Productivity and Innovation Credit
(PIC) Scheme
Presentation by Inland Revenue Authority of Singapore
1 April 2014
© 2014 IRAS Singapore
Agenda
Overview of Corporate Tax
Basis of Assessment
Filing Obligations
Productivity and Innovation Credit (PIC) Scheme
Overview
Tax Benefits (including PIC+ Scheme)
PIC Bonus
How to Claim PIC
What Qualifies for PIC
Case Study
Assistance and Service Channels
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© 2014 IRAS Singapore
Basis of Assessment
Income is assessable on a preceding accounting year basis
Year of Assessment (YA)
year in which income tax is charged
current YA is YA 2014
Basis Period for a YA
the period of income relevant to the YA
e.g. 1 Jan 2013 to 31 Dec 2013 (YA 2014)
1 Apr 2012 to 31 Mar 2013 (YA 2014)
1 Jul 2013 to 30 Jun 2014 (YA 2015)
1 Feb 2014 to 31 Jan 2015 (YA 2016)
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© 2014 IRAS Singapore
Filing Obligations
Estimated Chargeable Income
(ECI)
When to file
Within 3 months after end of accounting period
(e-Filing of ECI via myTax Portal is strongly
encouraged)
Waiver of ECI filing: You do not need to file ECI
for a particular accounting period if:
• annual revenue is not more than $1 million
• ECI is nil
Income Tax Return
(Form C/Form C-S)
If you are filing Form C
Submit a complete tax return comprising of the
following by 30 Nov of each year:
- Form C and appendix (Form IRIN 301)
- audited/unaudited accounts and detailed P/L
- tax computation
If you are filing Form C-S
Submit paper Form C-S by 30 Nov or e-Form C-S# by
15 Dec of each year
Notification of
filing
requirement
Company will receive a reminder letter to file the
ECI in the last month of the accounting period
A tax return filing package will be sent to the
company’s registered address in Apr of each year
Failure to file
Estimated assessment may be raised*
 Estimated assessment may be raised*
 Letter of Composition and/or Summons may be
issued
If you are in a
tax loss
position
A NIL ECI (ECI = 0) is required unless the
company has met the qualifying conditions for
waiver of ECI filing
Submit an Income Tax Return (Form C/Form C-S)
# Please authorise yourself/third party as an “Approver” for Corporate Tax Matters via the e-Services Authorisation System (EASY)
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* If you disagree with the estimated tax assessment, please lodge an objection within two months from the date of the Notice of Assessment with your
reasons for not filing on time and grounds of objection
© 2014 IRAS Singapore
Productivity and Innovation Credit
(PIC) Scheme
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© 2014 IRAS Singapore
Overview of PIC Scheme
6 activities covered under scheme:
Training of Employees*
Purchase/Leasing of PIC IT and Automation Equipment*
Acquisition/In-licensing of Intellectual Property
Registration of Intellectual Property
Research & Development
Approved Design Project
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* Budget 2014 Enhancement
© 2014 IRAS Singapore
Tax Benefits under PIC
400% tax deductions/allowances on expenditure on each
of the 6 activities for accounting years 2010 to 2017
[Years of Assessment (YAs) 2011 to 2018*]
Opt for cash payout in place of tax deductions/allowances
for accounting years 2010 to 2017 (YAs 2011 to 2018*)
PIC Bonus (YAs 2013 to 2015)
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* Budget 2014 Enhancement
© 2014 IRAS Singapore
400% Tax Deductions / Allowances
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© 2014 IRAS Singapore
Tax Deductions / Allowances
400% tax deductions/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 Cap
per Activity
Tax Deduction
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)
2016 to 2018*
(Combined)
$1,200,000
$4,800,000
(400% x $1,200,000)
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* Budget 2014 Enhancement
© 2014 IRAS Singapore
Tax Deductions / Allowances
Expenditure cap per qualifying activity applies only if carrying on
a trade or business for the relevant YAs. Otherwise, combined
cap is reduced accordingly
For newly incorporated/registered businesses whose 1st YA is
YA 2014, the combined expenditure cap for YAs 2014 to 2015 per
activity is $800,000
Expenditure is net of grant or subsidy by the government or
statutory board
Expenditure exceeding the cap can still enjoy deduction based
on existing rules
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© 2014 IRAS Singapore
New!
PIC+ Scheme
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© 2014 IRAS Singapore
PIC+ Scheme
From YA 2015, qualifying SMEs that invest in excess of the
combined cap of $1.2 million in any of the 6 qualifying activities
will enjoy enhanced deductions/allowances on an additional
amount of $200,000 for each qualifying activity per YA
Qualifying SMEs:
 Where the business is not part of a group
• Annual turnover not more than $100 million; or
• Employment size not more than 200 employees
 Where the business is part of a group
• Group annual turnover not more than $100 million; or
• Group employment size not more than 200 employees
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© 2014 IRAS Singapore
PIC+ Scheme
Expenditure conversion cap under the cash payout option
remains unchanged, at $100,000 for all 6 activities per YA
IRAS will release further details on the PIC+ scheme by end
Mar 2014.
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© 2014 IRAS Singapore
PIC+ Scheme
Maximum combined expenditure cap applicable for each 3-year
period:
YA
Max. annual cap
Max. combined cap*
2013
2014
2015
2016
2017
2018
400,000
400,000
600,000
600,000
600,000
600,000
$1,400,000#
$1,800,000
* 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 YA
2013 and YA 2014
#
© 2014 IRAS Singapore
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Cash Payout Option
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© 2014 IRAS Singapore
Cash Payout Option
Option to convert expenditure of up to $100,000 in all 6 activities
per YA
At 30% (YAs 2011 & 2012) / 60% (YAs 2013 to 2018*) cash
payout rate
$100,000
Expenditure incurred
during the basis period for
YA 2014
60%
$60,000
Cash Payout for YA 2014
Expenditure converted is not tax deductible
Cash payout is non-taxable
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* Budget 2014 Enhancement
© 2014 IRAS Singapore
Cash Payout Option
Years of
Assessment
Expenditure Cap
for All 6 activities
Maximum
Cash Payout
2011 and 2012
(Combined)
$200,000
$60,000
(30% x $200,000)
2013 to 2018
(No pooling of
expenditure cap)
$100,000 per YA
$60,000 per YA
(60% x $100,000)
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© 2014 IRAS Singapore
Cash Payout Option
Conditions for cash payout option
From YAs 2013 to 2015
Employed at least 3 local employees* (Singapore Citizens or PRs
with CPF contributions) in the last month of the quarter or
combined quarters in the basis period for the relevant YA
Carrying on business operations in Singapore
* Employees exclude sole-proprietors, partners under contract for service, shareholders
who are also directors of companies
Note: The 3-local-employee condition does not apply to 400% tax deductions/allowances
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© 2014 IRAS Singapore
Cash Payout Option
Conditions for cash payout option
New!
From YA 2016 to 2018*
Employed at least 3 local employees# (Singapore Citizens or PRs
with CPF contributions) in the last 3 months of the quarter or
combined quarters in the basis period for the relevant YA
Carrying on business operations in Singapore
#
Employees exclude sole-proprietors, partners under contract for service, shareholders
who are also directors of companies
Note: The 3-local-employee condition does not apply to 400% tax deductions/allowances
* Budget 2014 Enhancement
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© 2014 IRAS Singapore
PIC Bonus
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© 2014 IRAS Singapore
PIC Bonus
Effective from YAs 2013 to 2015
You will receive an equal amount in PIC bonus for every dollar
spent on qualifying activities, subject to the cap of $15,000
over the 3-year period from YAs 2013 to 2015
PIC Bonus is given on top of existing PIC benefits
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© 2014 IRAS Singapore
PIC Bonus
Conditions for PIC Bonus
Incurs at least $5,000 of PIC-qualifying expenditure^ during the
basis period for the YA in which a PIC Bonus is claimed
Employed at least 3 local employees* (Singapore Citizens or PRs
with CPF contributions) in the:


last month of basis period for the YA – if claiming 400% tax
deductions/allowances
last month of quarter or combined consecutive quarters –
if claiming cash payout
Carrying on business operations in Singapore
^ Net of grant or subsidy by the Government or statutory board
* Employees exclude sole-proprietors, partners under contract for service, shareholders
who are also directors of companies
© 2014 IRAS Singapore
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PIC Bonus
Example
Company
A
Description
YA 2013
YA 2014
YA 2015
PIC-qualifying
expenditure
$12k
$2k
$5k
PIC bonus
$12k
$0^
$3k
(capped)#
^ Incurs at least $5,000 of qualifying PIC expenditure during the basis period for the YA
in which a PIC Bonus is claimed
# Combined cap of $15,000 for the 3 YAs
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© 2014 IRAS Singapore
PIC Bonus
PIC bonus is taxable
Administrative procedures
 Businesses will not be required to make separate applications
for PIC bonus
 IRAS will process bonus automatically based on information
declared in income tax return or PIC cash payout application
Payment of PIC Bonus
 Within three months from filing income tax return – if claimed
400% tax deductions/allowances
 Within three weeks after cash payout has been approved – if
claimed cash payout
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© 2014 IRAS Singapore
Application of the
3-local-employee condition
(From YAs 2013 to 2015)
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© 2014 IRAS Singapore
3-local-employee condition
(Cash Payout & PIC Bonus)
YAs 2013 to 2015
Example 2: Business Y has a Dec accounting year-end and it opts for
cash payout at the end of 1st, 3rd and 4th quarters.
Year of Assessment 2015:
Quarters
Jan – Mar
2014
Cash payout option
exercised
Quarter 1
Relevant month for
determining
3-local-employee condition
Mar 2014
Sep 2014
Dec 2014
When to submit
cash payout application
From Apr
2014
From Oct
2014
From Jan
2015
Deadline to submit
cash payout application
Apr – Jun
2014
Jul – Sep
2014
Quarters 2 & 3 combined
Oct – Dec
2014
Quarter 4
By income tax return filing due date
•15 Apr 2015 for sole-proprietor and partnership
• 30 Nov 2015/ 15 Dec 2015 (e-file Form C-S) for company
© 2014 IRAS Singapore
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New!
Application of the
3-local-employee condition
(From YAs 2016 to 2018)
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© 2014 IRAS Singapore
3-local-employee condition
(Cash Payout)
YAs 2016 to 2018
Example 1: Business Y has a Dec accounting year-end and it opts for
cash payout at the end of 1st, 3rd and 4th quarters.
Year of Assessment 2016:
Quarters
Jan – Mar
2015
Cash payout option
exercised
Quarter 1
Relevant months for
determining
3-local-employee condition
Jan – Mar
2015
Jul – Sep
2015
Oct – Dec
2015
When to submit
cash payout application
From Apr
2015
From Oct
2015
From Jan
2016
Deadline to submit
cash payout application
Apr – Jun
2015
Jul – Sep
2015
Quarters 2 & 3 combined
Oct – Dec
2015
Quarter 4
By income tax return filing due date
•15 Apr 2016 for sole-proprietor and partnership
• 30 Nov 2016/ 15 Dec 2016 (e-file Form C-S) for company)
© 2014 IRAS Singapore
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How to Claim PIC (Summary)
400% tax
deductions/allowances
and PIC Bonus
Cash payout and
PIC Bonus
Cash payout
Applicable YA
YAs 2011 to 2018*
YAs 2011 to 2015*
YAs 2016 to 2018
How
Claim tax
deduction/allowances in
income tax return
Submit PIC cash payout application form and
hire-purchase template (where applicable)
When
For company, submit
income tax return by the
filing due date: 30 Nov
YAs 2013 to 2018:
For sole-proprietor/
partnership, submit income
tax return and PIC
declaration form by the
filing due date: 15 Apr
Relevant
month/months
for determining
3-localemployee
condition
Last month of the basis
period of the relevant YA
*PIC Bonus is applicable from YAs 2013 to 2015
After the end of each quarter or combined quarters
in the accounting year but not later than the income tax
filing due date
Last month of the
quarter or combined
consecutive quarters
Last 3 months of the quarter or
combined consecutive quarters
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© 2014 IRAS Singapore
Case Study
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© 2014 IRAS Singapore
Case Study 1:
400% Tax Deduction/Allowance + PIC Bonus
ABC Pte Ltd
runs a waste
management
company
Submission
Company claims tax
deduction/allowance in its
Income Tax Return for YA
2014 by 30 Nov 2014 / 15
Dec 2014 (e-file Form C-S)
UP TO $8,160
TAX SAVINGS
based on corporate tax
rate of 17%
Investments in accounting
year 2013
1) Automated cover systems
for open-top containers
2) Sent its staff on waste
management courses
Tax deduction/allowance
$12,000 (Total Expenses)
x
400% (YA 2014)
$48,000
Investments in PIC
Automation
equipment: $3,000
Training of
Employees: $9,000
Total :
$12,000
Choose your Benefits!
A) 400% Tax Deduction
B) Cash Payout
RECEIVE
$12,000
PIC BONUS
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© 2014 IRAS Singapore
Case Study 2:
CASH PAYOUT + PIC Bonus
ABC Pte Ltd runs a
waste management
company
PIC Cash Payout Application
Form
1) Apply any time after the end of
the financial quarter(s),
2) But not later than 30 Nov 2014
2014 / 15 Dec 2014 (e-file
Form C-S)
RECEIVE
$7,200
CASH PAYOUT
Investments in accounting
year 2013
1) Automated cover systems
for open-top containers
2) Sent its staff on waste
management courses
Cash Payout Calculation
$12,000 (Total Expenses)
x
60% (YA 2014)
$7,200
Investments in PIC
Automation
equipment: $3,000
Training of
Employees: $9,000
Total :
$12,000
Choose your Benefits!
A) 400% Tax Deduction
B) Cash Payout
RECEIVE
$12,000
PIC BONUS
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© 2014 IRAS Singapore
Summary of Budget 2014 Changes to PIC
Tax Changes
Summary
Extension of PIC
Scheme for three
years till YA 2018
For enhanced tax deductions, the expenditure cap of $400,000 per
qualifying activity per YA can be combined across YA 2016 to YA
2018 (i.e. $1.2 million per qualifying activity)
For PIC cash payout, the expenditure cap of $100,000 per YA for all
six qualifying activities cannot be combined across the three YAs, as
is the case currently
PIC+ Scheme
Under the PIC+ scheme, the expenditure cap for qualifying SMEs will
be increased from $400,000 to $600,000 per qualifying activity per
YA.
PIC+ will take effect for expenditure incurred in YA 2015 to YA 2018.
The combined expenditure cap will be up to $1.4 million for YA 2013
to YA 2015, and up to $1.8 million for YA 2016 to YA 2018.
The expenditure cap for PIC cash payout will remain at $100,000 of
qualifying expenditure per YA.
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© 2014 IRAS Singapore
Summary of Budget 2014 Changes to PIC
Tax Changes
Summary
Refining the threelocal-employee
condition for PIC cash
payout
With effect from YA 2016, businesses applying for PIC cash payout
will have to meet the three-local-employee condition for a
consecutive period of at least three months prior to claiming the
cash payout
Expansion of “PIC IT
and Automation
Equipment List”
With effect from YA 2014, the List is expanded to include:
1) Website (Item 37)
2) Automated cover system for open-top containers (Item 38) and
3) Landscaping equipment (Item 39)
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© 2014 IRAS Singapore
Summary of Budget 2014 Changes to PIC
Tax Changes
Summary
Individuals under
centralised hiring
arrangements
With effect from YA 2014, the PIC scheme will be enhanced to
allow businesses to claim PIC benefits on training expenses
incurred in respect of individuals hired under centralised hiring
arrangements, subject to qualifying conditions
In addition, individuals hired under centralised hiring
arrangements can be taken into account for purposes of
satisfying the 3-local-employee condition, subject to qualifying
conditions
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© 2014 IRAS Singapore
Training of Employees
New!
Individuals deployed under centralised hiring arrangement*
Centralised Hiring Arrangement
Individual (Employee C) contracts with the central hirer (Business A) and
deployed to another entity (Business B)
Employee C is not regarded as Business B’s employee as there is no
employment contract, notwithstanding wages and training expenses relating
to Employee C is recharged by Business A to Business B
Reimbursed Employee C’s wages &
training expenses
Business A
Wages,
Training
Employment
contract
Business B
Deployed to work
Employee C
* Budget 2014 Enhancement
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© 2014 IRAS Singapore
Training of Employees
Individuals deployed under centralised hiring arrangement
Current treatment
 Business B not entitled to claim PIC benefits on the training
recharged
 Employee C not taken into account as Business B’s employee for
purposes of satisfying 3-local-employee condition
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© 2014 IRAS Singapore
Training of Employees
Individuals deployed under centralised hiring arrangement
With effect from YA 2014, such individuals are regarded as
employees of the entities where they are deployed, subject to
qualifying conditions
 Entity (Business B) will be able to claim PIC benefits on training
recharged
 Individual taken into account for purposes of satisfying the 3local-employee condition under PIC cash payout & PIC bonus for
Business B
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© 2014 IRAS Singapore
Training of Employees
Individuals deployed under centralised hiring arrangement
Qualifying conditions
1) Claimant (Business B) able to produce supporting documents on
the recharging of employment costs by a related party (Business A)
in respect of employees working solely for the claimant;
2) The corporate structure and centralised hiring practises are
adopted for bona fide commercial reasons; and
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© 2014 IRAS Singapore
Training of Employees
Individuals deployed under centralised hiring arrangement
Qualifying conditions
3) (a) For purpose of claiming PIC on training expenses
- The related party (Business A) does not claim deductions on the
training expenses recharged to the claimant (Business B)
(b) For purpose of fulfilling the 3-local-employee condition
- The employee whose cost has been recharged will not contribute
to the requisite headcount of the related party (Business A) which
bore the upfront manpower costs
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© 2014 IRAS Singapore
PIC IT and Automation Equipment
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© 2014 IRAS Singapore
PIC IT and Automation Equipment
Automation equipment that qualify for PIC from YA 2011 are
prescribed in the “PIC IT and Automation Equipment List”
The “PIC IT and Automation Equipment List” has been expanded in
Budget 2014
Both purchase and lease (only for own use) of PIC IT and automation
equipment qualify for PIC
One expenditure cap applies for both purchase cost and lease
payments:
 $800,000 for YAs 2011 and 2012 combined;
 $1,200,000* for YAs 2013 to 2015 combined; and
 $1,200,000* for YAs 2016 to 2018 combined
*For qualifying SMEs under PIC+ scheme, a higher expenditure cap applies
© 2014 IRAS Singapore
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PIC IT and Automation Equipment
Current Automation Equipment in “PIC IT and Automation Equipment
List" includes:
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 (for
F&B industry only)
 Interactive shopping carts
 Automated housekeeping
equipment
 Automated seating systems for
convention or exhibition centre
 Self-climbing scaffold system
 Concrete pumps
More examples are available at the IRAS website.
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© 2014 IRAS Singapore
PIC IT and Automation Equipment
With effect from YAs 2014 to 2018, “PIC IT and Automation Equipment
List" has been expanded:
Description
Item 37 – Website
Budget 2014 Enhancement
Website development costs
100% write-off will apply under
S19A(10) instead of S19A(2)
Item 38 - Automated cover system for Only the automated covering system
open-top containers
and not the vehicle or container
Item 39 – Landscaping equipment
Examples: Ride-on mower, Wood
chipper, Trencher and Potting machine
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© 2014 IRAS Singapore
Flowchart on
PIC IT and Automation Equipment
IT and Automation
Equipment
Yes
Capital Allowance
Write-down over 1 year, 3
years or tax working life of
asset
In PIC IT
and
Automation
Equipment
List*
(Refer to the PIC IT and
Automation Equipment List*)
Approved cases
Capital Allowance
Write-down over 3 years
or tax working life of asset
* Refer to IRAS’ website at www.iras.gov.sg
<For Companies><Productivity and Innovation Credit>
No
Case–by-case
approval,
subject to
meeting criteria
Rejected cases
• Does not qualify for PIC
• Continue with current
Capital Allowance
treatment
© 2014 IRAS Singapore
45
PIC IT and Automation Equipment
Case-by-case approval
Businesses that invest in equipment not in the PIC IT
and Automation Equipment List may apply to IRAS to have the
equipment approved on a case-by-case basis
Businesses can:
 submit the Application for Approval of Equipment for PIC Form to
IRAS (available on IRAS website)
 two months before the return filing due date or earlier
 Application will be processed within 3 weeks of receipt of form
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© 2014 IRAS Singapore
PIC IT and Automation Equipment
Case-by-case approval
Revised Criteria (from YA 2013):
a) Equipment automates or mechanises the work processes of the
business;
b) Equipment enhances productivity of the business (for example,
in terms of reduced man-hours, more output or improved work
processes); and
c) If the equipment is a basic tool,
 it must increase productivity compared to existing
equipment used in the business; or
 it has not been used in the business before
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© 2014 IRAS Singapore
PIC IT and Automation Equipment
Cash payout option
Election is on “per equipment” basis (cannot claim tax deduction
and cash payout on the same equipment)
Expenditure in excess of expenditure conversion cap forfeited
With effect from YA 2012, HP equipment with repayment covering
2 or more basis periods are eligible for cash payout
 i.e. for equipment acquired under HP agreement signed during the
basis periods relating to YAs 2012 to 2018
 Hire purchase (HP) equipment acquired under HP agreement signed
during the basis period relating to YA2011, and with repayment
covering 2 or more basis periods, are not eligible for cash payout
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© 2014 IRAS Singapore
PIC IT and Automation Equipment
Minimum ownership period
Minimum 1-year holding for purchased equipment
Claw-back 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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© 2014 IRAS Singapore
PIC IT and Automation Equipment
(Summary)
Without PIC
With PIC
(YAs 2011 to 2018)
Qualifying Expenditure
Purchase
Lease
100% accelerated CA
100% revenue deduction
400% allowances/deductions subject to expenditure cap1, 100%
allowances/deductions on balance exceeding the cap
Cost of equipment
Lease payments
Minimum Ownership Period
1 year from the date of purchase
N.A.2
Cash Payout Option
(YAs 2013 to 2018)
Per equipment basis
Convert expenditure at 60% subject
to cap3
Convert expenditure at 60%
subject to cap3
PIC Bonus
1Total
PIC Bonus of up to $15,000 over 3-year period from YAs 2013 to
2015
expenditure cap for YAs 2011 and 2012 - $800,000 for each of the six activities
Total expenditure cap for YAs 2013 to 2018 - $1,200,000 for each of the six activities for each 3-year period (YAs 2013 to 2015 and
YAs 2016 to 2018). For qualifying SMEs under PIC+ scheme, a higher expenditure cap applies
50
2Equipment cannot be sub-leased within the same basis period of the YA
3 Maximum expenditure for YAs 2013 to 2018 - $100,000 per annum for all six activities taken together
© 2014 IRAS Singapore
Assistance and Service Channels
Website
www.iras.gov.sg
‒ <Businesses><For Companies ><Productivity and Innovation
Credit>
‒ <News & Events><Singapore Budget 2014- Tax Changes>
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
‒ 8.00am to 5.00pm from Mondays to Fridays
© 2014 IRAS Singapore
© 2014 IRAS Singapore