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.
On this page:
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
Claw-back provisions apply to the enhanced deductions/ allowances, cash payout and PIC bonus if the minimum ownership requirement is not met.
Disposal of PIC IT and Automation Equipment before the Minimum Ownership Period
If the 1-year ownership period is not met, the enhanced allowances or cash payout made may be clawed back or recovered. Similarly, any PIC bonus granted may be recovered.
| PIC benefits | Equipment disposed of within 1 year | Equipment disposed of after 1 year |
|---|---|---|
| Claim allowances - base | Compute balancing adjustments based on current rules | Compute balancing adjustments based on current rules |
| Claim allowances - enhanced | Deemed as income chargeable to tax in the year of disposal | Adjustments not required |
| Convert qualifying expenditure into cash | Claw-back of cash payout | No claw-back of cash payout |
| PIC bonus | Claw-back of PIC bonus | No claw-back of PIC bonus |
Learn more about the minimum ownership period for equipment (PDF, 1016KB) (refer to Annex A).
Waiver of Claw-Back Provisions
The claw-back/ recovery provisions can be waived under the following circumstances:
- Automatic Waiver
If in the year of disposal, the cost of remaining qualifying equipment (excluding cost of the equipment disposed of) acquired in the same basis period as the equipment disposed of is more than or equal to the expenditure cap applicable for the period, the waiver is given automatically. You only need to make this declaration in your tax return. There is no need to apply or get prior approval of the waiver.
Example
Company A acquired $1,300,000 worth of qualifying equipment during its financial year that ended on 31 Dec 2015. It claimed enhanced allowances on equipment cost of $1,200,000 (which is the combined expenditure cap for YAs 2016 to 2018) in its return for YA 2016.
In Oct 2016 (YA 2017), it disposed of a piece of qualifying equipment that it had acquired for $80,000 in 2015 and claimed enhanced allowances of $240,000 (300% x $80,000) on in YA 2016.
As the cost of the remaining qualifying equipment is $1,220,000 ($1,300,000 - $80,000) which is higher than the expenditure cap of $1,200,000, the enhanced allowances of $240,000 is not clawed back i.e. $240,000 is not deemed as income chargeable to tax in the year of disposal.
- Case-by-Case Waiver
Where, in the year of disposal, the cost of remaining qualifying equipment acquired in the same basis period as the equipment disposed of is less than the expenditure cap applicable for the period, you may apply to IRAS for a case-by-case waiver of the claw-back provision. For this waiver, you will need to provide the commercial reasons for such disposal for IRAS' consideration. You will be granted the waiver if IRAS accepts the commercial reasons for the disposal.
- Where Enhanced Allowances have been Claimed
You may apply to IRAS for a case-by-case waiver by submitting the Disposal of Qualifying Assets Form (XLSX, 23KB) together with your Income Tax Return for the YA in which the asset was disposed of by the filing due date (15 Apr for sole-proprietorship and partnership; and 30 Nov for company). State clearly the commercial reasons for the disposal in the Form.
- Where Cash Payout and/or PIC Bonus have been Granted
You may apply to IRAS for a case-by-case waiver by submitting the Disposal of Qualifying Assets Form (XLSX, 23KB) to IRAS within 30 days from the date of disposal. State clearly the commercial reasons for the disposal in the Form.
Disposal of Intellectual Property Rights (IPRs) before the Minimum Ownership Period
If the minimum ownership period is not met, the enhanced deductions or cash payout made may be clawed back or recovered. Similarly, any PIC bonus granted may be recovered.
The IPR ceases when any of the following events occurs:
- The company or partnership sells, transfers or assigns all or any part of the IPR
- The IPR acquired comes to an end without being subsequently revived
- The company/ partnership permanently ceases to carry on the trade or business for which the IPR was acquired
Company or partnership sells, transfers or assigns all or any part of the IPR
| PIC benefits | Event occurred within 1st year | Event occurred within the 2nd - 5th year# or before the end of the elected writing down period* | Event occurred after the 5th year# or end of the elected writing-down period* |
|---|---|---|---|
| Claim writing-down allowances (WDA) - base | If the sale price is more than the tax written down value (TWDV), balancing charge (capped at the amount of allowance granted previously) is brought to tax. If the sale price is less than TWDV, balancing allowance is not allowed. | If the sale price is more than TWDV, balancing charge (capped at the amount of allowance granted previously) is brought to tax. If the sale price is less than TWDV, balancing allowance is not allowed. | Balancing charge (capped at the amount of allowance granted previously) is brought to tax |
| Claim WDA - enhanced | Any enhanced WDA granted previously is deemed as income in the year of disposal; balance of enhanced WDA is forfeited | No claw-back of enhanced WDA previously granted; balance of enhanced WDA is forfeited | No claw-back of enhanced WDA previously granted |
# 5 years for capital expenditure incurred on acquiring the IPR before YA 2017
* 5/ 10/ 15 years for capital expenditure incurred on acquiring the IPR from YA 2017 as elected in the Declaration Form (PDF, 93KB)
| PIC benefits | Event occurred within 1st year | Event occurred within the 2nd - 5th year | Event occurred after the 5th year |
|---|---|---|---|
| Convert qualifying expenditure into cash | Claw-back of cash payout | Claw-back of proportionate amount of cash payout in the year of disposal | No claw-back of cash payout |
| PIC bonus | Claw-back of PIC bonus | Claw-back of proportionate amount of PIC bonus in the year of disposal | No claw-back of PIC bonus |
Learn more about the minimum ownership period for IPRs (PDF, 831KB) (refer to Annex B).
IPR acquired comes to an end without being subsequently revived or
Company/ partnership permanently ceases its trade or business for which the IPR was acquired
| PIC benefits | Event occurred within 1st year | Event occurred within 2nd - 5th year# or before the end of the elected writing-down period* | Event occurred after the 5th year# or end of the elected writing-down period* |
|---|---|---|---|
| Claim writing-down allowances (WDA) - base | From YA 2011, balancing charge will not be computed on the base allowance of 100%; balancing allowance will not be made | From YA 2011, balancing charge will not be computed on the base allowance of 100%; balancing allowance will not be made | From YA 2011, balancing charge will not be computed on the base allowance of 100%; balancing allowance will not be made |
| Claim WDA -enhanced | Any enhanced WDA granted previously is deemed as income in the year of disposal; balance of enhanced WDA is forfeited | No claw-back of enhanced WDA previously granted; balance of enhanced WDA is forfeited | No claw-back of enhanced WDA previously granted |
# 5 years for capital expenditure incurred on acquiring the IPR before YA 2017
* 5/ 10/ 15 years for capital expenditure incurred on acquiring the IPR from YA 2017 as elected in the Declaration Form (PDF, 93KB)
| PIC benefits | Event occurred within 1st year | Event occurred within the 2nd - 5th year | Event occurred after the 5th year |
|---|---|---|---|
| Convert qualifying expenditure into cash | Claw-back of cash payout | Claw-back of proportionate amount of cash payout in the year of disposal | No claw-back of cash payout |
| PIC bonus | Claw-back of PIC bonus | Claw-back of proportionate amount of PIC bonus in the year of disposal | No claw-back of PIC bonus |
Learn more about the minimum ownership period for IPRs (PDF, 831KB) (refer to Annex B).
When to File the Disposal of Qualifying Assets Form
Businesses have to submit the Disposal of Qualifying Assets Form if they have claimed enhanced deductions/ allowances/ cash payout/ PIC bonus and if any of the following events occur:
- The PIC IT and automation equipment is disposed of/ leased out within 1 year from the date of purchase (unless automatic waiver applies)
- The IPR is disposed of within 1 year from the date of filing of the IPR
- The company or partnership sells, transfers or assigns all or any part of the acquired IPR within 5 years from the date of acquisition of the IPR
- The IPR acquired comes to an end without being subsequently revived within 5 years from the date of acquisition of the IPR
- The company/ partnership permanently ceases to carry on the trade or business for which the IPR was acquired, within 5 years from the date of acquisition of the IPR
| PIC benefits | When to submit Disposal of Qualifying Assets Form |
|---|---|
| Enhanced allowances and PIC bonus claimed | Within 30 days of disposal |
| Enhanced allowances claimed; PIC bonus not claimed | Together with the Income Tax Return for the YA in which disposal of PIC IT and automation equipment occurred (15 Apr for sole proprietor and partnership; 30 Nov for company) |
| Cash payout granted and PIC bonus claimed | Within 30 days of disposal |
Penalties may apply if the 30-day notification period as above is not complied with.
Businesses have to repay the cash payout and/or PIC bonus within 30 days from the date of the PIC Cash Payout Recovery notice and/or PIC Bonus Recovery notice, otherwise, late payment penalties may apply.
FAQs
How do I inform IRAS if I dispose of an equipment/ IPR in respect of which a cash payout was claimed within the 1-year holding period?
You should complete the Disposal of Qualifying Assets Form (XLSX, 23KB) and provide the details of the equipment/ IPR disposed.
The completed form should be submitted to IRAS within 30 days from the date of disposal of the equipment/ IPR.
How is the recovery of cash payout on disposed IPRs computed?
For acquired IPRs disposed within 1 year from the date of acquisition of the IPR, the full amount of cash payout claimed will be recovered. For IPRs disposed within 2 to 5 years from the date of acquisition of the IPR, the amount of cash payout to be recovered will be apportioned as follows:
Amount to be recovered = [(5 - No. of complete years which the IPR was held) / 5] x cash payout
Is there a penalty for disposing a piece of equipment for which cash payout was claimed within the holding period?
Besides the recovery of cash payout, no penalty will be imposed if you inform IRAS of the disposal within 30 days from the date the equipment is disposed. However, penalties will be imposed for late notification, non-compliance or fraud.