Company director jailed for making false Productivity and Innovation Credit claims

23 September 2013

Company director Khoo Tzyh Shin was sentenced to eight weeks’ jail and ordered by the court to pay a penalty of $232,574.40 for fraudulently claiming a Productivity and Innovation Credit (PIC) cash payout of $58,143.60 for his company.

In a statement released on 19 September 2013, the Inland Revenue Authority of Singapore (IRAS) said that Khoo had falsified invoices and declared a sum of S$193,812 as qualifying expenditure in order to claim the PIC cash payout when there was no such expenditure incurred by the company.

The company, Greenit Pte Ltd, was also ordered to pay a fine of $10,000 and a penalty of $232,574.40. The penalty is four times the amount of cash payout that it had fraudulently claimed.  This is the first such case since the PIC scheme was introduced in 2010 to encourage productivity and innovation activities in Singapore.

Under the scheme, businesses can enjoy a 400% tax deduction or 30% cash payout for year of assessment (YA) 2011 and YA 2012 (60% for YA 2013 to YA 2015) for investments under six qualifying activities.  In Budget 2013, an additional dollar-for-dollar matching cash bonus (known as PIC Bonus) was introduced.

The IRAS takes a serious view of any abuse of PIC scheme. Those convicted of PIC fraud will have to pay a penalty of up to four times the amount of cash payout fraudulently obtained.  In addition, they will face a maximum fine of $50,000 and/or five years’ jail.

Examples of what IRAS regards as abuse of the PIC scheme includes:

  • Making PIC claims using false records or documents, when the company did not incur the expenditure or where the actual expenditure was lower than claimed.
  • Creating a shell company to claim PIC on purchase of automation equipment from a related company, when the transaction did not actually take place and the equipment continued to be owned and used by the related company.
  • Claiming PIC by colluding with a third party to purchase automation equipment, when the seller is not the legal owner of the equipment but merely renting or leasing it.
  • Using phantom employees to meet the PIC qualifying condition of having made CPF contributions for three or more local employees.
  • Engaging in arrangements that seek to inflate PIC claims such as purchase/lease arrangements bundled with non-qualifying costs.
  • Inflating the staff cost allocated to software development.

Guidance on the common mistakes to avoid when claiming PIC is available on the IRAS website

Source: Inland Revenue Authority of Singapore