IRAS issues a second edition of its e-Tax Guide to the PIC scheme

On By taxsgIn Corporate Tax, Deductions, Latest Tax News

20 August 2012

IRAS has recently updated the e-Tax Guide to the Productivity and Innovation Credit scheme (“PIC”). The PIC which was first introduced in Budget 2010, and enhanced in Budgets 2011 and 2012.

PIC grants businesses which invest in specified productivity and innovation activities enhanced deductions and/ or allowances on up to $400,000 of qualifying expenditure incurred for each activity.  These are in addition to the deductions and/ or allowances allowable under current tax rules. PIC is available for Year of Assessment (YA) 2011 to YA 2015.

In lieu of a deduction, businesses may opt to convert qualifying expenditure of up to $100,000 for each YA into cash.  The conversion rate is 30% (for YA 2011 and YA 2012) or 60% (for YA 2013 to YA 2015).

Businesses may also opt to defer tax payment based on qualifying expenditure incurred for YA 2012 to YA 2015.  Up to $100,000 per YA may be deferred to the following year.

The amendments reflect changes to PIC since the first edition of the guide was published on 15 July 2011. The major changes relate to:

1.   Cash conversion option

  • The extension of the cash conversion option from YA 2013 to YA 2015
  • The increase in cash conversion rate from 30% to 60% from YA 2013, and
  • Cash conversion option may be exercised on quarterly basis instead of an annual basis with effect from YA2013.

2.   PIC Automation Equipment (Annex A)

  • PIC benefits granted to equipment that are either prescribed under the Income Tax (PIC Automation Equipment) Rules 2012 or approved by the Minister or the Comptroller of Income Tax as a PIC automation equipment on a case-by-case basis
  • Cash conversion option extended to PIC automation equipment acquired on hire purchase with repayment schedules straddling two or more basis period.  The new treatment only applies to equipment acquired on hire purchased agreements signed during or after the basis period relating to YA 2012, and
  • PIC extended to include payments for cloud computing services.

3.   Research and Development (R&D) (Annex D)

  • Expansion of scope of sections 14D and 14DA of the Income Tax Act to include payments for R&D cost-sharing agreements with effect from YA 2012 which may qualify for PIC subject to conditions, and
  • R&D definition revised to remove the multiple sales conditions for software development.

4.   Training (Annex E)

  • Expansion of PIC from YA 2012 to include training expenditure on prescribed classes of individuals, and in-house training programmes that are not certified, subject to a cap of $10,000 for each YA.

Source: This article was extracted from the Inland Revenue Authority of Singapore (IRAS) website. Visit www.iras.gov.sg for more information.