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For companies

400% Tax Deductions/Allowances
-  How to claim tax deduction

Cash Payout Option
-  Conditions for cash payout
-  What to note when applying for cash payout
-  How to apply for cash payout

400% Tax Deductions/Allowances

How it works

Businesses can enjoy 400% tax deductions/allowances on up to $400,000 of their expenditure per year in each of the six qualifying activities, instead of the 100% deductions/allowances under the existing tax rules.

The annual expenditure cap of $400,000 may be combined as follows:

Year of Assessment (YA) Expenditure Cap per Qualifying Activity* Tax Deduction per Qualifying Activity

2011 and 2012
(Combined)

$800,000

$3,200,000
(400% x $800,000)

2013 to 2015
(Combined)

$1,200,000

$4,800,000
(400% x $1,200,000)

2016 to 2018
(Combined)

$1,200,000

$4,800,000
(400% x $1,200,000)

PIC+ Scheme

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:

Year of Assessment (YA) Expenditure Cap per Qualifying Activity* Tax Deduction per Qualifying Activity

2013 to 2015
(Combined)

$1,400,000#

$5,600,000
(400% x $1,400,000)

2016 to 2018
(Combined)

$1,800,000

$7,200,000
(400% x $1,800,000)

Find out more about the PIC+ Scheme for SMEs

* Only if you are carrying on a trade or business for the relevant YAs. Otherwise, the combined cap is reduced accordingly.

# 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 deductions/allowances in their income tax return for the relevant YA by the filing due date (15 Apr for sole-proprietorship and partnership; 30 Nov for company).

Sole-proprietors and partnerships also have to submit the PIC Enhanced Allowances/Deduction Declaration Form for Sole-Proprietors and Partnerships  (105KB) together with their income tax return.

Cash Payout Option

How it works

Eligible businesses can apply to convert up to $100,000 of their total expenditure for each YA in all the six qualifying activities into a non-taxable cash payout. The cash payout rate is at 60% of the expenditure incurred.

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
(Combined)

$200,000*

30%

$60,000
(30% x $200,000)

2013 to 2015
(Cap cannot be combined)

$100,000 per YA

60%

$60,000 per YA
(60% x $100,000)

2016 to 2018
(Cap cannot be combined)

$100,000 per YA

60%

$60,000 per YA
(60% x $100,000)

* Only if you are carrying on a trade or business for the relevant YAs.  Otherwise, the combined cap is reduced accordingly.

Conditions for cash payout

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
  • 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. A business is considered to have met the 3-local-employees condition if it contributes CPF on the payroll of at least 3 local employees in the relevant month(s).

Centralised Hiring Arrangements and the 3-Local-Employee Condition

From YA 2014, for the purpose of fulfilling the 3-local employee condition, individuals deployed under a centralised hiring arrangement* will be 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; and
  • The employee whose cost has been recharged will 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 HR function of a group of companies is centralised in a single entity, with the staff costs (including training expenditure) allocated to the respective entities, or a secondment, where employees are seconded to work for a related company. Once seconded, the staff costs are fully recharged to the related company.

Need for Equipment to be “In Use” at point of Cash Payout Election

New! From YA 2016, to qualify for cash payout on PIC IT and Automation equipment, businesses will need to show that the equipment is in use by the business at the point when they elect for cash payout. This condition reinforces the objective of encouraging businesses to increase their productivity by using automation equipment in their businesses. For businesses with genuine cash-flow difficulties and 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.

What to note when applying for cash payout

  • Once the qualifying expenditure is converted to cash, it cannot be claimed as tax deductions/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.

How to apply for cash payout

Businesses can apply for cash payout according to these timelines:

Year of Assessment (YA) When to Submit Relevant month(s) for determining 3-local-employees condition

2011 and 2012

One-time application
After the business’ financial year-end;

Not later than the filing due date of income tax return*.

Contributes CPF on the payroll for:
Last month of the basis period for the qualifying YA.

2013 to 2015

Quarterly applications
After the end of each quarter or combined consecutive quarters in the business’ financial year;

Not later than the filing due date of income tax return*.

Contributes CPF on the payroll for:
Last month of the quarter or combined consecutive quarters to which the cash payout option relates.

Please see Worked Examples for YAs 2013 to 2015.

2016 to 2018

Quarterly applications
After the end of each quarter or combined consecutive quarters in the business’ financial year;

Not later than the filing due date of income tax return*.

Contributes 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.

Please see Worked Examples for YAs 2016 to 2018.

* Income tax return filing due date is as follows:  

Filing due date if paper Return is submitted

Filing due date if Return is submitted online

For sole-proprietorships and partnerships

15 Apr

18 Apr

For companies

30 Nov

15 Dec

 
To apply for cash payout, please complete our new PIC Cash Payout Application Form. If you are claiming cash payout on PIC IT and Automation Equipment acquired under a hire-purchase agreement entered into during the basis period for YAs 2013 to 2018, please also complete the Hire-Purchase Template (297KB) .
 

The new PIC Cash Payout Application Form is an online form with validation checks to minimise errors in form completion and ensure that all relevant information is provided. It also has an iHelp facility < clip_image001.png> to provide guidance on how to fill up the form. This is to facilitate faster processing of the application forms as it minimises the need for IRAS to seek clarification on the application forms. In turn, this will allow the claimants to receive the cash payout more quickly.

To align with the changes to the PIC scheme as announced in Budget 2014, and as part of our efforts to streamline the application process, we will accept only the Online PIC Cash Payout Application Form from 1 Aug 2014 onwards.

Please read the Essential Information to Note (133KB) Revised! before completing the online PIC Cash Payout Application Form. You may also wish to view the user guide (1.84MB) for this form.

How to Submit PIC Cash Payout Application Form
After completing the form online, please print and submit the original signed form (i.e. not photocopied copy), together with the hire-purchase template (where applicable), to IRAS at the following address:

      Inland Revenue Authority of Singapore
      55 Newton Road
      Revenue House
      Singapore 307987

After Submitting PIC Cash Payout Application Form Revised!
IRAS strives to distribute the cash payout within 3 months of receiving complete information* from businesses. In most cases, IRAS processes the applications within 6 weeks of receiving complete information* from businesses.

We seek your cooperation not to contact IRAS to check on the status of your application within the first 6 weeks of submitting your application. This takes up resources that we can otherwise channel to processing the application and disbursing the cash payout more quickly.

In instances where the application forms are incomplete, IRAS will reject the application forms with reasons stated, and the claimants will be requested to re-submit a properly completed application form. Examples of incomplete applications are forms that are not signed by authorised persons, forms submitted without the relevant annexes, photocopied/ faxed copies of the forms (i.e. we need the original copies) and forms with missing information. Please exercise due care when completing and submitting the cash payout application.

Please also note that IRAS may select PIC applications for further review, even after the cash payout has been made.

*Complete information means properly completed application form, relevant annexes and hire purchase template.

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.

List of offenders convicted of PIC abuse:

Date Summary

Sep 2013

Feb 2014

Aug 2014

Measures to curb PIC abuses

IRAS has come across business arrangements aimed at artificially creating or inflating PIC claims. While such cases make up a minority of PIC claims, the following anti-abuse measures have been introduced to target abusive arrangements and intermediaries that promote or facilitate such arrangements:

  1. Deny PIC benefits arising from abusive arrangements as follows:

    Where the arrangement is abusive because Amount of PIC benefits disallowed
    It consists or makes use of artificial, contrived or fraudulent step(s) That part of PIC benefits that arises from the use of the artificial, contrived or fraudulent step(s)
    The amount paid for the goods/ services exceeds their open market value for no bona fide commercial reason PIC benefits computed based on the difference between the amount paid by the business and the open market value
    There is no bona fide commercial reason for entering into the arrangement Full amount of PIC benefits
  2. Impose penalties on intermediaries (including vendors and consultants) who know, or have reasonable grounds to believe that the arrangements they are promoting are abusive PIC arrangements. Convicted offenders will have to pay a fine of up to $10,000 and/ or imprisonment of up to three years.

Abusive PIC Arrangement

A PIC arrangement is abusive if:

  • it makes use of artificial, contrived or fraudulent step(s) to obtain PIC benefits;
  • the arrangement results in the payment of goods/ services for an amount that exceeds the open market value without a bona fide commercial reason; or
  • there is no bona fide commercial reason for entering into the arrangement, apart from getting the PIC benefits.

For example, Business A sends its employees for a training course. The course fee includes both the value of the training and the value of other goods to be given to the trainees (e.g. a watch as a door gift). To enable Business A to claim PIC benefits on the goods, the course provider added the value of the goods to the course fee charged. This arrangement is an abusive PIC arrangement as the purpose for setting the price in such a way is to help Business A obtain a higher PIC benefit.

Please refer to Annex H of the e-Tax Guide "Productivity and Innovation Credit (736KB)” for more examples of abusive PIC arrangements.

 

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Last Updated on 14 November 2014


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