3 April 2014

On 31 March 2014, the Inland Revenue Authority of Singapore (“IRAS”) released updated content on its website relating to the Productivity and Innovation Credit Plus (“PIC+”) Scheme introduced in Budget 2014.

About PIC+ Scheme

The PIC+ Scheme is available to qualifying small and medium enterprises (“SMEs”) which incur qualifying expenditure beyond the combined cap of S$1.2 million applicable for the relevant three years of assessment (“YAs”) from YA 2013 to YA 2015 and YA 2016 to YA 2018 respectively.

Under the PIC+ scheme, the expenditure cap will be increased from S$400,000 to S$600,000 per qualifying activity per YA. This means that, from YA 2015 to YA 2018, qualifying SMEs that invest in the six qualifying activities under the PIC scheme can claim 400% tax deductions/allowances on an additional S$200,000 in qualifying expenditure for each qualifying activity per YA.

The annual expenditure cap of S$600,000 per qualifying activity may be combined as follows:

Year of Assessment (“YA”)	Expenditure Cap per Qualifying Activity(1)	Tax Deduction per Qualifying Activity
2013 to 2015 (Combined)	S$1.4 million(2)	S$5.6 million (400% x S$1.4 million)
2016 to 2018 (Combined)	S$1.8 million	S$7.2 million (400% x S$1.8 million)

⁽¹⁾ Only applicable if the qualifying SME is carrying on a trade or business for the relevant YAs. Otherwise, the combined cap is reduced accordingly.

⁽²⁾ The combined expenditure cap is only applicable for YA 2015 as the additional expenditure cap of S$200,000 is not available for YA 2013 and YA 2014.

The expenditure cap for PIC cash payout will remain at S$100,000 of qualifying expenditure per YA.

Qualifying SMEs

Qualifying SMEs include sole-proprietorships, partnerships and companies carrying on a trade or business and whose

• revenue is not more than S$100 million, or
• employment size is not more than 200 employees.

This criterion will be applied at the group level if the business is part of a group.

Revenue condition

Revenue refers to income that arises from the ordinary activities of a business, that is, the business’ main source of income, excluding separate source income such as interest. For the purpose of the PIC+ Scheme, “revenue” will be determined based on the revenue derived during the relevant basis period for the YA. The basis period need not be a 12-month period.

Employment size condition

An employee is an individual who enters into a contract of service with an employer under which the employer will pay him a wage. An employee includes a director of a company and part-time employee.

An individual deployed to work for an entity under a centralised hiring arrangement will be considered as an employee of the entity where the individual is deployed, subject to qualifying conditions.

For the purpose of the PIC+ Scheme, the employment size will be determined as at the last day of the relevant basis period.

Part of a Group

A group refers to a parent and its subsidiaries as determined in accordance with Financial Reporting Standard (“FRS”) 110 (or FRS 27, for financial periods before 1 January 2014). This includes entities incorporated or registered outside Singapore. A parent refers to an entity that controls one or more entities, while a subsidiary refers to an entity that is controlled by another entity.

For the purpose of the PIC+ Scheme, whether an SME is part of a group will be determined as at the last day of the relevant basis period. Once an SME is determined to be part of a group, the revenue and employment size criteria will be applied at the group level.

Determination of eligibility

Businesses are required to self-assess their eligibility for the PIC+ Scheme based on the following conditions:

• A business that is claiming PIC+ for YA 2015 has to be a qualifying SME in the same period.
• For claiming PIC+ from YA 2016 to YA 2018, once the business meets the criterion to be a qualifying SME in any of these YAs, it will be able to enjoy the benefits under the PIC+ scheme from that YA onwards. This will apply even if it fails to meet the qualifying criterion in subsequent YAs. An exception to this is if there is a change in the business’ parent or if the business becomes part of a group. When this happens, the business will have to re-assess its eligibility for the YA relating to the basis period in which the change in control occurs.

Greater certainty and flexibility for businesses

To provide certainty to businesses which want to know if they will enjoy the benefits of the PIC+ Scheme at the point of making the investment, they are given the flexibility to choose the basis period with which to determine whether they are qualifying SMEs in YA 2015 and YA 2016, as follows:

To be a qualifying SME in	Look at the basis period for
YA 2015	Either YA 2014 or YA 2015
YA 2016	Either YA 2015 or YA 2016

Application for PIC+ Scheme

Qualifying businesses are not required to submit a separate application form for the PIC+ Scheme. Businesses that meet the qualifying criteria can claim the expenditure similar to the current PIC application process. Claims for the enhanced deductions/allowances can be made in their income tax return for the relevant YA by the filing due date (15 April for sole-proprietorship and partnership; 30 November for company).

For more information on the PIC+ and PIC Schemes, please refer to the IRAS website.

Source: Inland Revenue Authority of Singapore