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Productivity and Innovation Credit (PIC)
Years of Assessment 2017 to 2018  

 

What qualifies
Expenses (net of grants) incurred in 6 productivity improvement activities: 

1. Acquisition and leasing of PIC Information Technology (IT) and automation equipment (including equipment acquired on hire purchase/finance lease);
2. Training of employees;
3. Acquisition and In-licensing of Intellectual Property Rights;
4. Registration of patents, trademarks, designs and plant varieties;
5. Research and development activities; and
6. Design projects approved by DesignSingapore Council.

 

Benefits

A) Option 1 

       Tax deduction/allowances  -  cost plus 300% of cost 

- Cost up to $400,000 or $600,000* of spending per year in each of the six qualifying activities; or
- The annual expenditure cap may be combined up to $1,200,000 or $1,800,000* for Years of Assessment 2016 to 2018.

* For qualifying SMEs (i.e. business carrying on a trade or business and whose revenue is not more than $100 million or employment size is not more than 200 employees. Applied at the group level if the business is part of a group).


       OR

 

B) Option 2

      Cash payout (non-taxable) at :

i. 60% of cost (incurred up to 31 July 2016);
ii. 40% of cost (incurred from 1 August 2016).

- Cost up to $100,000 of total spending in all six activities per year.
- For businesses which have at least 3 local employees with CPF contribution (excluding sole-proprietors, partners and directors cum shareholders).
- For IT and automation equipment, it must be in-use.
- Each application must be for minimum cost of $400.
- Deadline to submit the application to IRAS is by 30 November each year.
- Mandatory efiling of application with effect from 1 August 2016.


Minimum ownership
1 year from date of purchase for acquisition of assets in items (1) & (3) above.
1 year from date of filing for registration for expenses in item (4) above.
Otherwise, claw-back provisions will apply in the year of disposal.

 

Which option – Tax deduction or cash payout?

For Year of Assessment 2017

Businesses will need to compare the relative benefits of both options to determine which option to elect. Three examples are given below.

The break-even point (ie net benefit between the two options is minimal) is at approximately chargeable income before PIC of $750,000 (at 60%) or $575,000 (at 40%). At this point and onwards, the business may be better off electing option 1 – tax deduction/allowances.

 

Example1-1


Example1-2


Example1-3 

 

Example2-1

example2-2

Example2-3
 

Resources

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