Productivity and Innovation Credit
(PIC) Scheme
PRESENTATION BY INLAND REVENUE AUTHORITY OF SINGAPORE
22 NOVEMBER 2011
Agenda
Productivity and Innovation Credit (PIC) Scheme
 Overview
 Tax Benefits
 How to Claim for PIC
 Details on What Qualifies for PIC
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Training of Employees
PIC Automation Equipment
Assistance and Service Channels
Q&A
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Overview of PIC Scheme
Introduced in Budget 2010 and enhanced in Budget 2011
Encourage businesses to invest in productivity and innovation
All businesses benefit, especially SMEs
- Either get a cash payout or claim tax deduction
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Overview of PIC Scheme
6 activities covered under scheme:
Training of Employees
Purchase/Lease of PIC Automation Equipment
Acquisition of Intellectual Property
Registration of Intellectual Property
Research & Development
Approved Design Project
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Tax Benefits under PIC
400% tax deduction/allowances on expenditure on each of
the 6 activities (YAs 2011 to 2015)
Opt for cash payout in place of tax deduction/allowances
(YAs 2011 to 2013)
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Tax Deduction / Allowances
400% tax deduction/allowances on up to $400,000
expenditure per year in each of the 6 activities
To allow max PIC benefits, the spending cap across YAs for each
activity is as shown below:
Years of Assessment
Expenditure
Tax Deduction
cap per activity per 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)
For newly incorporated/registered businesses whose 1st YA is YA
2012, the expenditure cap per activity is $400,000
Expenditure is net of grant or subsidy
Expenditure exceeding the cap can still enjoy deduction based on
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existing rules
Tax Deduction / Allowances
Potential Maximum Benefits for YAs 2011 & 2012 combined
Deduct up to $19.2m (400% x $800,000 x 6 activities)
R&D
Training
IP
Acquisition
400% deduction/allowances
on up to $800K expenditure
Automation
IP
Registration
Design
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Tax Deduction / Allowances
Example (YA 2011)
Expenditure on staff
training = $900,000
Total tax deduction
= $3,300,000
$100,000
$100,000
(remain 100% deduction)
$800,000
$3,200,000
(400% x $800,000)
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Cash Payout Option
Option to convert expenditure of up to $100,000 in all 6 activities
per YA
At 30% conversion rate
Expenditure converted is not tax deductible
$100,000
$30,000
Expenditure
Cash Payout
Cash payout is non-taxable
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Cash Payout Option
Year(s) of
Assessment
Expenditure cap
for all 6 activities
Maximum cash
payout
2011 and 2012
(Combined)
$200,000
$60,000
(30% x $200,000)
2013
$100,000
$30,000
(30% x $100,000)
For newly incorporated/registered businesses whose 1st YA is YA
2012, the expenditure cap for all 6 activities is $100,000
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Cash Payout Option
Conditions for cash conversion
Employed at least 3 local employees (Singapore Citizens or PRs
with CPF contributions) in the last month of accounting period
Carrying on business operations in Singapore
Note: Employees exclude sole-proprietors, partners under contract for service,
shareholders who are also directors of companies
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How to Claim PIC
400% tax deduction
Cash payout
Applicable
YA
YAs 2011 to 2015
YAs 2011 to 2013
How
Claim tax deduction/allowances in
income tax return
Submit PIC cash payout
application form
(available on IRAS’
website)
When
For company, submit income tax
return by the filing due date: 30 Nov
Anytime after accounting
year-end but not later
than the income tax
For sole-proprietor/partnership, submit filing due date
income tax return and PIC declaration
form by the filing due date: 15 Apr
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Most SMEs would have some spending on:
- Staff Training
- Purchase of Automation Equipment
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Training of Employees
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Training of Employees
External training
All external training qualify
Qualifying Expenditure Includes
Qualifying Expenditure Excludes
Course fees to any external training Accommodation,
travelling and
transport expenses of employees
attending the training
service provider
E.g. registration or enrolment fees,
examination fees, tuition fees and
aptitude test fees
Overheads like imputed rental and
utilities
Rental of external training premises
Meals and refreshments provided
during the courses
Training materials and stationery
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Training of Employees
In-house training
Qualifying training programmes:
(a) Workforce Skills Qualification (WSQ) training courses accredited
by the Singapore Workforce Development Agency and conducted
by a WSQ in-house training provider;
(b) courses approved by the Institute of Technical Education (ITE)
under the ITE Approved Training Centre scheme; and
(c) on-the-job training by an on-the-job training centre certified by
ITE
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Training of Employees
In-house training
Qualifying Expenditure Includes
Qualifying Expenditure Excludes
Salaries
and other remuneration Salaries and other remuneration
(excluding director fees) paid to inpaid to in-house trainers for other
house trainers for course delivery
duties including preparation of
training material
Rental of external training premises
Salaries and other remuneration
Meals and refreshments provided
paid to employees providing
during the courses
administrative support
Training materials and stationery
Absentee payroll
Accommodation, travelling
transport expenses
and
Overheads like imputed rental and
utilities
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PIC Automation Equipment
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Purchase/Lease of PIC Automation
Equipment
 Automation equipment that qualify for PIC with effect from
YA 2011 are prescribed in the “PIC Automation Equipment List”
 PIC Automation Equipment List
• Includes existing Section 19A(2) prescribed automation
equipment; and
• Expanded scope and new additions
 Both purchase and leasing (only for own use) of automation
equipment qualify for PIC
 One expenditure cap applies for both purchase cost and lease
payments:
• $800,000 for YAs 2011 and 2012 combined; and
• $1,200,000 for YAs 2013 to 2015 combined
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PIC Automation Equipment
Existing Section 19A(2) prescribed* automation equipment includes:
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Facsimile
Optical character reader
Laser printer
Mainframe/Computers
Milling machines
Office system software
Automatic storage and retrieval system of warehouses
Injection mould machines
Automotive navigation systems
Automated kitchen equipment for the purpose of food processing
Interactive shopping carts
Automated housekeeping equipment
Automated seating systems for convention or exhibition centre
Self-climbing scaffold system
Concrete pumps
* Refer to Income Tax (Automation Equipment)
- Rules 2004; and
- Amendment Rules 2010 (effective from 15 Dec 2010)
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PIC Automation Equipment (Expanded Scope)
Item Prescribed Automation
Equipment [S19A(2)]
PIC Automation Equipment
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Computer controlled machine for
cutting and removal operations
with automatic tool change
capabilities,
including
CNC
lathes, milling machines, EDM
wirecut,
machining
centers,
grinders, presses and laser
equipment.
Computer controlled machine for
joining (new), cutting or removal
operations, including CNC welding
machine (new), CNC lathes, milling
machines, EDM wirecut, machining
centers, grinders, presses and laser
equipment.
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Injection mould machines used
for making plastic, ceramic or
metal components in factory
production.
Injection mould machines used
for making plastic, ceramic, metal
or
silicone
rubber
(new)
components in factory production.
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PIC Automation Equipment (New Additions)
Item
PIC Automation Equipment
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Automated sorting system, automatic inserting system with high
speed cutting, collating, folding and inserting of documents into
envelopes, and automatic packaging system for packaging or
repackaging of products into plastic films or plastic wraps. (new)
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Hydraulic bucking unit which includes high automatic function for
quick make-up or break-out. (new)
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Automated machine used in laundry processes, including automatic
linen feeder, automatic linen folder and stacker, laundry conveyor
system and automatic garments managing system, but excludes
washing or drying machine. (new)
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Automated sludge treatment machine. (new)
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Automatic machine used in vegetable farming processes, including
auto-seeding machine for seed plugs and auto-seed plug transplanting
machine, and automatic machine used in vegetable packaging
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processes. (new)
Flowchart on PIC Automation Equipment
Automation
Equipment
In PIC
Automation
Equipment List
No
Yes
Qualify for
Prescribed
Automation
List*[S19A(2)]
Yes
Capital Allowance: 1 Year
E.g. computers, laptops,
printers
Case–by-case
approval,
subject to
meeting criteria
Approved cases
No
Capital Allowance:
3 Years
E.g. CNC welding machine,
automated machine used
in laundry processes
* Refer to Income Tax (Automation Equipment)
- Rules 2004; and
- Amendment Rules 2010 (effective from 15 Dec 2010)
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PIC Automation Equipment
Case-by-case approval
Businesses that invest in specialised equipment not in the PIC
Automation Equipment List, to automate their processes and
to enhance productivity may apply to IRAS to have their
equipment approved for PIC on a case-by-case basis
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PIC Automation Equipment
Cash conversion option
Election is on “per equipment” basis (can’t claim tax deduction
and cash payout on the same equipment)
Expenditure in excess of conversion cap forfeited
Hire purchase equipment with repayment covering 2 or > basis
periods not eligible for cash conversion
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PIC Automation Equipment
Minimum ownership period
Minimum 1-year holding for purchased equipment
Claw-back of allowances or cash payout may apply if equipment
disposed of or leased out within 1 year from date of purchase
Waiver of claw-back provisions
Automatic waiver: If in the basis period when the equipment
was acquired, the cost of qualifying equipment acquired (excluding
the cost of equipment disposed of) is more than or equal to the
expenditure cap applicable to that basis period
Case-by-case basis: If IRAS is satisfied with the commercial
reason(s) that led to the disposal
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PIC Automation Equipment
Example - Automatic waiver
Acquired $1,000,000 worth of
qualifying equipment in Jun 2010
(Enhanced allowances claimed in
YA 2011 - $800,000)
Holding period less
than one year
Jan 2010
Dec 2010
Dec 2011
Disposed of equipment costing
$100,000 in Jan 2011
Claw-back provisions automatically waived
as cost of remaining qualifying equipment
of $900,000 ($1 mil - $100K) is higher than
expenditure cap of $800,000
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Assistance and Service Channels
Website
http://www.iras.gov.sg
<Businesses><For Companies (including Productivity and
Innovation Credit scheme)>
Email
- ctmail@iras.gov.sg for general tax matters
- ctpayment@iras.gov.sg for payment matters
- picredit@iras.gov.sg for Productivity and Innovation Credit
Helpline
- For companies: 1800-356-8622
- For self-employed/partnership: (+65) 6351 3534
- 8.30am to 5.00pm from Mondays to Fridays
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