3 November 2011

The Productivity and Innovation Credit (PIC) scheme introduced in the Singapore Budget 2010 and enhanced in Budget 2011 to provide tax benefits for investments by businesses in a broad range of activities along the innovation value chain. The tax benefits under PIC will be effective from Years of Assessment (YA) 2011 to YA 2015.

The acquisition or leasing of PIC Automation Equipment is amongst the six activities along the innovation value chain that qualify for PIC benefits. Businesses that invest in specialised equipment not in the PIC Automation Equipment list may still apply to IRAS to have their equipment approved for PIC on a case-by-case basis.

Businesses applying for case-by-case approval have to complete and submit the “Application for Approval of Automation Equipment Form” to IRAS.

The following criteria must be met:

• The equipment automates current core work processes of the business
• The equipment enhances productivity of the principal trade of the business such as reduced man-hours and/or improvement in existing work processes, and
• The equipment is not a basic tool used in the industry of the business. A basic tool is one which is necessary for carrying out the trade or business, and is commonly used in the industry.

Processing time is within two months of the receipt of the Form. Applications must be submitted two months before the return filing due date or earlier so that the approval could be processed in time for the application of the PIC Cash Payout or to claim the PIC deduction/allowances in the income tax return, where applicable.

Businesses also need to take note of the transitional rules for the PIC claims, ie

A. PIC Cash Payout for YA 2011 and YA 2012
Currently businesses opting for the cash payout can submit the application for Cash Payout (only one application is allowed) anytime after the business’ accounting year-end but no later than the filing due date of income tax return for that YA.

In view of the introduction of the new PIC Equipment List which takes effect from YA 2011, businesses that invest in automation equipment that are prescribed in the new PIC Automation Equipment List or are approved on a case-by-case basis, are allowed to submit an application for Cash Payout on such automation equipment as follows:

1) For prescribed automation equipment under the new PIC Automation Equipment List, the application for Cash Payout has to be made by 29 Feb 2012:

– For all cases for YA 2011,
– For YA 2012 only if an application for Cash Payout had been previously submitted.

2) If the automation equipment that require approval from IRAS, the Application for Approval of Automation Equipment for PIC has to be made by 29 Feb 2012:

– For all cases for YA 2011,
– For YA 2012 only if an application for Cash Payout had been previously submitted. Otherwise, the application has to be made two months before the return filing due date or earlier.

The Cash Payout application form has to be submitted within one month from the date of approval of the equipment.

B. PIC deduction/allowances for YA 2011
Businesses which are claiming PIC deduction/allowances on automation equipment that are prescribed in the new PIC Automation Equipment List or are approved on a case-by-case basis and had already submitted their tax returns for YA 2011 may submit their revised tax computations (or revised 4-line statements for self-employed businesses with revenue of less than $500,000) to include the deduction/allowances for such automation equipment as follows:

1) For the prescribed automation equipment under the new PIC Automation Equipment List,  the revised tax computation has to be submitted by 29 Feb 2012.

2) If the automation equipment require approval from IRAS, the Application for Approval of Automation Equipment for PIC has to be made by 29 Feb 2012. Taxpayers will need to submit the revised tax computation within one month from the date of approval of the equipment.

To read more about the PIC scheme, please click here.

Source: IRAS