Tag: Productivity and Innovation Credit (PIC)

IRAS publishes the fifth edition of the “Productivity and Innovation Credit” e-Tax Guide

On By taxsgIn Corporate Tax, Latest Tax News

26 November 2016

On 22 November 2016, the Inland Revenue Authority of Singapore (IRAS) published the e-Tax Guide, “Productivity and Innovation Credit (5th Edition)”.

Productivity and Innovation Credit (PIC) was introduced in Budget 2010 for Year of Assessment (YA) 2011 to YA 2015 to encourage productivity and innovation activities in Singapore. The scheme was further extended for three years till YA 2018 in Budget 2014.

In Budget 2013, an additional cash bonus (known as PIC bonus) was announced as part of a 3-year transition support package under the Quality Growth Programme. The PIC bonus has since lapsed after YA 2015.

In Budget 2014, a PIC+ scheme was introduced to provide support to small and medium enterprises (SMEs) that are making more substantial investments to transform their businesses.

As announced in Budget 2016, the PIC scheme will lapse after YA 2018. In addition, the cash payout rate has been reduced from 60% to 40% for qualifying expenditure incurred on or after 1 August 2016.

The amendments in the fifth edition of the e-Tax Guide incorporate the Budget 2016 changes:

  • Expiry of the PIC Scheme in YA 2018
  • Reduction in the PIC cash payout rate from 60% to 40% for qualifying expenditure incurred on or after 1 Aug 2016, and
  • Compulsory e-Filing of PIC cash payout applications with effect from 1 August 2016.

Other amendments include the following:

  • Removal of information on PIC bonus which expired after YA2015.
  • Removal of paragraph on the clarification of the basic tool criteria (See “The evaluation criteria for the case-by-case approval of automation equipment” (Annex A)).
  • Enhancement to allow companies to make an irrevocable election to claim the WDA over a five, ten or fifteen-year period (on a straight line basis) on capital expenditure incurred in acquiring the IPR – with effect from YA 2017 (See “Enhanced Writing-Down Allowance (WDA) and Deduction for Intellectual Property Rights (IPRs)” (Annex B).

The previous edition of the e-Tax Guide was published on 19 September 2014.

For full details, please refer to the e-Tax Guide on the IRAS website.

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

Company and director charged for making false Productivity and Innovation Credit claims

On By taxsgIn General News

18 February 2014

On 14 February 2014, Alex Rajan s/o Anthony Samy (“Alex Rajan”), director of Exel Mitsui Technologies Pte Ltd (“EMTPL”) which manufactures machine tool accessories, was charged for making false Productivity and Innovation Credit (“PIC”) claims by the court. Alex Rajan pleaded guilty to the charge and will be sentenced on 21 February 2014 for the offence. Meanwhile, EMTPL was ordered to pay a fine of S$8,000 and a penalty of S$180,000.

Alex Rajan made a false declaration in a PIC cash payout application form that EMTPL had purchased PIC automation equipment for S$168,000 and that his company met the qualifying conditions for the cash payout.

However, investigations by the Inland Revenue Authority of Singapore (“IRAS”) revealed that EMTPL did not incur such expenditure on the equipment. In addition, the company did not employ or make CPF contributions for at least three local employees in the relevant period.  In fact, EMTPL had never been in active business operation.

This is the second case of a company and its director to be charged for making false PIC claims. For the earlier case, please refer to the TAX@SG post “Company director jailed for making false Productivity and Innovation Credit claims”  on 23 September 2013.

The PIC scheme was introduced to support businesses that invest in innovation and productivity improvements. 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, the PIC bonus was introduced to provide an additional dollar-for-dollar matching cash bonus.

The IRAS reiterated that it takes a serious view of any abuse of the PIC scheme. Offenders 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 fine of up to S$50,000 and/or imprisonment of up to five years.

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

  • Claiming PIC using false records or documents, when the company did not incur the expenditure or where the actual expenditure was lower.
  • Creating a shell company to claim PIC on purchase of equipment from a related company, when no such transaction took place and where the equipment continue 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 artificially inflate PIC claims such as purchase/lease arrangements bundled with non-qualifying costs.
  • Inflating the staff cost allocated to software development.

For more information on the PIC scheme and guidance on claiming PIC, please refer to the IRAS website.

Source: Inland Revenue Authority of Singapore

IRAS’s response to feedback from taxpayers

On By taxsgIn Corporate Tax, Goods and Services Tax, Individual Tax, Latest Tax News, Property Tax

30 January 2014

On 27 January 2014, the Inland Revenue Authority of Singapore (IRAS) published highlights of its response and follow-up actions in 2013 following suggestions and feedback from taxpayers. IRAS’s initiatives include:

  • Removal of need for businesses to furnish ACRA Biz Profile when updating registered business address with effect from October 2013, following suggestions.
  • Auto-application of owner-occupier property tax rates without requiring owners with only one residential property to apply for owner-occupier property tax rates, and allowing the owners to inform IRAS should the situation be otherwise. However, owners of multiple properties are still required to communicate their choice of property for IRAS to apply the owner-occupier property tax rates. This initiative was taken following feedback that it is a hassle to complete an application form for owner-occupier property tax rates and the suggestion to apply owner-occupier property tax rates based on property records with IRAS instead.
  • Publication of a comprehensive e-Tax Guide “GST: Guide on Reimbursement and Disbursement of Expenses” in May 2013, with illustrations to provide clear guidance on how goods and services tax (GST) rules should be applied. This initiative was taken following feedback that GST rules on reimbursement and disbursement of expenses were not explained in detail and the request for examples to be given to guide businesses in better applying the rules to their scenarios.
  • Making it easier for companies to determine their eligibility for Form C-S filing by implementing a Form C-S eligibility checklist, following feedback.
  • Providing more examples of IT and automation equipment qualifying for Productivity and Innovation Credit (PIC) listed by industry on the IRAS web page on automation equipment qualifying for PIC, following suggestions.
  • Providing more examples on expenses that can be deducted from rental income on the IRAS web page on rental expenses that are allowed or not allowed for deductions against the rental income, following suggestions.
  • Enhancing the user interface of the Assisted Self-Help Kit (ASK) to make it easier for GST-registered businesses to use. Changes were also made to ASK working templates and declaration form on completing Annual Review & Voluntary Disclosure of Errors. In addition, a new e-Service was introduced to retrieve GST Returns/Assessment for ASK Annual Review. This initiative was taken following feedback that the ASK was not user-friendly with too many templates to complete.
  • Improving the IRAS web page that explains the e-Filing of income tax with relevant links to information that will help e-Filers browse for relevant information when e-Filing the income tax, following suggestions.

For more information, please refer to the IRAS website.

Source: Inland Revenue Authority of Singapore

IRAS issues revised e-Tax Guide on Productivity and Innovation Credit (Third Edition)

On By taxsgIn Corporate Tax, Deductions, General News, Income, Latest Tax News

23 September 2013

The revised edition of the e-Tax Guide on Productivity and Innovation Credit (PIC) was issued by the Inland Revenue Authority of Singapore (IRAS) on 20 September 2013. The PIC scheme was introduced in Budget 2010 and the first edition of the e-Tax Guide to the scheme was published on 15 July 2011, followed by a second edition on 17 August 2012.

In the third edition, amendments were made to reflect the introduction of the PIC bonus and enhancements to the PIC scheme announced in Budget 2013.

With effect from year of assessment 2013, the PIC scheme is enhanced as follows:

  1. The term “automation equipment” has been changed to “information technology (IT) and automation equipment” as PIC already supports IT-related software besides automation equipment.
  2. PIC IT and Automation Equipment (Annex A)
    • The criteria for approving automation equipment on a case-by-case basis are liberalised. Basic tools may also be approved for purposes of PIC if they meet the approval criteria.
  3. Licensing of qualifying Intellectual Property Rights (IPRs) (Annex B)
    • Licensing of qualifying IPRs is included as one of the qualifying activities under PIC.

The e-Tax guide is available on the IRAS website.

Source: Inland Revenue Authority of Singapore

Company director jailed for making false Productivity and Innovation Credit claims

On By taxsgIn Corporate Tax, Deductions, General News, Income, Latest Tax News

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 http://www.iras.gov.sg/irasHome/commonpicmistakes.aspx.

Source: Inland Revenue Authority of Singapore