19 February 2013

PIC benefits are only available on the purchase cost or lease payments applicable to PIC automation equipment. Bundled items (eg cash vouchers, maintenance services and extended warranty provision) being non-qualifying costs, must be excluded from PIC claims. Any discount/rebate or subsequent cash-back obtained for the purchase or lease of PIC automation equipment must be deducted from the PIC claim as only the net amount incurred qualifies for PIC benefits.

Examples of bundled deals and how PIC should be claimed can be found on the IRAS website.

Concession

As a concession, the costs of bundled items may be included in the PIC claim if they are regarded as incidental, ie if the value of bundled non-qualifying items is less than or equal to:
• 10% of total value of sales/ lease package, and
• $3,000

Abusive arrangements

Arrangements that artificially inflate PIC claims (eg purchase/lease arrangements bundled with a high cash back for trade-in of an old asset that has little market value) are unacceptable and businesses found to have over-claimed PIC benefits through such abusive arrangements may be liable to penalties.

Businesses or individuals engaged in abusive tax arrangements are encouraged to voluntarily disclose such arrangements using the PIC Disclosure of Error Form available on the IRAS website.

PIC claims on photocopiers

Sales/lease packages for photocopiers typically include bundled items, such as free prints, cash vouchers, etc, as well as roll-overs and trade-ins. The IRAS has clarified that these items should be excluded from PIC claims. However, in line with the concession mentioned earlier, the IRAS is prepared to accept the total value of the sales/lease package as the market price of the photocopier where the bundled items are incidental costs incurred in closing the deal. Notes following the IRAS’s presentation on “Items bundled with the purchase or lease of photocopiers” can be found on the IRAS website.

In addition to the above, the IRAS has also updated the FAQs on the overview of PIC on its website.

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