payout under the PIC scheme. To enjoy the PIC Bonus, businesses must have made a claim for the 400% tax deductions/allowances and/or the PIC cash payout.
The PIC Bonus is taxable.
Qualifying Conditions
Businesses eligible for the PIC Bonus are sole-proprietorships, partnerships and companies that have:
- incurred at least $5,000 in PIC-qualifying expenditure(net of grant or subsidy by the Government or any statutory board) during the basis period for the YA in which a PIC Bonus is claimed;
- active business operations in Singapore; and
- at least 3 local employees (Singapore citizens or Singapore permanent residents with CPF contributions) excluding sole-proprietors, partners under contract for service and shareholders who are directors of the company.
