Productivity and Innovation Credit (“PIC”) Bonus
(FAQs)
A. Background & Objective of PIC
1. Background
1.1 PIC was first introduced in Budget 2010 and enhanced in Budgets 2011 and 2012. PIC seeks to encourage productivity and innovation activities amongst businesses in Singapore.
B. How the PIC Bonus Benefits You
2. Overview of PIC Bonus
2.1 Businesses
1 that spend a minimum of $5,000 in qualifying PIC investments in a Year of Assessment (YA) will receive a dollar-for-dollar matching cash bonus. The Bonus is up to $15,000 from YA 2013 to 2015.
This is in addition to existing PIC benefits of:
(i) 400% PIC tax deductions/allowances up to $400,000 in qualifying expenditure for each PIC qualifying activity; or
(ii) Cash payout at 60% on up to $100,000 of the qualifying expenditure.
2.2 Q: Why is the PIC Bonus for three years?
The PIC Bonus is part of a 3-Year Transition Support package that was introduced in Budget 2013.
2.3 Q: Why is the PIC Bonus floor $5,000?
The intention of the floor is to ensure that businesses make meaningful investments in productivity for useful progress.
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Active businesses (i.e. companies, sole proprietorships, partnerships) with business operations in Singapore and that have made CPF contributions to at least three qualifying local employees.
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2.4 Q: Why is the PIC Bonus capped at $15,000?
The cap is set at $15,000 over three years to allow firms the flexibility to decide how they want to invest in productivity – they can choose to spend up to $15,000 in qualifying expenditure in any one of the years from YA
2013 to YA 2015; or they can spread out their investments over the three years.
The $15,000 cap also ensures that PIC Bonus benefits SMEs particularly.
2.5 Q: What is the objective of the PIC Bonus?
We want as many businesses as possible to take advantage of the PIC scheme. This Bonus seeks to encourage businesses in undertaking improvement in productivity and innovation.
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Businesses that had already made their YA 2013 PIC claims in 2011 or 2012 will be eligible to receive the PIC Bonus if their accounting period ends in 2012.
C. Who Qualifies for PIC Bonus
3. Eligibility Criteria
3.1 Businesses (i.e. companies (including registered business trusts), sole proprietorships, partnerships) that have: a) Spent a minimum of $5,000 in PIC qualifying activity in a YA b) Carried on active business operations in Singapore; and c) Made CPF contributions for at least 3 local employees (Singapore citizens or Singapore permanent residents) excluding soleproprietors, partners under contract for service and shareholders who are directors of the company.
Conditions b) and c) are the same as the eligibility criteria for the PIC cash payout option.
3.2 Q: Why is there a requirement for CPF contributions to at least 3 local employees (excluding sole-proprietors, partners under contract for
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service and shareholders who are directors of the company)?
The 3 local employee condition, like conditions for the cash payout option, is set after taking into account: a) First, making the scheme simple and easy for businesses to get the
PIC Bonus; and b) Second, curbing possible abuse, such that the PIC Bonus benefits businesses with active business undertaking.
Businesses that do not qualify for the PIC Bonus can still receive benefits from the PIC enhanced tax deductions/allowances.
3.3 Q: Why are sole-proprietors, partners under contract for service and shareholders who are directors of the company excluded when calculating the number of local employees in the business?
They are business owners and cannot be considered as employees.
3.4 Q: Do I need to make CPF contributions to my local employees for all
12 months of each YA?
No, these contributions do not need to be made back-to-back on consecutive months. To qualify, businesses must have made CPF contributions for at least 3 employees on their payroll for the last month of the period in respect of which the PIC Bonus is claimed.
3.5 Q: Why are other entities such as town councils, clubs, and associations excluded from the PIC Bonus?
Under the PIC scheme, all taxpaying entities can claim the enhanced tax deductions/allowances on PIC qualifying expenditures. The cash payout option is however available only to companies, partnerships and sole proprietorships with at least 3 local employees. The intention of the PIC
Bonus is to focus our help for business enterprises, especially SMEs, with cash-flow needs for their expenditures on innovation and productivity initiatives.
D. How to Apply for PIC Bonus
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4. Applying for the PIC Bonus
4.1 Details for application of the PIC Bonus will be released by IRAS in
March 2013.
4.2 Q: Can I apply for the PIC Bonus as and when I have purchased at least $5,000 in productivity and innovation-related investments?
The number of times businesses can seek claims on the PIC Bonus is up to four times a year for the PIC cash payout and once for enhanced tax deductions/allowances. This is aligned with the existing application framework for PIC.
E. How the PIC Bonus Payout will be Disbursed
5. PIC Bonus Payments
5.1 IRAS will process the PIC Bonus applications after the PIC Cash Payout
Application Form or Form C has been received.
IRAS will disburse the PIC Bonus within three months from date of receipt of the PIC Cash Payout Application Form or Form C and relevant annexes, provided all requisite information is submitted at the time of the application. More details will be released by IRAS in March 2013.
The payment will either be through a cheque or GIRO.
F. How the PIC Bonus complement the PIC and other Government
Productivity Schemes
6. PIC Bonus and Other Government Productivity Schemes
6.1 Businesses sometimes also receive grants and subsidies from Government and statutory boards for making investment in qualifying PIC activities.
Such grants and subsidies will not enjoy the dollar-for-dollar matching under the PIC Bonus.
The PIC Bonus is therefore computed based on expenditure net of grants and subsidies from Government and statutory boards. This is the same as the existing PIC.
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Businesses may approach respective agencies on their productivity initiatives for more details.
G. Illustration of the PIC Bonus
7. Examples of PIC Bonus
7.1 Assuming a company invests –
PIC qualifying
YA13
$5,000
Expenditure
PIC Cash
Payout
PIC Bonus
$5,000 x 60%
= $3,000
$5,000
Total Benefits $8,000
YA14
$1,800
$3,000
$3,000 x 60%
= $1,800
0
YA15
$12,000 x 60%
=$7,200
$10,000
(cap of $15,000 reached)
$17,200
$12,000
SUM $27,000
H. Others
8. Is PIC Bonus Taxable?
8.1 Yes, the PIC Bonus is taxable.
For more details please visit the MOF Budget website
( www.singaporebudget.gov.sg
), or contact IRAS at 1800 356 8622 (for companies) and 6351 3534 (for self-employed/partnership), or via email at picredit@iras.gov.sg
.
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