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400% Tax Deductions/Allowances
How to claim tax deduction

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

List of Offenders Convicted of PIC Abuse

Measures to Curb PIC Abuses

Abusive PIC Arrangement

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
Conditions for cash payout
What to note when applying for cash payout
When to apply for cash payout

Find out how to apply for PIC cash payout now. New!

How it works

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

The cash payout option is to support small and growing businesses, which may be cash-constrained, and encourage them 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).

# An expense is incurred when the legal liability to pay has arisen, regardless of the date of actual payment of the money.  For more information and examples of when an expense is considered incurred, please refer to Examples of when an expenditure is considered incurred (101KB).

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

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.

When 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

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

 

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 27 February 2015


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