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PIC Bonus in Singapore
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. Any purchase make after the Company’s financial year ended 2014 will not qualify for PIC Bonus.
This is given on top of the existing 400% tax deductions/allowances and/or 60% cash payout (“PIC cash payout”) under the PIC scheme. The tax benefits under PIC are available from Years of Assessment (YAs) 2011 to 2018, for investment in any of the six qualifying activities.
To enjoy the PIC Bonus, businesses must have made a claim for the 400% tax deductions/allowances and/or the PIC cash payout.
Lapsing of Productivity and Innovation Credit (“PIC”) scheme
As you may be aware, the PIC scheme will lapse after Year of Assessment 2018. Year of Assessment 2018 refers to the company’s financial year ending/ended 2017. The financial year ending/ended 2017 will be the final time frame for companies to incur qualifying expenses for PIC benefits.
Businesses eligible for the PIC Bonus are sole-proprietorships, partnerships and companies that have:
– incurred at least $5,000 in PIC-qualifying expenditure 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. A business is considered to have met the 3-local-employee condition if it contributes CPF on the payroll of at least 3 local employees:
- Where 400% tax deductions/allowances on qualifying PIC expenditure is claimed – in the last month of the basis period for the YA to which the deductions/allowances relates.
- Where PIC cash payout on qualifying PIC expenditure is claimed – in the last month of the quarter or combined consecutive quarters to which the cash payout option relates.
The PIC-qualifying expenditure is as follows. Six Qualifying Activities under PIC for more information for the qualifying expenditure.
– Acquisition or 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 Design Singapore Council.
Payment of PIC Bonus
Businesses do not need to apply for the PIC Bonus separately. Businesses can claim the PIC Bonus together in the PIC cash payout application or the income tax return.
How is it work?
For example, if you purchase a laptop and IT server with a cost of $15,000.
You can claim the existing PIC cash payout which is 60% of the amount from IRAS
$15,000 X 60% = $9,000
On top of the cash payout, IRAS will give you the PIC Bonus without any term and condition attached to it
A dollar-for-dollar matching cash bonus = $15,000
In total, you will get $24,000 from IRAS and you have only spending $15,000 to improve the productivity of the Company.
Email us today at firstname.lastname@example.org and we will get our affiliated partners to contact you for the following PIC services which the promotion is on-going.
Productivity and Innovation Credit (PIC)
Under the Productivity and Innovation Credit (PIC) scheme, your business can enjoy:
– 400% tax deductions/ allowances and/ or
– 60% cash payout
The tax benefits are available from the Years of Assessment (YAs) 2011 to 2018, for investments in any of the Six Qualifying Activities relating to innovation and productivity improvements.
400% Tax Deductions/Allowances
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.
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.
PIC cash payout
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).
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.
The cash payout rate will be lowered from 60% to 40% for qualifying expenditure incurred from 1 August 2016. All other conditions of the scheme remain unchanged. The PIC scheme, which has been extended for YA2016 to YA2018, will expire thereafter. It will not be available from YA2019.
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.
Click PIC for more information.