IRAS clarifies treatment of straddled items for PIC cash payout

On By taxsgIn Corporate Tax, Latest Tax News

2 December 2015

IRAS has updated its website on PIC Cash Payout to clarify the treatment of expenditure incurred on the construction or development of PIC IT and automation equipment, as well as intellectual property registration, over two or more YAs.

Under the PIC Cash Payout, eligible businesses can apply to convert up to $100,000 of their total expenditure for each year of assessment (YA) in all the six qualifying activities into a non-taxable cash payout. For YAs 2013 to 2018, the cash payout rate is at 60% of the expenditure incurred.

Conditions for PIC Cash Payout claims on PIC IT and automation equipment constructed over two or more YAs

  • The conversion must be done on a “per equipment basis” on the full cost of the automation equipment, subject to the expenditure cap at the end of construction. Partial conversion is not allowed.
  • Eligible businesses can opt for the cash payout only when the construction of the automated equipment is completed provided that no claim for capital allowances had been made on the expenditure incurred in the prior YAs.
  • From YA 2016 onwards, cash payout will only be granted if the equipment is used by the business at the point of electing for cash payout.
  • The expenditure cap will be applied in the YA that the construction was fully completed.
  • The cash payout option is made on the total expenditure incurred on the construction of automated equipment. If the expenditure incurred is in excess of the conversion cap, the excess will be forfeited and will not be available for capital allowance claims against the business income.
  • All other conditions for the PIC cash payout claim will continue to apply.

Conditions for PIC Cash Payout claims on intellectual property registration (IPR) over two or more YAs

  • The conversion must be done on a “per registration basis” on the full cost of the IPR registration, subject to the expenditure cap at the end of registration. Partial conversion is not allowed.
  • Eligible businesses can opt for the cash payout only when the registration of the IPR is completed provided that no claim for deduction had been made on the expenditure incurred in the prior YAs.
  • The expenditure cap will be applied in the YA that the registration was fully completed.
  • The cash payout option is made on the total expenditure incurred on the registration of IPR. If the expenditure incurred is in excess of the conversion cap, the excess will be forfeited and not be available for deduction against the business income.
  • All other conditions for the PIC cash payout claim will continue to apply.

IRAS has also provided examples on its website to illustrate the treatment of these straddled items for claims of PIC Cash Payout.

The update was made on 23 November 2015.

For further details, please refer to the IRAS website.

Source: IRAS