1. No category

Productivity and Innovation Credit
Scheme
Presentation by Inland Revenue Authority of Singapore
For PIC seminars held in January 2015
© 2015 IRAS Singapore
Agenda
Overview of Corporate Tax


Basis of Assessment
Fili Obli
Filing
Obligations
ti
Productivity and Innovation Credit (PIC) Scheme






Overview
Tax Benefits (including PIC+ Scheme)
How to Claim PIC
Pointers - Completing Cash Payout Application Form
What Qualifies for PIC
Abusive PIC arrangements
g
Q&A
© 2015 IRAS Singapore
Basis of Assessment
Income is assessable on a preceding accounting year basis
Year of Assessment (YA)
year in which income tax is charged
current YA is YA 2014
Basis Period for a YA
the period of income relevant to the YA
e.g. 1 Jan 2013 to 31 Dec 2013 (YA 2014)
1 Apr 2012 to 31 Mar 2013 (YA 2014)
1 Jul 2013 to 30 Jun 2014 (YA 2015)
1 Feb 2014 to 31 Jan 2015 (YA 2016)
3
© 2015 IRAS Singapore
Filing Obligations
Estimated Chargeable Income
(ECI)
When to file
Within 3 months after end of accounting period
(e-Filing of ECI via myTax Portal is strongly
encouraged)
Waiver of ECI filing: You do not need to file ECI
for a particular accounting period if:
• annual revenue is not more than $1 million
• ECI is nil
Income Tax Return
(Form C/Form C-S)
If you are filing Form C
Submit a complete tax return comprising of the
following by 30 Nov of each year:
- Form C and appendix (Form IRIN 301)
- audited/unaudited accounts and detailed P/L
- tax computation
If you are filing Form C-S
Submit paper Form C-S by 30 Nov or e-Form C-S# by
15 Dec of each year
Notification of
filing
requirement
Company will receive a reminder letter to file the
ECI in the last month of the accounting period
A tax return filing package will be sent to the
company’s registered address in Apr of each year
Failure to file
Estimated assessment may be raised*
 Estimated assessment may be raised*
 Letter of Composition and/or Summons may be
If you are in a
tax loss
position
A NIL ECI (ECI = 0) is required unless the
company has met the qualifying conditions for
waiver of ECI filing
Submit an Income Tax Return (Form C/Form C-S)
issued
# Please authorise yourself/third party as an “Approver” for Corporate Tax Matters via the e-Services Authorisation System (EASY)
4
* If you disagree with the estimated tax assessment, please lodge an objection within two months from the date of the Notice of Assessment with your
reasons for not filing on time and grounds of objection
© 2015 IRAS Singapore
Productivity and Innovation Credit
(PIC) Scheme
5
© 2015 IRAS Singapore
Overview of PIC Scheme
Introduced in Budget 2010; enhanced in Budget 2011, 2012,
2013
0 3 and
a d 2014
0
Encourage
g businesses to invest in productivity
p
y and innovation
activities
All businesses benefit, especially SMEs
6
© 2015 IRAS Singapore
Overview of PIC Scheme
6 activities
i i i covered
d under
d scheme:
h
Training of Employees
Purchase/Leasing of PIC IT and Automation Equipment
Acquisition/In-licensing of Intellectual Property
Registration
of Intellectual Property
g
p y
Research & Development
Approved Design Project
7
© 2015 IRAS Singapore
Tax Benefits under PIC
400% tax deductions/allowances on expenditure on each
of the 6 activities for accounting years 2010 to 2017
[Years of Assessment (YAs) 2011 to 2018*]
Opt for cash payout in place of tax deductions/allowances
for accounting years 2010 to 2017 (YAs 2011 to 2018*)
PIC Bonus (YAs 2013 to 2015)
* Budget 2014 Enhancement
8
© 2015 IRAS Singapore
400% Tax
T Deductions
D d ti
/ Allowances
All
9
© 2015 IRAS Singapore
Tax Deductions / Allowances
400% tax deductions/allowances on up to $400,000 expenditure
per year in each of the 6 activities
To allow max PIC benefits, the spending cap across YAs for each
activity is as shown below:
Years of
Assessment
Expenditure Cap
per Activity
Tax Deduction
per Activity
2011 and 2012
(Combined)
$800,000
$3,200,000
(400% x $800,000)
2013 to 2015
(Combined)
$1 200 000
$1,200,000
$4,800,000
$4
800 000
(400% x $1,200,000)
2016 to 2018*
(Combined)
$1,200,000
$
,
,
$ ,
$4,800,000
,
(400% x $1,200,000)
* Budget 2014 Enhancement
10
© 2015 IRAS Singapore
Tax Deductions / Allowances
Expenditure cap per qualifying activity applies only if carrying on
a trade or business for the relevant YAs. Otherwise, combined
cap is
i reduced
d
d accordingly
di l
For newly incorporated/registered businesses whose 1st YA is
YA 2014,
2014 the combined expenditure cap for YAs 2014 to 2015 per
activity is $800,000
Expenditure is net of grant or subsidy by the government or
statutory board
Expenditure exceeding the cap can still enjoy deduction based
on existing rules
11
© 2015 IRAS Singapore
Tax Deductions / Allowances
Potential Maximum Benefits for YA 2013, YA 2014 & 2015 combined
Deduct up to $28.8M (400% x $1.2M x 6 activities)
R&D
Training
IP
Acq isition/
Acquisition/
In-licensing
400% deduction/allowances
on up to $1.2M expenditure
Automation
IP
Registration
Design
g
12
© 2015 IRAS Singapore
Tax Deductions / Allowances
Example (YA 2014)
Assume did not claim PIC on training in YA 2013
Expenditure on staff training
= $1,300,000
Total tax deductions
= $4,900,000
$1,200,000
$4,800,000
(400% x $1,200,000)
$1 200 000)
$100,000
$100,000
$100
000
(remain 100% deduction, as
cap exceeded)
13
© 2015 IRAS Singapore
New!
PIC+ Scheme
14
© 2015 IRAS Singapore
PIC+ Scheme
From YA 2015
F
2015, qualifying
lif i SMEs
SME that
h invest
i
in
i excess off the
h combined
bi d
cap of $1.2 million in any of the 6 qualifying activities will enjoy
enhanced deductions/allowances on an additional amount of $200,000
for each qualifying activity per YA
Maximum combined expenditure cap applicable for each 3
3-year
year period:
YA
Max annual cap
Max.
2013
2014
2015
2016
2017
2018
400 000
400,000
400 000
400,000
600 000
600,000
600 000
600,000
600 000
600,000
600 000
600,000
Max. combined cap*
$1,400,000#
$1,800,000
* Only if you are carrying on a trade or business for the relevant YAs. Otherwise, the
combined cap is reduced accordingly.
Th combined
The
bi d expenditure
dit
cap off $1,400,000
$1 400 000 is
i only
l applicable
li bl for
f YA 2015 as the
th
additional expenditure cap of $200,000 ($600,000 - $400,000) is not available for YA
2013 and YA 2014
#
15
© 2015 IRAS Singapore
PIC+ Scheme
Example (YA 2015)
Assume did not claim PIC on training in YAs 2013 and 2014
Expenditure on staff training
= $1,500,000
$1,400,000
$100,000
Total tax deductions
= $5,700,000
$5,600,000
(400% x $1,400,000)
$1 400 000)
$100,000
$100
000
(remain 100% deduction, as
cap exceeded)
16
© 2015 IRAS Singapore
PIC+ Scheme
Qualifying SMEs:
 Where the business is not part of a group
• Revenue not more than $100 million; or
• Employment size not more than 200 employees
 Where the business is part of a group
• Group revenue not more than $100 million; or
G
l
t size
i nott more th
l
• Group
employment
than 200 employees
Expenditure conversion cap under the cash payout option
remains unchanged, at $100,000 for all 6 activities per YA
17
© 2015 IRAS Singapore
PIC+ Scheme
H
How
tto determine
d t
i
eligibility
li ibilit


A business that is claiming PIC+ for YA 2015 has to be a qualifying SME
in the same period
For 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
from that YA onwards
Example
Company A qualifies as a qualifying SME in YA 2016 but does not meet
the qualifying criteria in YA 2017, it can continue to enjoy the benefits
under the PIC+ scheme in YA 2017 and YA 2018
18
© 2015 IRAS Singapore
PIC+ Scheme
H
How
tto determine
d t
i
eligibility
li ibilit
To p
provide certaintyy to businesses which want to know if theyy will enjoy
j y the
benefits of PIC+ at the point of making the investment, flexibility given to
choose the basis period 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
YA 2015
Basis period for either YA 2014 or YA 2015
YA 2016
Basis period for either YA 2015 or YA 2016
19
© 2015 IRAS Singapore
PIC+ Scheme
How to determine eligibility for YA 2015
Year of Assessment
2014
Basis period
for the YA
Qualifying
SME?
Qualifying PIC+
2015
2016
2017
2018
Meet
Meet
OR
conditions?
conditions?
Y
Yes
+200k 20
20
© 2015 IRAS Singapore
PIC+ Scheme
How to determine eligibility for YA 2016
Year of Assessment
2015
Basis period
for the YA
Meet
conditions? OR
Qualifying
SME?
2016
2017
2018
Meet
conditions?
Y
Yes
Qualifying PIC+
+600k 600k
21
21
© 2015 IRAS Singapore
PIC+ Scheme
R
Revenue
condition:
diti


Income that arises from the ordinary activities of a business i.e. business'
main source of income
Determined based on the revenue derived during the relevant basis
period for the YA. 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
Includes a director of a company and part-time employee
Includes
l d individual
d d l deployed
d l
d to workk for
f an entity under
d a centralised
l d
hiring arrangement
Employment size determined as at the last day of the relevant basis
period
22
© 2015 IRAS Singapore
PIC+ Scheme
Part of a group:




A parent and its subsidiaries as determined in accordance
with the accounting standards (FRS 110), i.e. based on
control
I l d both
Includes
b th Singapore
Si
and
d foreign
f i entities
titi
To determine whether an SME is part of a group, reference
is made to the last dayy of the relevant basis p
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
23
© 2015 IRAS Singapore
How to Claim 400% Tax Deductions/ Allowances
400% tax deductions/allowances
How
Claim tax deductions/allowances in income tax return
When
For company, submit income tax return by the filing due
date: 30 Nov / 15 Dec (e-File return)
For sole-proprietor/
F
l
i t / partnership,
t
hi submit
b it income
i
tax
t return
t
and PIC declaration form by the filing due date: 15 Apr / 18
Apr (e-File return)
24
© 2015 IRAS Singapore
Tax Deductions / Allowances
Carry back
C
b k
to offset income
of immediate
preceding YA
Unutilised tax
deductions/
allowances
ll
Carry forward
to offset income
of future YAs
Transfer
- Group Relief System
(companies)
- between spouses*
(individuals)
Note: Subject to shareholding test and other relevant conditions under current rules
* From YA 2016, the transfer between spouses will be phased out
25
© 2015 IRAS Singapore
C hP
Cash
Payoutt O
Option
ti
26
© 2015 IRAS Singapore
Cash Payout Option
Option to convert expenditure of up to $100,000 in all 6 activities
per YA
At 30% (YAs 2011 & 2012) / 60% (YAs 2013 to 2018*) cash
payout rate
60%
$100,000
$60,000
Expenditure incurred
during the basis period for
YA 2014
Cash Payout for YA 2014
Expenditure converted is not tax deductible
Cash payout is non
non-taxable
taxable
27
* Budget 2014 Enhancement
© 2015 IRAS Singapore
Cash Payout Option
Years of
Assessment
Expenditure Cap
for All 6 activities
Maximum
y
Cash Payout
2011 and 2012
(Combined)
$200,000
$60,000
(30% x $200,000)
$200 000)
2013 to 2018
(No pooling of
expenditure cap)
$100,000 per YA
$60,000 per YA
(60% x $100,000)
28
© 2015 IRAS Singapore
Cash Payout Option
Conditions for cash payout option
From YA
F
YAs 2013 tto 2015
Employed at least 3 local employees* (Singapore Citizens or PRs
with CPF contributions)) in the last month of the q
quarter or
combined quarters in the basis period for the relevant YA
C
i on business
b i
ti
i Singapore
Si
Carrying
operations
in
* Employees exclude sole-proprietors, partners under contract for service, shareholders
who are also directors of companies
Note: The 3-local-employee condition does not apply to 400% tax deductions/allowances
29
© 2015 IRAS Singapore
Cash Payout Option
Conditions for cash payout option
New!
From YA
F
YAs 2016 tto 2018*
Employed at least 3 local employees# (Singapore Citizens or PRs
with CPF contributions)) in the last 3 months of the q
quarter or
combined quarters in the basis period for the relevant YA
C
i on business
b i
ti
i Singapore
Si
Carrying
operations
in
#
Employees exclude sole-proprietors, partners under contract for service, shareholders
who are also directors of companies
Note: The 3-local-employee condition does not apply to 400% tax deductions/allowances
* Budget 2014 Enhancement
30
© 2015 IRAS Singapore
How to Claim Cash Payout
Cash payout
How
Submit:
• PIC cash payout application form; and
• Hire-purchase
p
template
p
((where applicable)
pp
)
When
After the end of each quarter or combined quarters in
the accounting year but not later than the income tax filing
due date
Most businesses can expect to receive the cash payout within three
months from the date of receipt of the application, provided all
information is submitted.
submitted
31
© 2015 IRAS Singapore
How to Claim Cash Payout
File your cash payout online from Feb 2015!
Prepare yourself for the online filing by
authorising
h i i yourself
lf on EASY!
32
© 2015 IRAS Singapore
Pointers:
Completing Cash Payout Application Form
33
© 2015 IRAS Singapore
Pointers
C hP
Cash
Payoutt Application
A li ti
Form
F
Click here for
link to new cash
payout
application form
34
© 2015 IRAS Singapore
Pointers
C hP
Cash
Payoutt Application
A li ti
Form
F
The new PIC Cash Payout Application Form is easier and
simpler to complete as it allows you to:
 Use the iHelp facility < > for guidance/ instructions on
how to fill up the form
 Minimise completion and computation errors with in
in-built
built
system formulae and checks
 Receive your cash payout earlier when you submit a
l t application
li ti
complete
Please read the Essential Information to Note before completing
the PIC Cash Payout Application Form.
Form You may also wish to view
the user guide for this form
35
© 2015 IRAS Singapore
Pointers
C hP
Cash
Payoutt Application
A li ti
Form
F
Ad i i
Administrative
i matters
After completing the form,
form please print and submit the original
signed form, together with the relevant annexes and hire-purchase
template (where applicable), to IRAS at
I l d Revenue
Inland
R
Authority
A th it off Singapore
Si
55 Newton Road
Revenue House
Singapore 307987
Supporting documents such as invoices, agency approval letters and
CPF Records of Payment do not need to be submitted with the
application form.
form Businesses should retain these documents and
submit them to IRAS upon request
36
© 2015 IRAS Singapore
Application of the
3-llocal
locall-employee
l
condition
diti
(From YAs 2013 to 2015)
37
© 2015 IRAS Singapore
3-local
local--employee condition
(Cash Payout & PIC Bonus)
Bonus)
YAs 2013 to 2015
Example
E
l 1
1: Business
B i
X has
h a Dec
D accounting
ti
year-end
d and
d it opts
t for
f
cash payout at the end of each quarter.
Year of Assessment 2015:
Quarters
Jan – Mar
Ja
a
2014
Apr
p – Ju
Jun
2014
Ju – Sep
Jul
2014
Oc – Dec
Oct
ec
2014
payout
y
option
p
Cash p
exercised
Q t 1
Quarter 1
Q t 2
Quarter 2
Q t 3
Quarter 3
Q t 4
Quarter 4
Relevant month for
determining
3-local-employee condition
Mar 2014
Jun 2014
Sep 2014
Dec 2014
When to submit
cash payout application
From Apr
2014
From Jul
2014
From Oct
2014
From Jan
2015
Deadline to submit
cash payout application
By income tax return filing due date
• 15 Apr 2015 / 18 Apr 2015 (e-File return) for sole-proprietor and partnership
• 30 Nov 2015/ 15 Dec 2015 (e-File return) for company
38
© 2015 IRAS Singapore
3-local
local--employee condition
(Cash Payout & PIC Bonus)
Bonus)
YAs 2013 to 2015
Example
E
l 2
2: Business
B i
Y has
h a Dec
D accounting
ti
year-end
d and
d it opts
t for
f
st
rd
th
cash payout at the end of 1 , 3 and 4 quarters.
Year of Assessment 2015:
Quarters
Jan – Mar
Ja
a
2014
payout
y
option
p
Cash p
exercised
Q t 1
Quarter 1
Relevant month for
determining
3-local-employee condition
Mar 2014
Sep 2014
Dec 2014
When to submit
cash payout application
From Apr
2014
From Oct
2014
From Jan
2015
Deadline to submit
cash payout application
Apr
p – Ju
Jun
2014
Ju – Sep
Jul
2014
Q t 2&3
Quarters 2 & 3 combined
bi d
Oc – Dec
Oct
ec
2014
Q t 4
Quarter 4
By income tax return filing due date
• 15 Apr 2015 / 18 Apr 2015 (e-File return) for sole-proprietor and partnership
• 30 Nov 2015/ 15 Dec 2015 (e-File return) for company
39
© 2015 IRAS Singapore
3-local
local--employee condition
(PIC Bonus - For a business claiming
enhanced deductions/allowances)
Example 3: Business Z has a Dec accounting year-end and
it opts for enhanced deductions/allowances.
Year of Assessment 2015:
Accounting period
Jan – Dec 2014
Enhanced deductions /
allowances
Relevant month for
determining
3-local -employee condition
Dec 14
By income tax return filing due date
Deadline to submit
• 15 Apr 2015 / 18 Apr 2015 (e-File return) for sole-proprietor and partnership
• 30 Nov 2015/ 15 Dec 2015 (e-File return) for company
40
© 2015 IRAS Singapore
New!
Application of the
3-llocal
locall-employee
l
condition
diti
(From YAs 2016 to 2018)
41
© 2015 IRAS Singapore
3-local
local--employee condition
(Cash Payout)
YAs 2016 to 2018
Example
E
l 1
1: Business
B i
X has
h a Dec
D accounting
ti
year-end
d and
d it opts
t for
f
cash payout at the end of each quarter.
Year of Assessment 2016:
Quarters
Jan – Mar
Ja
a
2015
Apr
p – Ju
Jun
2015
Ju – Sep
Jul
2015
Oc – Dec
Oct
ec
2015
payout
y
option
p
Cash p
exercised
Q t 1
Quarter 1
Q t 2
Quarter 2
Q t 3
Quarter 3
Q t 4
Quarter 4
Relevant months for
determining
3-local-employee condition
Jan – Mar
2015
Apr – Jun
2015
Jul – Sep
2015
Oct – Dec
2015
When to submit
cash payout application
From Apr
2015
From Jul
2015
From Oct
2015
From Jan
2016
Deadline to submit
cash payout application
By
y income tax return filing
g due date
•15 Apr 2016 / 18 Apr 2016 (e-File return) for sole-proprietor and partnership
• 30 Nov 2016/ 15 Dec 2016 (e-File return) for company
42
© 2015 IRAS Singapore
3-local
local--employee condition
(Cash Payout)
YAs 2016 to 2018
Example
E
l 2
2: Business
B i
Y has
h a Dec
D accounting
ti
year-end
d and
d it opts
t for
f
st
rd
th
cash payout at the end of 1 , 3 and 4 quarters.
Year of Assessment 2016:
Quarters
Jan – Mar
Ja
a
2015
payout
y
option
p
Cash p
exercised
Q t 1
Quarter 1
Relevant months for
determining
3-local-employee condition
Jan – Mar
2015
Jul – Sep
2015
Oct – Dec
2015
When to submit
cash payout application
From Apr
2015
From Oct
2015
From Jan
2016
Deadline to submit
cash payout application
Apr
p – Ju
Jun
2015
Ju – Sep
Jul
2015
Q t 2&3
Quarters 2 & 3 combined
bi d
Oc – Dec
Oct
ec
2015
Q t 4
Quarter 4
By
y income tax return filing
g due date
•15 Apr 2016 / 18 Apr 2016 (e-File return) for sole-proprietor and partnership
• 30 Nov 2016/ 15 Dec 2016 (e-File return) for company
43
© 2015 IRAS Singapore
How to Claim PIC ((Summary)
y)
400% tax
deductions/allowances
and PIC Bonus
Cash payout and
PIC Bonus
Cash payout
Applicable YA
YAs 2011 to 2018*
YAs 2011 to 2015*
YAs 2016 to 2018
How
Claim tax
ded ction/allo ances in
deduction/allowances
income tax return
Submit PIC cash payout application form and
hi e p chase template ((where
hire-purchase
he e applicable)
When
For company, submit income
tax return byy the filing
g due
date: 30 Nov / 15 Dec (e-File
income tax return)
YAs 2013 to 2018:
For sole-proprietor/
partnership submit income
partnership,
tax return and PIC
declaration form by the filing
due date: 15 Apr / 18 Apr (eFile income tax return)
Relevant
month/months
for determining
3-local-employee
3
local employee
condition
Last month of the basis
period of the relevant YA
After the end of each quarter or combined quarters in
the accounting year but not later than the income tax filing
due date
Last month of the
quarter or combined
consecutive quarters
Last 3 months of the quarter or
combined consecutive quarters
44
*PIC Bonus is applicable from YAs 2013 to 2015
© 2015 IRAS Singapore
Capping of Expenditure/Payout for
Taxpayers with Multiple Businesses
45
© 2015 IRAS Singapore
Individuals with Multiple Businesses
Businesses
Individual
A
Business 1
Business 2
Expenditure cap applies regardless of
the number of businesses A has as a
sole-proprietor
Individual
A
Individual
B
Partnership
Business
A separate expenditure cap is
applicable on the partnership
46
© 2015 IRAS Singapore
Companies that Own Partnership Businesses
Company
A
Business
Expenditure
p
cap
p
applies
Company
A
Company
B
Partnership
Business
Separate
expenditure cap
applies
47
© 2015 IRAS Singapore
What Qualifies for PIC
48
© 2015 IRAS Singapore
Training of Employees
49
© 2015 IRAS Singapore
Training of Employees
External training
g
All external training qualify
Qualifying Expenditure Includes
Qualifying Expenditure Excludes
Course fees to any external training Accommodation,
travelling and
service provider
transport expenses of employees
E.g. registration or enrolment fees,
attending the training
examination fees, tuition fees and
aptitude
p
test fees
Overheads like imputed
p
rental and
utilities
Rental of external training premises
Meals and refreshments provided
during the courses
Training materials and stationery
50
© 2015 IRAS Singapore
Training of Employees
In-house training
Qualifying training programmes:
Workforce Skills Qualification (WSQ) training courses accredited by the
Singapore Workforce Development Agency and conducted by a WSQ
in-house training provider;
 courses approved by the Institute of Technical Education (ITE) under
the ITE Approved Training Centre scheme; and
 o
on-the-job
centre
certified
t e job training
ta
g by an
a on-the-job
o t e job ttraining
a
g ce
t e ce
t ed by ITE

With effect from YAs 2012 to 2018, in-house training includes:
 Non-certified
N
tifi d in-house
i h
training
t i i courses, subject
bj t tto an expenditure
dit
cap off
$10,000 per YA. The $10,000 cap cannot be combined across YAs
 The total training expenditure cap remains unchanged
51
© 2015 IRAS Singapore
Training of Employees
In-house training
Examples of in-house training that may be allowed without
external certification


Training sessions conducted on operation of specialised equipment
with the help of instruction manual
T i i on a business’
Training
b i
’ operating
ti processes and
d functions
f
ti
in
i a
group setting, with prepared materials and handouts
Exclude informal sessions such as spontaneous consultation,
day-to-day problem solving and coaching sessions
52
© 2015 IRAS Singapore
Training of Employees
In-house
In
house training
Qualifying Expenditure Includes
Qualifying Expenditure Excludes
Salaries
and other remuneration Salaries and other remuneration
(excluding director fees) paid to inpaid to in-house trainers for other
duties including preparation of
house trainers for course delivery
g material
training
Rental of external training premises
Salaries and other remuneration
paid to employees providing
Meals and refreshments provided
administrative support
during the courses
Training materials and stationery
Absentee payroll
Accommodation, travelling
transport expenses
and
Overheads like imputed rental and 53
utilities
© 2015 IRAS Singapore
Training of Employees
Example on the $10,000 cap
In-house
External
($’000)
Total
($’000)
WSQ
Accredited
($’000)
Non- WSQ
Non
accredited
($’000)
Salaries of in-house
in house trainers1
45
9
-
54
Training materials
8
2
-
10
Course fees for employees
p y
-
-
27
27
11
27
91
27
90
Total
1
based on hours spent on conducting 53
courses
Amount qualifying for PIC
benefits
1
53
10
(Capped at
$10,000)
based on hours spent on conducting courses
54
© 2015 IRAS Singapore
Training of Employees
With
Wi
h effect
ff
ffrom YA
YAs 2012 to 2018:
2018
Expenditure incurred by a business on the training of the
following
o o
gp
prescribed
esc bed classes
c asses o
of individuals
d dua s qualify
qua y for
o PIC:
C





Salespersons registered under the Estate Agent Act;
Representatives within the meaning of the Financial Advisers Act;
R
Representatives
t ti
within
ithi th
the meaning
i off th
the S
Securities
iti and
d Futures
F t
A
Act;
t
Insurance agents of insurers licensed under the Insurance Act;
Hirers of taxis from taxi service operators licensed under the Road
Traffic Act
Qualifying conditions include:


Regular working relationship between the business and the individual;
Sharing of risks and rewards between the two
55
© 2015 IRAS Singapore
Training of Employees
Computation of enhanced deduction under PIC for training
E.g. Incurred training expenses as follows for YA 2014 (Dec year-end):
Training
Date
Training
Base
cost
deduction
incurred
100%
Enhanced deduction
300% of up to $1,200K
expenditure
Total
11 Jan 13
$250k
$250k
$250k x 300% = $750k
$1,000k
22 Mar 13
100k
100k
$100k x 300% = $300k
400k
1 050K
1,050K
1,400K
350K
YA 2014 Tax Computation (assuming no tax disallowable items)
Net Profit
fi Before
f
Tax
Less: Enhanced deduction for training costs
Adj t d Profit
Adjusted
P fit Before
B f
Capital
C it l Allowances
All
$ 8 0k
$1,850k
(1,050k)
800k
56
© 2015 IRAS Singapore
Training of Employees
If opt to convert $100,000 of training costs to cash payout:
Training
Date
Training
g
cost
incurred
11 Jan 13
$250k
$
22 Mar 13
100k
Cost
Converted
Base
deduction
100%
100k
Enhanced deduction
300%
Total
$250k $250k x 300% = $750k
$
0
0
$1,000k
$
,
750K
1,000K
350K
Net Profit Before Tax
YA 2014 Tax
Add: Expenditure converted into cash
Computation
(assuming no tax Less: Enhanced deduction for training costs
disallowable items)
Adjusted Profit Before Capital Allowances
0
$1,850K
100k
(750k)
1,200k
Cash payout = 60% x $100k = $60k
57
© 2015 IRAS Singapore
Training of Employees
New!
I di id l d
Individuals
deployed
l
d under
d centralised
li d hi
hiring
i
arrangement*
*
Centralised Hiring Arrangement
Individual
d d l (Employee)
(
l
) contracts with
h the
h centrall hirer
h
(Business
(
H)) and
d
deployed to another entity (Business D)
Employee is not regarded as Business D’s employee as there is no
employment contract, notwithstanding wages and training expenses relating
to Employee is recharged by Business H to Business D
Reimbursed Employee’s
Employee s wages &
training expenses
Business H
Wages,
Training
Employment
contract
Business D
Deployed to work
Employee
58
* Budget 2014 Enhancement
© 2015 IRAS Singapore
Training of Employees
Individuals deployed under centralised hiring arrangement
Current treatment
 Business D not entitled to claim PIC benefits on the training
recharged
 Employee
l
not taken
k into account as Business D’s
’ employee
l
for
f
purposes of satisfying 3-local-employee condition
59
© 2015 IRAS Singapore
Training of Employees
Individuals deployed under centralised hiring arrangement
With effect from YA 2014, such individuals are regarded
g
as
employees of the entities where they are deployed, subject to
qualifying conditions
 Entity (Business D) will be able to claim PIC benefits on training
recharged
 Individual (Employee) taken into account for purposes of
f
h 3
l
l
l
d
d PIC cash
h payout
satisfying
the
3-local-employee
condition
under
& PIC bonus for Business D
60
© 2015 IRAS Singapore
Training of Employees
Individuals deployed under centralised hiring arrangement
Qualifying conditions
1) Claimant (Business D) able to produce supporting documents on
the recharging of employment costs by a related party (Business H)
in respect of employees working solely for the claimant;
2) The corporate structure and centralised hiring practices are
adopted for bona fide commercial reasons; and
61
© 2015 IRAS Singapore
Training of Employees
Individuals deployed under centralised hiring arrangement
Qualifying conditions
3) (a) For purpose of claiming PIC on training expenses
The related party (Business H) does not claim deductions on the training
expenses recharged to the claimant (Business D)
(b) For purpose of fulfilling the 3-local-employee condition
The individual (Employee) whose cost has been recharged will not
contribute to the requisite headcount of the related party (Business H)
which bore the upfront manpower costs
62
© 2015 IRAS Singapore
Training of Employees (Summary)
External
In-house
In
house
Without PIC
100% revenue deduction
With PIC
(YAs 2011 to 2018)
400% tax deduction subject to expenditure cap1, 100% deduction
on balance
b l
exceeding
di the
th cap
Qualifying Expenditure for
Training of Employees
including qualifying agents
- Remuneration for course
delivery
- Rental of external premises
- Refreshments
- Training materials
Cash Payout Option
(YAs 2013 to 2018)
Convert expenditure at 60% subject to cap2
PIC Bonus
- Course fees paid
- Rental
R t l off external
t
l
premises
- Refreshments
- Training
a
g materials
a a
PIC Bonus of up to $15,000
$15 000 over 3
3-year
year period from YAs 2013 to
2015
1 Total
expenditure cap for YAs 2011 and 2012 - $800,000 for each of the six activities
Total expenditure cap for YAs 2013 to 2018 - $1,200,000 for each of the six activities for each 3-year period (YAs 2013 to 2015 and
63
YAs 2016 to 2018). For qualifying SMEs under PIC+ scheme, a higher expenditure cap applies
2 Maximum expenditure for YAs 2013 to 2018 - $100,000 per annum for all six activities taken together
© 2015 IRAS Singapore
PIC IT and Automation Equipment
64
© 2015 IRAS Singapore
PIC IT and Automation Equipment
Automation
A
i equipment
i
that
h qualify
lif for
f PIC from
f
YA 2011 are
prescribed in the “PIC IT and Automation Equipment List”
The “PIC IT and
Th
dA
Automation
i E
Equipment
i
Li
List”” h
has b
been expanded
d d in
i
Budget 2014
Both
B
th purchase
h
and
d lease
l
(only
( l for
f own use)) off PIC IT and
d automation
t
ti
equipment qualify for PIC
O expenditure
dit
li for
f both
b th purchase
h
d lease
l
One
cap applies
costt and
payments:
 $800,000 for YAs 2011 and 2012 combined;
 $1,200,000* for YAs 2013 to 2015 combined; and
 $1,200,000* for YAs 2016 to 2018 combined
*For qualifying SMEs under PIC+ scheme, a higher expenditure cap applies
65
© 2015 IRAS Singapore
PIC IT and Automation Equipment
Current Automation
C
A
i Equipment
E i
in
i “PIC IT and
d Automation
A
i Equipment
E i
List" includes:
Facsimile
Optical character reader
Laser printer
Mainframe/Computers
Milling machines
Office system software
Automatic storage and retrieval
system of warehouses
 Injection mould machines
 Automotive navigation systems







 Automated kitchen equipment
q p
for
the purpose of food processing (for
F&B industry only)
 Interactive shopping carts
 Automated housekeeping
equipment
 Automated seating systems for
convention or exhibition centre
 Self-climbing scaffold system
 Concrete pumps
More examples are available at the IRAS website.
66
© 2015 IRAS Singapore
New!
PIC IT and Automation Equipment
“PIC
PIC IT and Automation Equipment List
List" has been expanded:
Description
Enhancement
Item 37 - Automated cover system for Only the automated covering system
and not the vehicle or container
open-top containers
Effective from YA 2014
Item 38 – Landscaping equipment
Examples: Ride-on mower, Trencher
and Potting machine
Effective from YA 2014
Item 39 - Bi-directional Mass Flow
Metering system (“MFM”) installed on
bunker tankers, approved for use by
MPA
Effective from YA 2015
67
© 2015 IRAS Singapore
Website development costs
Enhanced Allowance
100% write-off will apply under S19A(10) instead of S19A(2)
Enhance allowances under PIC will apply under S19A(16A) with effect
from YAs 2014 to 2018
68
© 2015 IRAS Singapore
Cloud Computing –
Payments Qualifying for PIC Enhanced
Deduction
69
Source: IDA
© 2015 IRAS Singapore
Flowchart on
PIC IT and Automation Equipment
IT and Automation
Equipment
Yes
Capital Allowance
Write-down over 1 year, 3
years or tax working life of
asset
In PIC IT
and
Automation
qu p e t
Equipment
List*
(Refer to the PIC IT and
Automation Equipment List*)
A
Approved
d cases
Capital Allowance
Write-down over 3 years
or tax working life of asset
* Refer to IRAS’ website at www.iras.gov.sg
<For Companies><Productivity and Innovation Credit>
No
Case–by-case
approval,
subject to
meeting criteria
R j t d cases
Rejected
• Does not qualify for PIC
• Continue with current
Capital Allowance
treatment
70
© 2015 IRAS Singapore
PIC IT and Automation Equipment
C
Case-by-case
b
approvall
Businesses that invest in equipment not in the PIC IT
and Automation Equipment List may apply to IRAS to have the
equipment approved on a case-by-case basis
Businesses
B
i
can:
 submit the Application for Approval of Equipment for PIC Form to
IRAS ((available on IRAS website))
 two months before the return filing due date or earlier
 Application will be processed within 3 weeks of receipt of form
71
© 2015 IRAS Singapore
PIC IT and Automation Equipment
Case-by-case approval
Revised Criteria (from YA 2013):
a)) E
Equipment
i
t automates
t
t or mechanises
h i
th workk processes off th
the
the
business;
b) Equipment enhances productivity of the business (for example,
in terms of reduced man-hours, more output or improved work
processes); and
c) If the equipment is a basic tool
tool,
 it must increase productivity compared to existing
equipment
q p
used in the business;; or
 it has not been used in the business before
72
© 2015 IRAS Singapore
PIC IT and Automation Equipment
Case-by-case approval
Example
E
l off automation
t
ti
equipment
i
t approved
d on a case-byb
case basis
Microsoft Office
el 97-2003 Worksh
73
© 2015 IRAS Singapore
Productivity and Innovation Credit (PIC)
Application for Approval of Equipment for PIC
(From Year of Assessment 2013)
1.
2.
3.
4.
5.
6.
7.
Please complete this form if you are applying for approval of equipment for PIC from Year of Assessment 2013.
This form may take you 15 minutes to complete. Please read the IRAS website on "Application for Approval of Equipment for PIC" at
www.iras.gov.sg - Businesses | For Companies | Productivity and Innovation Credit.
You need to complete this form if your equipment does not fall under the PIC IT and Automation Equipment List and you wish to have your
equipment approved for PIC.
If you are applying for more than 1 such equipment, please use a separate form for each equipment.
IRAS will process the application within three weeks. Please submit your application early to allow IRAS to process it in time for you to apply
for PIC Cash Payout or to claim PIC deductions/allowances in your annual income tax return.
The claim for PIC should not be made in your tax return or cash payout application form until approval has been granted.
Please submit the completed form to IRAS at 55 Newton Road, Revenue House, Singapore 307987.
Part A - Taxpayer Particulars
1. For all businesses (including sole-proprietorships):
Name of business
Tax reference no. of business
2. For Sole-proprietors only:
Name of Sole-proprietor
Tax reference no. of Sole-proprietor
:
:
ABC Pte Ltd
201212345X
:
:
Part B - Details
1.
Year of Assessment of claim
:
2014
2.
Accounting Period
:
01/01/2013
31/12/2013
(dd/mm/yyyy) to
(dd/mm/yyyy)
B1. Details of automation equipment (Please attach a separate sheet if you need more space.)
1. Detailed description of the equipment (e.g. name, model, function & specification) and to provide photographs where applicable.
Equipment: CCTV
Function: Detailed specifications as provided by manufacturer
2.
Date of purchase/lease period (dd/mm/yyyy), (if applicable)
01/03/2013
3.
Cost of equipment
$ 5,200
Please mark "X" in the appropriate box
4a. Is the equipment a basic tool used in the business?
Yes
No
Yes
No
Yes
No
x
(E.g. washing machine and dryer are basic tools used in the laundry business)
If you have indicated "Yes" in 4a above, please complete 4b:
4b. Has the equipment been used in the business before?
If you have indicated "Yes" in 4b above, please complete 4c:
4c. Does the equipment increase productivity as compared to existing equipment used in
the business?
5.
How does the equipment automate/mechanise the current work process(es) of your business? Please give a detailed description of
the automation/mechanisation feature of the equipment as well as the current process that is being automated/mechanised.
The CCTV replaces the need for security guards to monitor incidences of theft etc.
6.
How does the equipment increase or enhance productivity of the business (for example in terms of reduced man-hours, more
output or improved work processes)?
The equipment reduces the number of security guards required from 5 to 3.
Part C - Declaration
I declare that the information given is true and complete.
Full name of
authorised person
Signature
:
: Mr XXX
Date (dd/mm/yyyy)
Designation
: Director
Name of contact person &
number
: 15/3/2013
Mr XXX
: 91234567
Under the Singapore Income Tax Act, penalties will be imposed for making a false or incorrect declaration.
If you require further clarification, please call our helpline at 1800-356 8622 (for companies) /
(+65) 6351 3534 (for sole-proprietorship/partnership) or send an email to [email protected].
PIC IT and Automation Equipment
E.g.
E
g Capital allowances (CA) under PIC for YA 2014
Assume no CA claimed under PIC for YA 2013
Equipment
Cost
Base
B
CA
100%
A
$340k
$340k
B
400k
Enhanced
E
h
d CA
300% on expenditure of
up to $1.2M
$300k x 300% = $900k
$1,240k
400k x 300% = 1,200k
1 200k
1 600k
1,600k
500k x 300% = 1,500k
2,000k
Total CA for YA 2014
4,840k
Total
Note1,240k
1: Portion of Equipment A that(Note
qualifies
1) for enhanced
allowance = $
$610k ($800k
($400k cap
p less cost of Equipments
q p
B & C))
C
900k
500k
1 240k
1,240k
500k
Note 1: Portion of Equipment A that qualifies for enhanced allowance
= $300k ($1,200k cap less cost of Equipment B & C)
74
© 2015 IRAS Singapore
PIC IT and Automation Equipment
Cash payout option
Election is on “per equipment” basis (cannot claim tax deduction and
cash payout on the same equipment)
Expenditure in excess of expenditure conversion cap forfeited
From YA 2012, HP equipment with repayment covering 2 or more basis
periods are eligible for cash payout
i e for equipment acquired under HP agreement signed during the basis
 i.e.
periods relating to YAs 2012 to 2018
 HP equipment acquired under HP agreement signed during the basis
period relating to YA2011,
YA2011 and with repayment covering 2 or more basis
periods, are not eligible for cash payout
From YA 2016, to q
qualifyy for cash payouts
p y
on qualifying
q
y g equipment,
q p
businesses must show that the equipment is in use by the business at
75
the point when they elect for cash payout
© 2015 IRAS Singapore
PIC IT and Automation Equipment
Cash payout option for HP equipment
Expenditure conversion cap will be applied on the price of the PIC
automation equipment (excluding finance charges)
Actual amount of cash payout is based on the principal sum repaid
during the year
Election has to be done in year of acquisition and the cash payout
rate is “locked-in” in the same year
HP agreement
Repayment of equipment costing $100k
entered in
YA 2012
YA 2013
YA 2014
YA 2015
YA 2016
YA 2012*
20k
20k
20k
20k
20k
Cash payout
rate
30%
30%
30%
30%
30%
Cash payout
6k
6k
6k
6k
6k
*For HP agreement entered between YAs 2013 to 2018, the cash payout rate is 60%
76
© 2015 IRAS Singapore
PIC IT and Automation Equipment
Cash payout option for HP equipment
For cash p
payout
y
on equipment
q p
acquired
q
under HP agreement
g
entered into during the basis period for YAs 2013 to 2018, please
submit the completed Hire-Purchase Template together with the
PIC cash payout application form
Submission of HP Template is not compulsory but recommended
If you are not using the HP Template, you must submit the HP
agreement(s), invoice(s) and payment schedule(s) together with
cash payout application form
77
© 2015 IRAS Singapore
PIC IT and Automation Equipment
Minimum ownership period
Minimum 1-year holding for purchased equipment
Claw-back may apply if equipment disposed of or leased out within
1 year from date of purchase
Waiver of claw-back provisions
A t
ti waiver:
i
i period
i d when
h th
i
t was
Automatic
If iin th
the b
basis
the equipment
acquired, the cost of qualifying equipment acquired (excluding the cost
of equipment disposed of) is more than or equal to the expenditure cap
applicable to that basis period
Case-by-case basis: If IRAS is satisfied with the commercial reason(s)
that led to the disposal
78
© 2015 IRAS Singapore
PIC IT and Automation Equipment
Example - Automatic waiver
Acquired $1,500,000 worth of
qualifying equipment in Jun 2013
(Enhanced allowances claimed in
YA 2014 on cost of $1,200,000)
Holding period less
than one year
Jan 2013
Dec 2013
Dec 2014
Disposed of equipment costing
$100,000 in Jan 2014
Claw-back provisions automatically waived
as cost of remaining qualifying equipment
of $1,400,000 ($1,500,000 - $100,000) is
higher than expenditure cap of $1,200,000
79
© 2015 IRAS Singapore
PIC IT and Automation Equipment
(Summary)
Without PIC
With PIC
(YAs 2011 to 2018)
Qualifying Expenditure
Purchase
Lease
100% accelerated CA
100% revenue deduction
400% allowances/deductions subject to expenditure cap1, 100%
allowances/deductions on balance exceeding the cap
q p
Cost of equipment
Lease p
payments
y
Minimum Ownership Period
1 year from the date of purchase
N.A.2
Cash
C
hP
Payoutt O
Option
ti
(YAs 2013 to 2018)
P equipment
Per
i
tb
basis
i
Convert expenditure at 60% subject
to cap3
Convertt expenditure
C
dit
att 60%
subject to cap3
PIC Bonus of up to $15,000 over 3-year period from YAs 2013 to
2015
PIC Bonus
1Total
expenditure cap for YAs 2011 and 2012 - $800,000
$800 000 for each of the six activities
Total expenditure cap for YAs 2013 to 2018 - $1,200,000 for each of the six activities for each 3-year period (YAs 2013 to 2015 and
YAs 2016 to 2018). For qualifying SMEs under PIC+ scheme, a higher expenditure cap applies
80
2Equipment cannot be sub-leased within the same basis period of the YA
3 Maximum expenditure for YAs 2013 to 2018 - $100,000 per annum for all six activities taken together
© 2015 IRAS Singapore
Case Study 1:
400
400%
% Tax Deduction/Allowance + PIC Bonus
Investments in PIC
ABC Fashion
Pte Ltd runs a
retail outlet
Submission
Company claims tax
deduction/allowance in its
Income Tax Return for YA
2014 byy 30 Nov 2014 / 15
Dec 2014 (e-file Form C-S)
UP TO $8,160
Investments in accounting
year 2013
Automation
equipment:
i
t
1) A point of sale (POS)
system
Training of
Employees:
2) Sent its staff on customer
service courses
Total :
$3 000
$3,000
$9,000
$12,000
,
Tax deduction/allowance
$12,000 (Total Expenses)
x
400% ((YA 2014))
$48,000
Choose your Benefits!
A) 400% Tax Deduction
B) Cash
C h Payout
P
t
RECEIVE
TAX SAVINGS
$12,000
based on corporate tax
rate of 17%
PIC BONUS
81
© 2015 IRAS Singapore
Case Study 2: CASH PAYOUT + PIC Bonus
Investments in PIC
Investments in accounting
year 2013
ABC Fashion Pte Ltd
runs a retail outlet
PIC Cash Payout
y
Application
pp
Form
1) Apply any time after the end of
the financial quarter(s),
2) But not later than 30 Nov 2014
2014 / 15 Dec 2014 (e-file
Form C-S)
Automation
equipment:
$3,000
1) A point of sale (POS)
system
Training of
Employees:
$9,000
2) Sent its staff on customer
service courses
Total :
$12,000
Cash Payout Calculation
$12,000 (Total Expenses)
x
Choose your Benefits!
A) 400% Tax Deduction
60% (YA 2014)
B) Cash Payout
$7,200
RECEIVE
RECEIVE
$7 200
$7,200
$12 000
$12,000
CASH PAYOUT
PIC BONUS
82
© 2015 IRAS Singapore
Acquisition/Licensing of
Intellectual Property
83
© 2015 IRAS Singapore
Acquisition
q
of
Intellectual Property
Q lif i
Qualifying
expenditure
di
Acquisition cost of patent,
patent copyright,
copyright trademark,
trademark registered designs,
designs
geographical indication, layout design of integrated circuit, trade secret
and information with commercial value#, and plant variety*
Example
Price paid to buy an overseas trademark to accelerate inroad into the
offshore market
#It
was clarified in Budget 2014 that, in line with the policy intent of Section 19B, customerbased intangibles and documentation of work processes do not fall within the scope of
Intellectual Property
p y Rights.
g
*e.g. selected genera/species of orchids, vegetables, aquatic plants and ornamentals
84
© 2015 IRAS Singapore
Acquisition of
Intellectual Property
Legal and economic ownership of IPR
Exclude EDB approved IPRs
−
e.g. IPRs relating to media and digital entertainment contents
approved for accelerated 2-year
2 year write
write-down
down
85
© 2015 IRAS Singapore
Acquisition of
Intellectual Property
Cash payout option
Election on a “per IPR” basis
Allowances
o a ces in e
excess
cess o
of tthe
ee
expenditure
pe d tu e co
conversion
e s o cap will be
forfeited
Mi i
Minimum
ownership
hi period
i d off acquired
i d IPR
Minimum 1-year holding
Claw-back apply if any of the following events occur within 5 years
from date of acquisition
- IPRs come to an end without being subsequently revived
- Company/partnership sells, transfers or assigns all or any part of
those IPRs
- Company/partnership permanently ceases to carry on the trade
86
or business
© 2015 IRAS Singapore
Licensing of
Intellectual Property
From YAs 2013 to 2018, scope of IPR acquisition widened to
include IPR licensing
As per existing list of qualifying IPRs excluding trademarks and any
rights
g
to the use of software. Payments
y
for the use of software
are covered under leasing of PIC automation equipment.
Q alif ing expenditure
e pendit e means license fees and excludes
e cl des
Qualifying
expenditure for the transfer of ownership of any those rights and
legal fees and other incidental costs arising from the licensing of
such rights
87
© 2015 IRAS Singapore
Acquisition/Licensing of Intellectual Property
(Summary)
Without PIC
With PIC
(YAs 2011 to 2018)
Qualifying Expenditure
Acquisition
Licensing
100% WDA over 5 years
100% revenue deduction
400% allowances/deductions subject to expenditure cap1, 100%
allowances/deductions on balance exceeding the cap
Cost of IPR
License fees
Minimum Ownership Period
1 year from the date of acquisition
N.A.
Cash
C
hP
Payoutt O
Option
ti
(YAs 2013 to 2018)
Per IPR b
P
basis
i
Convert expenditure at 60% subject
to cap2
Convertt expenditure
C
dit
att 60%
subject to cap2
PIC Bonus
PIC Bonus of up to $15,000 over 3-year period from YAs 2013 to
2015
1Total
expenditure cap for YAs 2011 and 2012 - $800,000 for each of the six activities
Total expenditure cap for YAs 2013 to 2018 - $1,200,000 for each of the six activities for each 3-year period (YAs 2013 to 2015 and
88
YAs 2016 to 2018). For qualifying SMEs under PIC+ scheme, a higher expenditure cap applies
2 Maximum expenditure for YAs 2013 to 2018 - $100,000 per annum for all six activities taken together
© 2015 IRAS Singapore
Registration of Intellectual Property
(Patents, Trademarks, Designs and
Plant Varieties)
89
© 2015 IRAS Singapore
Registration of Intellectual Property
Qualifying expenditure
Official fees paid to respective Registry (e
(e.g.
g for filing
application/registration)
Professional fees for registration of IPRs
Regardless of application outcome
Example
p
Fees to IPOS for registering trademark or patent
90
© 2015 IRAS Singapore
Registration of Intellectual Property
Legal and economic ownership of IP
Partial claim on 1 IPR only so as to cap the total qualifying expenditure
i.e.
 $800,000
$800 000 for YAs 2011 and 2012 combined;
 $1,200,000* for YAs 2013 to 2015 combined; and
 $1,200,000* for YAs 2016 to 2018 combined
*For qualifying SMEs under PIC+ scheme, a higher expenditure cap applies
91
© 2015 IRAS Singapore
Registration of Intellectual Property
Minimum ownership period of IPR
Minimum 1-year ownership
Claw-back apply if:

IPR; or

application for registration; or

grant off IPR;
disposed off within 1 year from date of filing of application
92
© 2015 IRAS Singapore
Registration of Intellectual Property
(Summary)
Without PIC
100% deduction on patenting costs
With PIC
(YAs 2011 to 2018)
400% tax deduction subject to expenditure cap1, 100% deduction
for balance exceeding cap
Qualifying Expenditure
Official fees paid to Registry and professional fees
Minimum Ownership
Period
1 year2 from the date of filing
Cash Payout Option
(YAs 2013 to 2018)
Per filing basis. Convert expenditure at 60% subject to cap3
PIC Bonus
PIC Bonus of up to $15,000 over 3-year period from YAs 2013 to
2015
1Total
T t l
expenditure
dit
cap ffor YAs
YA 2011 and
d 2012 - $800,000
$800 000 for
f each
h off th
the six
i activities
ti iti
Total expenditure cap for YAs 2013 to 2018 - $1,200,000 for each of the six activities for each 3-year period (YAs 2013 to 2015 and
YAs 2016 to 2018). For qualifying SMEs under PIC+ scheme, a higher expenditure cap applies
93
2Even if filing is unsuccessful, IPR is still subject to 1 year ownership period
3 Maximum expenditure for YAs 2013 to 2018 - $100,000 per annum for all six activities taken together
© 2015 IRAS Singapore
Research & Development
94
© 2015 IRAS Singapore
Research & Development
What is R&D?
According to Section 2 of Income Tax Act, R&D refers to:
 any systematic, investigative and experimental study
 that involves novelty or technical risk
 carried out in the field of science or technology with the object
of acquiring
─ new knowledge or
─ using the results of the study for the production or
i
improvement
off materials,
i l devices,
d i
products,
d
produce,
d
or
processes.
95
© 2015 IRAS Singapore
Research & Development
Wh is
What
i R&D?
 Novelty
─ N
New iin relation
l ti to
t creation
ti or iimprovementt off products,
d t
processes or knowledge
 Technical risk
─ Issues that cannot be readily resolved by a competent
professional in the relevant field
R&D covered under PIC:
 conducted in Singapore
 conducted outside Singapore (must be related to trade/business)
 conducted on cost sharing basis (YAs 2012 to 2018)
96
© 2015 IRAS Singapore
Research & Development
R&D excludes:
a) quality control or routine testing of materials, devices or products;
b) research
h in
i the
th social
i l sciences
i
or the
th humanities;
h
iti
c) routine data collection;
d) efficiency surveys or management studies;
e)) market research or sales p
promotion;;
f) routine modifications or changes to materials, devices, products,
processes or production methods;
g) cosmetic modifications or stylistic changes to materials, devices,
products, processes or production methods; or
97
© 2015 IRAS Singapore
Research & Development
R&D excludes:
h) development of a computer software that is not intended to be
sold, rented, leased, licensed or hired to 2 or more persons
(multiple sale condition) who are not related parties to each
other,
h
and
d to the
h person who
h develops
d
l
the
h software
f
or on whose
h
behalf the development of the software is undertaken (for YA 2011
only)
With effect from YAs 2012 to 2018:
 Multiple
M l i l sale
l condition
di i is
i removed
d i.e.
i R&D software
f
development
d
l
for own business use can now qualify as R&D
98
© 2015 IRAS Singapore
Research and Development
Qualifying expenditure
R&D conducted in-house
 Staff costs (excluding directors’
directors fees) and consumables incurred on
R&D
Outsourced R&D (re: fees paid to R&D organization)
 60% deemed as staff costs and consumables; or
 actual % if > 60% of fees substantiated
R&D cost sharing
 60% of shared costs deemed as staff costs and consumables; or
 actual % if > 60% of fees substantiated
Examples
Salaries of your R&D personnel engaged in a R&D project
60% of fees paid to a R&D institute in Singapore to do R&D
99
© 2015 IRAS Singapore
Research & Development (Summary)
Without PIC
100%/150% tax deduction
With PIC
(YAs 2011 to 2018)
400% tax deduction
d d i off qualifying
lif i expenditure
di
subject
bj
to
expenditure cap1. For the balance exceeding the cap and all other
R&D expenses, deduction will be 100%/150%
Qualifying Expenditure
Staff costs and consumables
(if outsourced, 60% of invoiced costs)
Cash Payout Option
(YAs 2013 to 2018)
PIC Bonus
Convert at 60% of expenditure subject to cap2
PIC Bonus of up to $15,000 over 3
3-year
year period from YAs 2013 to
2015
1Total
expenditure cap for YAs 2011 and 2012 - $800,000
$800 000 for each of the six activities
Total expenditure cap for YAs 2013 to 2018 - $1,200,000 for each of the six activities for each 3-year period (YAs 2013
to 2015 and YAs 2016 to 2018). For qualifying SMEs under PIC+ scheme, a higher expenditure cap applies
100
2Maximum expenditure for YAs 2013 to 2018 - $100,000 per annum for all six activities taken together
© 2015 IRAS Singapore
Approved Design Project
101
© 2015 IRAS Singapore
Approved Design Project
D i Si
DesignSingapore
C
Council
il (DS
(DSg))
Approving Agency
Qualifying conditions include:
design activities done/primarily done in Singapore
Resultant IP (design or patent) registered with Intellectual
Property Office of Singapore (“IPOS”)
( IPOS )
Be the eventual owner of the registered design
Project must be completed within 2 years (include registration of
IP with IPOS)
102
© 2015 IRAS Singapore
Approved Design Project
Qualifying expenditure
Approved design activities conducted in-house
in house
 Staff costs of qualified design professional
Outsourced approved design activities
 60% of payments to approved design service provider deemed as
cost of qualified designers
 actual % if > 60% of payments substantiated
Example
Fees to engage external designer to create new product design
(approved by Design Singapore)
Details and application procedure available at DSg’s website www.designsingapore.org
103
© 2015 IRAS Singapore
Approved Design Project (Summary)
Without PIC
100% revenue deduction
With PIC
(YAs 2011 to 2018)
400% tax deduction subject to expenditure cap1, 100%
deduction for balance exceeding cap
Qualifying
Expenditure
Approved designer costs
(if outsourced, 60% of invoiced costs)
Cash Payout Option
(YAs 2013 to 2018)
Convert at 60% of expenditure subject to cap2
PIC Bonus
PIC Bonus of up to $15,000 over 3-year
3 year period from YAs 2013 to
2015
1Total
expenditure cap for YAs 2011 and 2012 - $800,000 for each of the six activities
Total expenditure cap for YAs 2013 to 2018 - $1,200,000 for each of the six activities for each 3-year period (YAs 2013 to 2015
104
and YAs 2016 to 2018). For qualifying SMEs under PIC+ scheme, a higher expenditure cap applies
2 Maximum expenditure for YAs 2013 to 2018 - $100,000 per annum for all six activities taken together
© 2015 IRAS Singapore
Abusive PIC arrangements
105
© 2015 IRAS Singapore
Abusive PIC arrangements
The following anti-abuse measures have been introduced to target
abusive arrangements and intermediaries that promote or facilitate
such
h arrangements:
t
 Deny PIC benefits arising from abusive arrangements; and
 Impose penalties on intermediaries (including vendors and
consultants) who know, or have reasonable grounds to believe
that the arrangements they are promoting are abusive PIC
arrangements.
g
Convicted offenders will have to pay
p y a fine of
up to $10,000 and/ or imprisonment of up to three years.
106
© 2015 IRAS Singapore
Abusive PIC arrangements
A PIC arrangement is abusive if:
 it makes use of artificial
artificial, contrived or fraudulent step(s) to obtain
PIC benefits
 the arrangement results in the payment of goods/ services for an
amount that exceeds the open market value without a bona fide
commercial reason; or
 there is no bona fide commercial reason for entering into the
arrangement.
107
© 2015 IRAS Singapore
Abusive PIC arrangements
Example
B i
Business
A enters
t
into
i t a contract
t t with
ith a training
t i i company to
t ttrain
i
his employees
The contract p
price includes both the value of the training
g and the
value of the door gift which was a watch. The cost of the watch is
not eligible for a PIC cash payout.
The purpose of setting the price for the training in this way is to
enable a higher cash payout to be paid to Business A.
The contract is an abusive PIC arrangement.
108
© 2015 IRAS Singapore
Summary of Budget 2014 Changes to PIC
Tax Changes
Summary
Extension
E
tension of PIC
Scheme for three
years till YA 2018
For enhanced
F
h
d tax
t d
deductions,
d ti
the
th expenditure
dit
cap off $400,000
$400 000 per
qualifying activity per YA can be combined across YA 2016 to YA
2018 (i.e. $1.2 million per qualifying activity)
For PIC cash payout, the expenditure cap of $100,000 per YA for all
six qualifying activities cannot be combined across the three YAs, as
is the case currently
Individuals under
centralised hiring
arrangements
With effect from YA 2014, the PIC scheme will be enhanced to allow
businesses to claim PIC benefits on training expenses incurred in
respect of individuals hired under centralised hiring arrangements,
arrangements
subject to qualifying conditions
In addition, individuals hired under centralised hiring arrangements
can be taken into account for purposes of satisfying the 3-localemployee condition, subject to qualifying conditions
109
© 2015 IRAS Singapore
Summary of Budget 2014 Changes to PIC
Tax Changes
Summary
Expansion of “PIC IT
and Automation
Equipment List”
With effect from YA 2014, the List is expanded to include:
1) Website
2) Automated cover system for open-top containers and
3) Landscaping equipment
PIC+ Scheme
Under the PIC+ scheme, the expenditure cap for qualifying SMEs
will be increased from $400,000
$400 000 to $600,000
$600 000 per qualifying activity
per YA.
PIC+ will take effect for expenditure
p
incurred in YA 2015 to YA
2018. The combined expenditure cap will be up to $1.4 million for
YA 2015, and up to $1.8 million for YA 2016 to YA 2018.
The expenditure cap for PIC cash payout will remain at $100,000
$100 000
of qualifying expenditure per YA.
110
© 2015 IRAS Singapore
Summary of Budget 2014 Changes to PIC
Tax Changes
Summary
Refining the three-localemployee condition for
PIC cash payout
With effect from YA 2016, businesses applying for PIC cash
payout will have to meet the three-local-employee condition
for a consecutive period of at least three months prior to
claiming the cash payout.
111
© 2015 IRAS Singapore
Assistance and Service Channels
Website
www.iras.gov.sg
‒ <Businesses><For Companies ><Productivity and Innovation Credit>
‒ <News & Events><Singapore Budget 2014- Tax Changes>
Email
‒ [email protected] for general tax matters
‒ [email protected]
ctpayment@iras gov sg for payment matters
‒ [email protected] for Productivity and Innovation Credit
Helpline
p
‒ For companies: 1800-356-8622
‒ For self-employed/partnership: (+65) 6351 3534
‒ 8.00am to 5.00pm from Mondays to Fridays
SMS “Return My Call” service (applicable for Singapore mobile number)
- For companies: SMS “PIC-CT <followed by your name>” (e.g. “PIC-CT John Tan”) to 91076902
- For self-employed/ partnership: SMS “PIC-SE <followed by your name>” (e.g. “PIC-SE John Tan”) to 91076902
We will contact you by the next working day
© 2015 IRAS Singapore
Please complete our online Feedback Form here after the seminar:
http://www.iras.gov.sg/irasHome/PIC.aspx
Your
seminars
Y
ffeedback
db k will
ill assist
i t us in
i planning
l
i and
d organising
i i our future
f t
i
This information aims to provide a better general understanding of IRAS’ practices and is not intended to
comprehensively address all possible tax issues that may arise. This information is correct as at 17 December 2014.
While every effort has been made to ensure that this information is consistent with existing law and practice, should
there be any changes, IRAS reserves the right to vary our position accordingly.
© 2015 IRAS Singapore
Annex
114
© 2015 IRAS Singapore
PIC B
Bonus
115
© 2015 IRAS Singapore
PIC Bonus
Effective from YAs 2013 to 2015
You will receive an equal amount in PIC bonus for every dollar
spent on qualifying activities,
activities subject to the cap of $15
$15,000
000
over the 3-year period from YAs 2013 to 2015
PIC Bonus is given on top of existing PIC benefits
116
© 2015 IRAS Singapore
PIC Bonus
C di i
Conditions
ffor PIC B
Bonus
Incurs at least $5,000 of PIC-qualifying expenditure^ during the
b i period
basis
i d for
f th
the YA iin which
hi h a PIC B
Bonus iis claimed
l i d
Employed at least 3 local employees* (Singapore Citizens or PRs
with CPF contributions) in the:


last month of basis period for the YA – if claiming 400% tax
deductions/allowances
l t month
th off quarter
t or combined
bi d consecutive
ti quarters
t
last
–
if claiming cash payout
Carrying on business operations in Singapore
^ Net of grant or subsidy by the Government or statutory board
* Employees exclude sole-proprietors, partners under contract for service, shareholders
who are also directors of companies
117
© 2015 IRAS Singapore
PIC Bonus
Example
C
Company
A
D
Description
i ti
YA 2013
YA 2014
YA 2015
PIC-qualifying
expenditure
$12k
$2k
$5k
PIC bonus
$12k
$0^
$0
$3k
(capped)#
^ Incurs at least $5,000 of qualifying PIC expenditure during the basis period for the YA
in which a PIC Bonus is claimed
# Combined cap of $15,000 for the 3 YAs
118
© 2015 IRAS Singapore
PIC Bonus
PIC bonus is taxable
Administrative procedures
p
 Businesses will not be required to make separate applications
for PIC bonus
 IRAS will process bonus automatically based on information
declared in income tax return or PIC cash payout application
Payment of PIC Bonus
 Within three months from filing income tax return – if claimed
400% ttax d
deductions/allowances
d ti
/ ll
 Within three weeks after cash payout has been approved – if
claimed cash payout
119
© 2015 IRAS Singapore
Pointers: Claiming PIC Benefits
120
© 2015 IRAS Singapore
Pointers
Claiming PIC Benefits
Do not claim 400% tax deductions/allowances for expenditure
on equipment not listed in the PIC IT and Automation
E i
Equipment
t List
Li t
 If an automation equipment is not in the list but it
automates/mechanises
/
the work p
process,, businesses mayy
apply for it to be approved, on a case-by-case basis,
before making a claim on that equipment
Cannot claim both PIC Cash Payout and 100% / 400% tax
deductions on the same dollar of expenditure
 E.g. A company that has claimed PIC Cash Payout on
training costs of $1,000 should not be claiming 400% tax
deduction of the same training cost against its income
121
© 2015 IRAS Singapore
Pointers
Cl i i
Claiming
PIC B
Benefits
fi
Partial conversion into cash payout is not allowed for qualifying
expenditure relating to purchase of PIC IT and Automation Equipment,
registration and acquisition of IPRs
 Such expenditure can only be converted into cash payout on a “per
equipment”, “per filing” or “per IPR” basis respectively subject to a cap of
$100 000 for each YA
$100,000
 The excess expenditure on the same equipment/ IPR exceeding the cap
will be forfeited and will not qualify for tax allowances/ deductions
 E.g. Equipment A is purchased at cost of $150,000 in YA 2014. If cash
payout is opted, it will be computed at 60% of the qualifying expenditure
(i e 60% x $150,000
(i.e.
$150 000 = $90,000),
$90 000) subject to the cash payout cap of
$60,000 for YA 2014.
It cannot apply for a cash payout on the $100,000 expenditure and claim
the remaining $50,000
$50 000 expenditure as capital allowance of $200,000
$200 000
122
(400% x $50,000) because the remaining $50,000 expenditure will be
forfeited.
© 2015 IRAS Singapore
Pointers
Claiming PIC Benefits
Do not claim 500% instead of 400% tax
deductions/allowances under any of the six PIC activities
 A company can receive a total of 400% tax
deductions/allowances (comprising 100% normal
deduction and 300% additional tax deduction)) on the
qualifying expenditure
 Do not claim 400% additional tax deductions on the
expenditure which has already been deducted as an
expense (100% normal deduction) against the income
123
© 2015 IRAS Singapore
Pointers
Claiming PIC Benefits
Do not claim non-qualifying expenditure
 Examples of non-qualifying expenditure:
 GST paid by a GST registered trader on an item qualifying
for PIC (GST component is not claimable for income tax
purpose
p
p
as the GST trader can claim input
p tax in its GST
return);
 costs not applicable to the automation equipment such as
warranty fees and service maintenance fees;
 consulting fees unrelated to the development of the
automation equipment
124
© 2015 IRAS Singapore
Pointers
Claiming PIC Benefits
Do not claim PIC benefits if the company has not commenced
business
Do not submit the Cash Payout application form before the
end of the financial quarters
Do not submit more than one Cash Payout
application
form
y
pp
for each quarter or combined quarters
125
© 2015 IRAS Singapore
Advisory to the Public
126
© 2015 IRAS Singapore
Advisory to the Public
PIC application process kept simple and easy such that businesses
can readily complete and submit the applications on their own
Businesses may still choose to engage consultants to help them
with
ith their
th i claims.
l i
However,
H
businesses
b i
are ultimately
lti t l responsible
ibl
for the accuracy of their claims
IRAS has not appointed or endorsed any private consultant to
provide advice or assistance to businesses on PIC matters
127
© 2015 IRAS Singapore
Advisory to the Public
Businesses that wish to engage consultants should
 Conduct checks to ensure that those engaged are competent
and knowledgeable in their field
 Obtain the consultant’s advice in writing and
 Verifyy the accuracyy of the information on the application
pp
form
before submitting it to IRAS
Businesses should also be mindful
misrepresent the intention of the scheme
of
advertisements
that
 Those which grossly over
over-exaggerate
exaggerate the benefits of the scheme
 Promise that businesses can “profit” from PIC
 Suggestion that the government will “pay” the business
128
© 2015 IRAS Singapore
Advisory to the Public
IRAS has published information on what businesses should look out
for when engaging PIC consultants on the IRAS website
Businesses that require help with their PIC cash payout applications
can sign-up
sign up for PIC seminars or approach IRAS officers or SME
Centre Business Advisors for help
129
© 2015 IRAS Singapore
T D
Tax
Deferral
f
lO
Option
ti
130
© 2015 IRAS Singapore
Tax Deferral Option
Help businesses, especially SMEs to ease their cash flow
Amount of tax that can be deferred
Lower of:
 the tax payable assessed for the current YA;
 the
th qualifying
lif i PIC expenditure
dit
incurred
i
d in
i the
th currentt
financial year; and
capped at $100,000
Deferred tax is due when we assess the next YA’s tax
Businesses can continue to apply for PIC Cash Payout or claim
PIC deductions in their tax returns for relevant YA
131
© 2015 IRAS Singapore
Tax Deferral Option
Example:
Incurred
$80,000 on
staff
training
Jan 2013
Paid
$200,000
YA 2013
tax based
on ECI
Dec 2013
Apply for $80,000
YA 2013 tax to be
deferred
f
-> $80,000 will be
refunded within 30
d
days
Dec 2014
Pay $80,000 YA
2013 deferred
tax with YA
2014 tax based
on ECI
132
© 2015 IRAS Singapore
Tax Deferral Option
Election available for tax payable for YAs 2011 to 2014 based
on expenditure incurred in the corresponding financial years
2011 to 2014
 As announced in Budget 2014, tax deferral option will be
allowed to lapse with effect from YA 2015
Businesses can:
 submit PIC Tax Deferral Form (available on IRAS website)
to IRAS
 anytime after they have incurred qualifying expenditure but
no later than the end of the current financial year-end
This option effectively allows businesses to enjoy tax savings
in advance
133
© 2015 IRAS Singapore