Productivity and Innovation Credit Schemejlcs.com.sg/Promotions/PIC Seminar Slides.pdf · PICBonus(YAs2013to2015) * Budget 2014 Enhancement 9. 400% Tax Deductions / Allowances

Productivity and Innovation Credit Productivity and Innovation Credit SchemeScheme

© 2014 IRAS Singapore

Presentation by Inland Revenue Authority of Singapore Slides updated as at 7 Apr 2014For PIC seminars held in Apr 2014

AgendaAgenda

Overview of Corporate Tax

� Basis of Assessment

� Filing Obligations

Productivity and Innovation Credit (PIC) Scheme� Overview


� Overview

� Tax Benefits (including PIC+ Scheme)

� How to Claim PIC

� Pointers - Completing Cash Payout Application Form

� What Qualifies for PIC

Q&A

Basis of AssessmentBasis 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


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

Filing ObligationsFiling Obligations

Estimated Chargeable Income (ECI)

Income Tax Return (Form C/Form C-S)

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

If you are filing Form CSubmit 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


• ECI is nil 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

issued

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)

# Please authorise yourself/third party as an “Approver” for Corporate Tax Matters via the e-Services Authorisation System (EASY) * 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

4

Filing ObligationsFiling Obligations

Pilot launch of Form C e-Filing for YA 2014 in July 2014

IRAS is inviting companies to participate in Form C e-filing pilot run

Your participation and feedback on the e-filing experience is important before official launch


before official launch

To encourage and support participants, IRAS will provide:

� Dedicated help and technical support for e-filing Form C

� 15 days extension to file your Form C till 15 December 2014 and

� Instant acknowledgement of your Form C submission

To register, please refer to feedback form for more details

5

Productivity and Innovation Credit Productivity and Innovation Credit (PIC) Scheme(PIC) Scheme


6

Overview of PIC SchemeOverview of PIC Scheme

Introduced in Budget 2010; enhanced in Budget 2011, 2012, 2013 and 2014

Encourage businesses to invest in productivity and innovation


Encourage businesses to invest in productivity and innovation activities

All businesses benefit, especially SMEs

7

Overview of PIC SchemeOverview of PIC Scheme

6 activities covered under scheme:

Training of Employees

Purchase/Leasing of PIC IT and Automation Equipment


Acquisition/In-licensing of Intellectual Property

Registration of Intellectual Property

Research & Development

Approved Design Project

8

Tax Benefits under PICTax Benefits under PIC

400% tax deductions/allowances on expenditure on eachof 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


Opt for cash payout in place of tax deductions/allowancesfor accounting years 2010 to 2017 (YAs 2011 to 2018*)

PIC Bonus (YAs 2013 to 2015)

9* Budget 2014 Enhancement

400% Tax Deductions / Allowances400% Tax Deductions / Allowances


10

Tax Deductions / AllowancesTax 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 $4,800,000(400% x $1,200,000)

2016 to 2018*(Combined)

$1,200,000 $4,800,000(400% x $1,200,000)

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* Budget 2014 Enhancement


Expenditure cap per qualifying activity applies only if carrying on a trade or business for the relevant YAs. Otherwise, combined cap is reduced accordingly

For newly incorporated/registered businesses whose 1st YA is YA 2014, the combined expenditure cap for YAs 2014 to 2015 per


YA 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

12


Potential Maximum Benefits for YA 2013, YA 2014 & 2015 combined

Deduct up to $28.8M (400% x $1.2M x 6 activities)

R&D

IP Acquisition/


R&D Acquisition/In-licensing

IP Registration

DesignAutomation

Training 400% deduction/allowances on up to $1.2M expenditure

13


Example (YA 2014)

Assume did not claim PIC on training in YA 2013

Total tax deductions = $4,900,000

Expenditure on staff training = $1,300,000


$100,000(remain 100% deduction, as

cap exceeded)

$100,000

$1,200,000 $4,800,000(400% x $1,200,000)

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PIC+ SchemePIC+ SchemeNew!


15

From YA 2015, qualifying SMEs that invest in excess of the combined 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-year period:

PIC+ SchemePIC+ Scheme


Maximum combined expenditure cap applicable for each 3-year period:

YA 2013 2014 2015 2016 2017 2018

Max. annual cap 400,000 400,000 600,000 600,000 600,000 600,000

Max. combined cap* $1,400,000# $1,800,000

# The combined expenditure cap of $1,400,000 is only applicable for YA 2015 as the additional expenditure cap of $200,000 ($600,000 - $400,000) is not available for YA 2013 and YA 2014

* Only if you are carrying on a trade or business for the relevant YAs. Otherwise, the combined cap is reduced accordingly.

16


Example (YA 2015)

Assume did not claim PIC on training in YAs 2013 and 2014

Total tax deductions = $5,700,000

Expenditure on staff training = $1,500,000


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$100,000

$1,400,000 $5,600,000(400% x $1,400,000)

$100,000(remain 100% deduction, as

cap exceeded)

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

• Group employment size not more than 200 employees

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Expenditure conversion cap under the cash payout option remains unchanged, at $100,000 for all 6 activities per YA

How to determine eligibility

� 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



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

Exception: Business will have to re-assess its eligibility if there is a change in the business’ parent or if the business becomes part of a group

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How to determine eligibility

To provide certainty to businesses which want to know if they will enjoy 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:



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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

OR

How to determine eligibility for YA 2015

2014 2015 2016 2017 2018

Year of Assessment

Meetconditions?

Meet conditions?


Basis period for the YA

© 2014 IRAS Singapore21

+200k+200kQualifying PIC+

Qualifying

SME? Yes

for the YA

OR

How to determine eligibility for YA 2016

2015 2016 2017 2018

Year of Assessment

Meetconditions?

Meet conditions?


Basis period for the YA


+600k *+600k *Qualifying PIC+

Qualifying

SME? Yes

* Assume no change in business’ parent or business does not become part of a group in YA 2017 & 2018

for the YA

Revenue condition:

� 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 individual deployed to work for an entity under a centralised hiring arrangement

� Employment size determined as at the last day of the relevant basis period

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Part of a group:

� A parent and its subsidiaries as determined in accordance with the accounting standards (FRS 110), i.e. based on control

� Includes both Singapore and foreign entities



� Includes both Singapore and foreign entities

� To determine whether an SME is part of a group, reference is made to 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

24

How to Claim 400% Tax Deductions/ AllowancesHow 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 Form C-S)

For sole-proprietor/ partnership, submit income tax return and PIC declaration form by the filing due date: 15 Apr

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Unutilised tax deductions/ allowances Carry forward

to offset income of future YAs

Carry back

to offset income of immediate


Transfer

- Group Relief System (companies)

- between spouses* (individuals)

of future YAsof immediate preceding YA

Note: Subject to shareholding test and other relevant conditions under current rules26

* From YA 2016, the transfer between spouses will be phased out

Cash Payout OptionCash Payout Option


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Option to convert expenditure of up to $100,000 in all 6 activitiesper YA

At 30% (YAs 2011 & 2012) / 60% (YAs 2013 to 2018*) cash payout rate

Cash Payout Option Cash Payout Option


Expenditure converted is not tax deductible

Cash payout is non-taxable

Expenditure incurred during the basis period for

YA 2014

$100,000

Cash Payout for YA 2014

$60,000

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60%



Years of Assessment

Expenditure Cap for All 6 activities

Maximum Cash Payout

2011 and 2012 (Combined)

$200,000 $60,000 (30% x $200,000)


(Combined) (30% x $200,000)

2013 to 2018(No pooling of expenditure cap)

$100,000 per YA $60,000 per YA(60% x $100,000)

29


Conditions for cash payout option

From YAs 2013 to 2015

Employed at least 3 local employees* (Singapore Citizens or PRs with CPF contributions) in the last month of the quarter or


with CPF contributions) in the last month of the quarter or combined quarters in the basis period for the relevant YA

Carrying on business operations in Singapore

* Employees exclude sole-proprietors, partners under contract for service, shareholders

who are also directors of companies

30Note: The 3-local-employee condition does not apply to 400% tax deductions/allowances


Conditions for cash payout option

From YAs 2016 to 2018*

Employed at least 3 local employees# (Singapore Citizens or PRs with CPF contributions) in the last 3 months of the quarter or

New!


with CPF contributions) in the last 3 months of the quarter or combined quarters in the basis period for the relevant YA


31


# 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

How to Claim Cash PayoutHow to Claim Cash Payout

Cash payout

How Submit:• PIC cash payout application form; and • Hire-purchase template (where applicable)


• Hire-purchase template (where applicable)

When After the end of each quarter or combined quarters in the accounting year but not later than the income tax filing due date

32

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.

Pointers: Pointers: Completing Cash Payout Application FormCompleting Cash Payout Application Form


33

Pointers Pointers Cash Payout Application FormCash Payout Application Form


Click here for link to new cash payout application form

34


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-built


35

� Minimise completion and computation errors with in-built system formulae and checks

� Receive your cash payout earlier when you submit a complete application

Please read the Essential Information to Note before completing the PIC Cash Payout Application Form. You may also wish to view the user guide for this form


Administrative matters

After completing the form, please print and submit the original signed form, together with the relevant annexes and hire-purchase template (where applicable), to IRAS at

Inland Revenue Authority of Singapore


Inland Revenue Authority of Singapore

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. Businesses should retain these documents and submit them to IRAS upon request


Discontinuation of Old Excel Form

To improve the speed with which claimants receive the PIC cash payouts, the old excel PIC Cash Payout Application Form (Form 33000, Annex A1 and Annex A2) will no longer be in use from 1 May 2014 onwards


2014 onwards

From 1 May 2014, all applications must be made using the Online PIC Cash Payout Application Form

There will be 3-month grace period, during which IRAS will continue to process PIC Cash Payout applications made using old excel form

From 1 Aug 2014, only the Online PIC Cash Payout Application Form will be accepted.

PIC BonusPIC Bonus


38

PIC BonusPIC Bonus

Effective from YAs 2013 to 2015

You will receive an equal amount in PIC bonus for every dollar spent on qualifying activities, subject to the cap of $15,000


spent on qualifying activities, subject to the cap of $15,000 over the 3-year period from YAs 2013 to 2015

PIC Bonus is given on top of existing PIC benefits

39

PIC BonusPIC Bonus

Conditions for PIC Bonus

Incurs at least $5,000 of PIC-qualifying expenditure^ during the basis period for the YA in which a PIC Bonus is claimed

Employed at least 3 local employees* (Singapore Citizens or PRs with CPF contributions) in the:


with CPF contributions) in the:

� last month of basis period for the YA – if claiming 400% tax deductions/allowances

� last month of quarter or combined consecutive quarters –if claiming cash payout


40

^ 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

PIC BonusPIC Bonus

Example

Company Description YA 2013 YA 2014 YA 2015

A PIC-qualifying $12k $2k $5k


41

A PIC-qualifying expenditure

$12k $2k $5k

PIC bonus $12k $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

PIC BonusPIC Bonus

PIC bonus is taxable

Administrative procedures

� 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% tax deductions/allowances

� Within three weeks after cash payout has been approved – if claimed cash payout

42

Application of the Application of the 33--locallocal--employee conditionemployee condition(From YAs 2013 to 2015) (From YAs 2013 to 2015)


43

Example 1: Business X has a Dec accounting year-end and it opts for cash payout at the end of each quarter.

Year of Assessment 2015:

Quarters

Jan – Mar

2014

Apr – Jun

2014

Jul – Sep

2014

Oct – Dec

2014

Cash payout option Quarter 1 Quarter 2 Quarter 3 Quarter 4

33--locallocal--employee conditionemployee condition(Cash Payout(Cash Payout & PIC Bonus& PIC Bonus))

YAs 2013 to 2015YAs 2013 to 2015


Cash payout option

exercisedQuarter 1 Quarter 2 Quarter 3 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 application44

By income tax return filing due date •15 Apr 2015 for sole-proprietor and partnership

• 30 Nov 2015/ 15 Dec 2015 (e-file Form C-S) for company

Example 2: Business Y has a Dec accounting year-end and it opts for cash payout at the end of 1st, 3rd and 4th quarters.


Quarters

Jan – Mar

2014

Apr – Jun

2014

Jul – Sep

2014

Oct – Dec

2014

Cash payout option Quarter 1 Quarters 2 & 3 combined Quarter 4

33--locallocal--employee conditionemployee condition(Cash Payout(Cash Payout & PIC Bonus& PIC Bonus))

YAs 2013 to 2015YAs 2013 to 2015


Cash payout option

exercisedQuarter 1 Quarters 2 & 3 combined Quarter 4

Relevant month for

determining


Mar 2014 Sep 2014 Dec 2014

When to submit


From Apr

2014

From Oct

2014

From Jan

2015

Deadline to submit




Example 3: Business Z has a Dec accounting year-end and it opts for enhanced deductions/allowances.


Accounting periodJan – Dec 2014

33--locallocal--employee conditionemployee condition(PIC Bonus (PIC Bonus -- For a business claiming For a business claiming enhanced deductions/allowances)enhanced deductions/allowances)


Enhanced deductions /

allowances

Relevant month for

determining

3-local -employee conditionDec 14

Deadline to submit

46



Application of the Application of the 33--locallocal--employee conditionemployee condition(From YAs 2016 to 2018)(From YAs 2016 to 2018)

New!


47

Example 1: Business X has a Dec accounting year-end and it opts for cash payout at the end of each quarter.


Quarters

Jan – Mar

2015

Apr – Jun

2015

Jul – Sep

2015

Oct – Dec

2015

Cash payout option Quarter 1 Quarter 2 Quarter 3 Quarter 4

33--locallocal--employee conditionemployee condition(Cash Payout)(Cash Payout)

YAs 2016 to 2018YAs 2016 to 2018


Cash payout option

exercisedQuarter 1 Quarter 2 Quarter 3 Quarter 4

Relevant months for

determining


Jan – Mar

2015

Apr – Jun

2015

Jul – Sep

2015

Oct – Dec

2015

When to submit


From Apr

2015

From Jul

2015

From Oct

2015

From Jan

2016

Deadline to submit




Example 2: Business Y has a Dec accounting year-end and it opts for cash payout at the end of 1st, 3rd and 4th quarters.


Quarters

Jan – Mar

2015

Apr – Jun

2015

Jul – Sep

2015

Oct – Dec

2015

Cash payout option Quarter 1 Quarters 2 & 3 combined Quarter 4

33--locallocal--employee conditionemployee condition(Cash Payout)(Cash Payout)

YAs 2016 to 2018YAs 2016 to 2018


Cash payout option

exercisedQuarter 1 Quarters 2 & 3 combined Quarter 4

Relevant months for

determining


Jan – Mar

2015

Jul – Sep

2015

Oct – Dec

2015

When to submit


From Apr

2015

From Oct

2015

From Jan

2016

Deadline to submit



• 30 Nov 2016/ 15 Dec 2016 (e-file Form C-S) for company)

How to Claim PIC (Summary)How to Claim PIC (Summary)

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 deduction/allowances in income tax return

Submit PIC cash payout application form and hire-purchase template (where applicable)

When For company, submit income tax return by the

YAs 2013 to 2018:


income tax return by the filing due date: 30 Nov

For sole-proprietor/ partnership, submit income tax return and PIC declaration form by the filing due date: 15 Apr

After the end of each quarter or combined quarters in the accounting year but not later than the income tax filing due date

Relevant month/months for determining 3-local-employee condition

Last month of the basis period of the relevant YA

Last month of the quarter or combined consecutive quarters

Last 3 months of the quarter or combined consecutive quarters

50

*PIC Bonus is applicable from YAs 2013 to 2015

Capping of Expenditure/Payout for Capping of Expenditure/Payout for Taxpayers with Multiple BusinessesTaxpayers with Multiple Businesses


51

Individual A

Individual A

Individual B

Individuals with Multiple BIndividuals with Multiple Businessesusinesses


Business 1 Business 2

Expenditure cap applies regardless of the number of businesses A has as a

sole-proprietor

PartnershipBusiness

A separate expenditure cap is applicable on the partnership

52

Company A

Company A

Company B

Companies that Own Partnership BusinessesCompanies that Own Partnership Businesses


Business

Expenditure cap applies

Partnership Business

Separate expenditure cap

applies

53

What Qualifies for PICWhat Qualifies for PIC


54

Training of EmployeesTraining of Employees


55


External training

All external training qualify

Qualifying Expenditure Includes Qualifying Expenditure Excludes

�Course fees to any external trainingservice provider

�Accommodation, travelling andtransport expenses of employees


service providerE.g. registration or enrolment fees,examination fees, tuition fees andaptitude test fees

�Rental of external training premises

�Meals and refreshments providedduring the courses

�Training materials and stationery

transport expenses of employeesattending the training

�Overheads like imputed rental andutilities

56


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

� on-the-job training by an on-the-job training centre certified by ITE

With effect from YAs 2012 to 2018, in-house training includes:

� Non-certified in-house training courses, subject to an expenditure cap of $10,000 per YA. The $10,000 cap cannot be combined across YAs

� The total training expenditure cap remains unchanged

57

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

� Training on a business’ operating processes and functions in a



� Training on a business’ operating processes and functions in a group setting, with prepared materials and handouts

Exclude informal sessions such as spontaneous consultation, day-to-day problem solving and coaching sessions

58


In-house training

Qualifying Expenditure Includes Qualifying Expenditure Excludes

�Salaries and other remuneration(excluding director fees) paid to in-house trainers for course delivery

�Salaries and other remunerationpaid to in-house trainers for otherduties including preparation oftraining material


�Rental of external training premises

�Meals and refreshments providedduring the courses

�Training materials and stationery

training material

�Salaries and other remunerationpaid to employees providingadministrative support

�Absentee payroll

�Accommodation, travelling andtransport expenses

�Overheads like imputed rental andutilities

59

Example on the $10,000 cap

In-house External($’000)

Total($’000)

WSQ Accredited ($’000)

Non- WSQ accredited ($’000)

Salaries of in-house trainers1 45 9 - 54



1 based on hours spent on conducting courses

Salaries of in-house trainers 45 9 - 54

Training materials 8 2 - 10

Course fees for employees - - 27 27

Total 53 11 27 91

Amount qualifying for PIC

benefits53

10

(Capped at

$10,000)

27 90

1 based on hours spent on conducting courses

60

With effect from YAs 2012 to 2018:

Expenditure incurred by a business on the training of the following prescribed classes of individuals qualify for PIC:

� Salespersons registered under the Estate Agent Act;

� Representatives within the meaning of the Financial Advisers Act;

� Representatives within the meaning of the Securities and Futures Act;



� Representatives within the meaning of the Securities and Futures Act;

� 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

61


Computation of enhanced deduction under PIC for training

E.g. Incurred training expenses as follows for YA 2014 (Dec year-end):

Training Date

Training cost

incurred

Base deduction 100%

Enhanced deduction300% of up to $1,200K

expenditure Total


Net Profit Before Tax $1,850k

YA 2014 Tax Computation (assuming no tax disallowable items)

11 Jan 13

22 Mar 13

$250k

100k

350K

$250k

100k

$250k x 300% = $750k

$100k x 300% = $300k

1,050K

$1,000k

400k

1,400K

Less: Enhanced deduction for training costs (1,050k)

Adjusted Profit Before Capital Allowances 800k62


If opt to convert $100,000 of training costs to cash payout:

Training Date

Training cost

incurredCost

Converted

Base deduction 100%

Enhanced deduction300% Total

11 Jan 13 $250k $250k $250k x 300% = $750k $1,000k


YA 2014 Tax Computation(assuming no tax disallowable items)

Cash payout = 60% x $100k = $60k

Net Profit Before Tax $1,850K

11 Jan 13

22 Mar 13

$250k

100k

350K

100k

$250k

0

$250k x 300% = $750k

0

750K

$1,000k

0

1,000K

Less: Enhanced deduction for training costs (750k)

Adjusted Profit Before Capital Allowances 1,200k

Add: Expenditure converted into cash 100k

63

Individuals deployed under centralised hiring arrangement*

Centralised Hiring Arrangement

Individual (Employee) contracts with the central hirer (Business H) and 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

Training of EmployeesTraining of EmployeesNew!


employment contract, notwithstanding wages and training expenses relating to Employee is recharged by Business H to Business D

Business H Business D

Employee

Employment contract

Wages,Training

Deployed to work

Reimbursed Employee’s wages & training expenses


64

Individuals deployed under centralised hiring arrangement

Current treatment

� Business D not entitled to claim PIC benefits on the training recharged

� Employee not taken into account as Business D’s employee for



� Employee not taken into account as Business D’s employee for purposes of satisfying 3-local-employee condition

65


With effect from YA 2014, such individuals are regarded 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



� Entity (Business D) will be able to claim PIC benefits on training recharged

� Individual (Employee) taken into account for purposes of satisfying the 3-local-employee condition under PIC cash payout & PIC bonus for Business D

66


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;



in respect of employees working solely for the claimant;

2) The corporate structure and centralised hiring practises are adopted for bona fide commercial reasons; and

67


Qualifying conditions

3) (a) For purpose of claiming PIC on training expensesThe related party (Business H) does not claim deductions on the training expenses recharged to the claimant (Business D)



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

68

Training of Employees (Summary)Training of Employees (Summary)

In-house External

Without PIC 100% revenue deduction

With PIC (YAs 2011 to 2018)

400% tax deduction subject to expenditure cap1, 100% deduction on balance exceeding the cap

Qualifying Expenditure for - Remuneration for course delivery

- Course fees paid- Rental of external


Qualifying Expenditure for Training of Employees including qualifying agents

delivery- Rental of external premises- Refreshments- Training materials

- Rental of external premises

- Refreshments- Training materials

Cash Payout Option(YAs 2013 to 2018)

Convert expenditure at 60% subject to cap2

PIC BonusPIC Bonus of up to $15,000 over 3-year period from YAs 2013 to 2015

1 Total expenditure cap for YAs 2011 and 2012 - $800,000 for each of the six activitiesTotal 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

2 Maximum expenditure for YAs 2013 to 2018 - $100,000 per annum for all six activities taken together

69

PIC IT and Automation Equipment PIC IT and Automation Equipment


70

PIC IT and Automation EquipmentPIC IT and Automation Equipment

Automation equipment that qualify for PIC from YA 2011 are prescribed in the “PIC IT and Automation Equipment List”

The “PIC IT and Automation Equipment List” has been expanded in Budget 2014

Both purchase and lease (only for own use) of PIC IT and automation


Both purchase and lease (only for own use) of PIC IT and automation equipment qualify for PIC

One expenditure cap applies for both purchase cost and lease 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 applies71


Current Automation Equipment in “PIC IT and Automation Equipment List" includes:

� Facsimile� Optical character reader� Laser printer� Mainframe/Computers

Milling machines

� Automated kitchen equipment for the purpose of food processing (for F&B industry only)

� Interactive shopping cartsAutomated housekeeping


72

�

� Milling machines� Office system software� Automatic storage and retrieval

system of warehouses � Injection mould machines� Automotive navigation systems

�

� 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.

Description Budget 2014 Enhancement

Item 37 – Website Website development costs

100% write-off will apply under

S19A(10) instead of S19A(2)

With effect from YAs 2014 to 2018, “PIC IT and Automation Equipment List" has been expanded:

PIC IT and Automation EquipmentPIC IT and Automation EquipmentNew!


S19A(10) instead of S19A(2)

Item 38 - Automated cover system for

open-top containers

Only the automated covering system

and not the vehicle or container

Item 39 – Landscaping equipment Examples: Ride-on mower, Trencher

and Potting machine

73

Cloud Computing Cloud Computing ––Payments Qualifying for PIC Enhanced Payments Qualifying for PIC Enhanced

DeductionDeduction

© 2014 IRAS SingaporeSource: IDA

74

Flowchart on Flowchart on PIC IT and Automation EquipmentPIC IT and Automation Equipment

IT and Automation Equipment

NoYes

In PIC IT and

Automation Equipment


Case–by-case approval, subject to

meeting criteria

Capital AllowanceWrite-down over 1 year, 3 years or tax working life of

asset(Refer to the PIC IT and

Automation Equipment List*)

Capital AllowanceWrite-down over 3 years or tax working life of asset

Approved cases

* Refer to IRAS’ website at www.iras.gov.sg<For Companies><Productivity and Innovation Credit>

Equipment List*

•Does not qualify for PIC •Continue with current Capital Allowance treatment

Rejected cases

75


Case-by-case approval

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 can:


Businesses 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

76



Revised Criteria (from YA 2013):

a) Equipment automates or mechanises the work processes of the business;

b) Equipment enhances productivity of the business (for example,


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,

� it must increase productivity compared to existing equipment used in the business; or

� it has not been used in the business before

77



Example of automation equipment approved on a case-by-case basis


78

Microsoft Office

Excel 97-2003 Worksheet

1.

2.

3.

4. If you are applying for more than 1 such equipment, please use a separate form for each equipment.

5.

6.

7.

Part A - Taxpayer Particulars

1. For all businesses (including sole-proprietorships)::

Tax reference no. of business :2. For Sole-proprietors only:

Name of Sole-proprietor :Tax reference no. of Sole-proprietor :

1. Year of Assessment of claim :

2. Accounting Period : (dd/mm/yyyy) to (dd/mm/yyyy)

1.

2.

3. $

4a.

4b.

4c.

5.

6.

I declare that the information given is true and complete.

:

: :

Designation : :

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].

Part B - Details

number

Has the equipment been used in the business before?

31/12/2013

Under the Singapore Income Tax Act, penalties will be imposed for making a false or incorrect declaration.

If you have indicated "Yes" in 4b above, please complete 4c:

91234567

How does the equipment increase or enhance productivity of the business (for example in terms of reduced man-hours, moreoutput or improved work processes)?

Productivity and Innovation Credit (PIC)

Application for Approval of Equipment for PIC

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.

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.

Please submit the completed form to IRAS at 55 Newton Road, Revenue House, Singapore 307987.

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.

The claim for PIC should not be made in your tax return or cash payout application form until approval has been granted.

(From Year of Assessment 2013)

Please complete this form if you are applying for approval of equipment for PIC from Year of Assessment 2013.

Director

5,200

The CCTV replaces the need for security guards to monitor incidences of theft etc.

The equipment reduces the number of security guards required from 5 to 3.

If you have indicated "Yes" in 4a above, please complete 4b:

Name of contact person &

Signature

Mr XXX

Mr XXX

Name of business

Part C - Declaration

Date (dd/mm/yyyy) 15/3/2013

Please mark "X" in the appropriate box

x

(E.g. washing machine and dryer are basic tools used in the laundry business)

Yes

Yes

Equipment: CCTVFunction: Detailed specifications as provided by manufacturer

No

Does the equipment increase productivity as compared to existing equipment used inthe business? Yes

01/01/2013

Detailed description of the equipment (e.g. name, model, function & specification) and to provide photographs where applicable.

Is the equipment a basic tool used in the business? No

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.

Full name of authorised person

Cost of equipment

No

Date of purchase/lease period (dd/mm/yyyy), (if applicable) 01/03/2013

ABC Pte Ltd201212345X

B1. Details of automation equipment (Please attach a separate sheet if you need more space.)

2014


E.g. Capital allowances (CA) under PIC for YA 2014

Assume no CA claimed under PIC for YA 2013

Equip-ment

Cost Base CA

100%

Enhanced CA 300% on expenditure of

up to $1.2MTotal


Note 1: Portion of Equipment A that qualifies for enhanced allowance = $610k ($800k cap less cost of Equipments B & C)1,240k

900k

Note 1: Portion of Equipment A that qualifies for enhanced allowance = $300k ($1,200k cap less cost of Equipment B & C)

A

B

C

$340k

400k

500k

1,240k

$340k

400k

500k

$300k x 300% = $900k(Note 1)

400k x 300% = 1,200k

500k x 300% = 1,500k

$1,240k

1,600k

2,000k

Total CA for YA 2014 4,840k

79


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


With effect 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 periods relating to YAs 2012 to 2018

� Hire purchase (HP) equipment acquired under HP agreement signed during the basis period relating to YA2011, and with repayment covering 2 or more basis periods, are not eligible for cash payout

80

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%81

PICPIC IT and Automation EquipmentIT and Automation Equipment

Cash payout option for HP equipment

For cash payout on equipment acquired under HP agreement 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

82

PICPIC IT and Automation EquipmentIT 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

Automatic waiver: If in the basis period when the equipment was 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

83


Acquired $1,500,000 worth of qualifying equipment in Jun 2013(Enhanced allowances claimed in YA 2014 on cost of $1,200,000)

Example - Automatic waiver

Holding period less than one year


Disposed of equipment costing $100,000 in Jan 2014

Jan 2013 Dec 2013 Dec 2014

than one year

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 84

Purchase Lease

Without PIC 100% accelerated CA 100% revenue deduction


400% allowances/deductions subject to expenditure cap1, 100% allowances/deductions on balance exceeding the cap

Qualifying ExpenditureCost of equipment Lease payments

PIC IT and Automation Equipment PIC IT and Automation Equipment (Summary)(Summary)


1Total expenditure cap for YAs 2011 and 2012 - $800,000 for each of the six activitiesTotal 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

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

Cost of equipment Lease payments

Minimum Ownership Period 1 year from the date of purchase N.A.2


Per equipment basisConvert expenditure at 60% subject to cap3



85

ABC Fashion Pte Ltd runs a retail outlet

Investments in accounting

service courses

Investments in accounting year 2013

1) A point of sale (POS) system

2) Sent its staff on customer service courses

Investments in PIC

Automation equipment: $3,000

Training of Employees: $9,000

Total : $12,000

Tax deduction/allowance Submission

Case Study Case Study 1: 1:

400400% Tax % Tax Deduction/Allowance + PIC Bonus Deduction/Allowance + PIC Bonus


Choose your Benefits!

A) 400% Tax Deduction

B) Cash Payout

Tax deduction/allowance

$12,000 (Total Expenses)

x

400% (YA 2014)

$48,000

Submission Company claims tax

deduction/allowance in its

Income Tax Return for YA

2014 by 30 Nov 2014 / 15

Dec 2014 (e-file Form C-S)

UP TO $8,160

TAX SAVINGS

based on corporate tax rate of 17%

RECEIVE

$12,000

PIC BONUS

86

Case Study Case Study 2: 2: CASH CASH PAYOUT + PIC BonusPAYOUT + PIC Bonus

PIC Cash Payout Application

Investments in PIC

Automation equipment: $3,000

Training of Employees: $9,000

Total : $12,000

Investments in accounting Investments in accounting year 2013

1) A point of sale (POS) system

2) Sent its staff on customer service courses

ABC Fashion Pte Ltd runs a retail outlet


Cash Payout Calculation

$12,000 (Total Expenses)

x

60% (YA 2014)

$7,200

RECEIVE

$7,200

CASH PAYOUT

PIC Cash Payout Application 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)

Choose your Benefits!

A) 400% Tax Deduction

B) Cash Payout

RECEIVE

$12,000

PIC BONUS87

Acquisition/InAcquisition/In--licensing of licensing of Intellectual Property Intellectual Property


88

Acquisition of Acquisition of Intellectual PropertyIntellectual Property

Qualifying expenditure

Acquisition cost of patent, copyright, trademark, registered designs,geographical indication, layout design of integrated circuit, trade secretand 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, customer-based intangibles and documentation of work processes do not fall within the scope of information with commercial value.

*e.g. selected genera/species of orchids, vegetables, aquatic plants and ornamentals 89

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 write-down



approved for accelerated 2-year write-down

90


Cash payout option

Election on a “per IPR” basis

Allowances in excess of the expenditure conversion cap will be forfeited

Minimum ownership period of acquired IPR


Minimum ownership period of acquired 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

or business91

From YAs 2013 to 2018, scope of IPR acquisition widened to include IPR in-licensing

As per existing list of qualifying IPRs excluding trademarks and any

rights to the use of software. Payments for the use of software

InIn--licensinglicensing of of Intellectual PropertyIntellectual Property


rights to the use of software. Payments for the use of software are covered under leasing of PIC automation equipment.

Qualifying expenditure means license fees and excludesexpenditure for the transfer of ownership of any those rights andlegal fees and other incidental costs arising from the licensing ofsuch rights

92

Acquisition In-Licensing

Without PIC 100% WDA over 5 years 100% revenue deduction


400% allowances/deductions subject to expenditure cap1, 100% allowances/deductions on balance exceeding the cap

Qualifying ExpenditureCost of IPR License fees

Acquisition/InAcquisition/In--licensing of Intellectual Propertylicensing of Intellectual Property(Summary)(Summary)


1Total expenditure cap for YAs 2011 and 2012 - $800,000 for each of the six activitiesTotal 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

2 Maximum expenditure for YAs 2013 to 2018 - $100,000 per annum for all six activities taken together

Cost of IPR License fees

Minimum Ownership Period 1 year from the date of acquisition N.A.


Per IPR basisConvert expenditure at 60% subject to cap2



93

Registration of Intellectual PropertyRegistration of Intellectual Property((Patents, Trademarks, Designs and

Plant Varieties)


Plant Varieties)

94

Registration of Intellectual PropertyRegistration of Intellectual Property


Official fees paid to respective Registry (e.g. for filing application/registration)

Professional fees for registration of IPRs


Regardless of application outcome

Example

Fees to IPOS for registering trademark or patent

95

Registration of Intellectual PropertyRegistration 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 for YAs 2011 and 2012 combined;


� $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

96

*For qualifying SMEs under PIC+ scheme, a higher expenditure cap applies

Registration of Intellectual Property Registration of Intellectual Property

Minimum ownership period of IPR

Minimum 1-year ownership

Claw-back apply if:


� IPR; or

� application for registration; or

� grant of IPR;

disposed off within 1 year from date of filing of application

97

Without PIC 100% deduction on patenting costs


400% tax deduction subject to expenditure cap1, 100% deduction for balance exceeding cap

Qualifying Expenditure Official fees paid to Registry and professional fees

Registration of Intellectual Property Registration of Intellectual Property (Summary)(Summary)


Qualifying Expenditure Official fees paid to Registry and professional fees

Minimum Ownership Period

1 year2 from the date of filing


Per filing basis. Convert expenditure at 60% subject to cap3


1Total expenditure cap for YAs 2011 and 2012 - $800,000 for each of the six activitiesTotal 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 applies2Even if filing is unsuccessful, IPR is still subject to 1 year ownership period3 Maximum expenditure for YAs 2013 to 2018 - $100,000 per annum for all six activities taken together

98

Research & Development Research & Development


99


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 improvement of materials, devices, products, produce, or processes.

100


What is R&D?

� Novelty

─ New in relation to creation or improvement of products, processes or knowledge

� Technical risk


� 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)

101


R&D excludes:

a) quality control or routine testing of materials, devices or products;

b) research in the social sciences or the humanities;

c) routine data collection;


d)efficiency surveys or management studies;

e) market research or sales 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

102


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, and to the person who develops the software or on whose


other, and to the person who develops the software or on whose behalf the development of the software is undertaken (for YA 2011 only)

With effect from YAs 2012 to 2018:

� Multiple sale condition is removed i.e. R&D software development for own business use can now qualify as R&D

103

Research and Development Research and Development


R&D conducted in-house

� Staff costs (excluding directors’ fees) and consumables incurred on R&D

Outsourced R&D (re: fees paid to R&D organization)


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&D104

Research & Development (Summary)Research & Development (Summary)

Without PIC 100%/150% tax deduction


400% tax deduction of qualifying expenditure subject to expenditure cap1. For the balance exceeding the cap and all other R&D expenses, deduction will be 100%/150%


Qualifying ExpenditureStaff costs and consumables (if outsourced, 60% of invoiced costs)


Convert at 60% of expenditure subject to cap2


1Total expenditure cap for YAs 2011 and 2012 - $800,000 for each of the six activitiesTotal 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 applies2Maximum expenditure for YAs 2013 to 2018 - $100,000 per annum for all six activities taken together

105

Approved Design Project Approved Design Project


106


DesignSingapore Council (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”)

Be the eventual owner of the registered design

Project must be completed within 2 years (include registration of IP with IPOS)

107



Approved design activities conducted 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.org108

Approved Design Project (Summary)Approved Design Project (Summary)

Without PIC 100% revenue deduction


400% tax deduction subject to expenditure cap1, 100% deduction for balance exceeding cap


Qualifying Expenditure

Approved designer costs(if outsourced, 60% of invoiced costs)


Convert at 60% of expenditure subject to cap2


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 YAs 2016 to 2018). For qualifying SMEs under PIC+ scheme, a higher expenditure cap applies2 Maximum expenditure for YAs 2013 to 2018 - $100,000 per annum for all six activities taken together

109

Summary of Budget 2014 Changes to PIC Summary of Budget 2014 Changes to PIC

Tax Changes Summary

Extension of PIC Scheme for three years till YA 2018

For enhanced tax deductions, the expenditure cap of $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,subject to qualifying conditions

In addition, individuals hired under centralised hiring arrangements can be taken into account for purposes of satisfying the 3-local-employee condition, subject to qualifying conditions 110


Tax Changes Summary

Expansion of “PIC IT and Automation Equipment List”

With effect from YA 2014, the List is expanded to include:1) Website2) Automated cover system for open-top containers and3) Landscaping equipment


3) Landscaping equipment

PIC+ Scheme Under the PIC+ scheme, the expenditure cap for qualifying SMEs will be increased from $400,000 to $600,000 per qualifying activity per YA.

PIC+ will take effect for expenditure 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 of qualifying expenditure per YA.

111


Tax Changes Summary

Refining the three-local-employee 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.


claiming the cash payout.

112

Assistance and Service ChannelsAssistance 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] for payment matters

‒ [email protected] for Productivity and Innovation Credit

Helpline

‒ For companies: 1800-356-8622

‒ For self-employed/partnership: (+65) 6351 3534

‒ 8.00am to 5.00pm from Mondays to Fridays


AnnexAnnex

1) Tax Deferral Option1) Tax Deferral Option


1) Tax Deferral Option1) Tax Deferral Option2) Pointers: Claiming PIC Benefits2) Pointers: Claiming PIC Benefits

115

(1) Tax Deferral Option(1) Tax Deferral Option


116

Tax Deferral OptionTax 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 qualifying PIC expenditure incurred in the current


� the qualifying PIC expenditure incurred in the current 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

117


Incurred $80,000 on staff training

Example:


Paid $200,000 YA 2013 tax based on ECI

Apply for $80,000 YA 2013 tax to be deferred-> $80,000 will be refunded within 30 days

Pay $80,000 YA 2013 deferred tax with YA 2014 tax based on ECI

Jan 2013 Dec 2013 Dec 2014

118


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

119

(2) Pointers: Claiming PIC Benefits(2) Pointers: Claiming PIC Benefits


120

Do not claim 400% tax deductions/allowances for expenditure on equipment not listed in the PIC IT and Automation Equipment List

� If an automation equipment is not in the list but it automates/mechanises the work process, businesses may

PointersPointersClaiming PIC BenefitsClaiming PIC Benefits


automates/mechanises the work process, businesses may 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% taxdeductions 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

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



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

122

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 as the GST trader can claim input tax in its GST



purpose as the GST trader can claim input 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

123

Do not claim PIC benefits if the company has not commencedbusiness

Do not submit the Cash Payout application form before theend of the financial quarters



end of the financial quarters

Do not submit more than one Cash Payout application formfor each quarter or combined quarters

124

Documents

Productivity and Innovation Credit Schemejlcs.com.sg/Promotions/PIC Seminar Slides.pdf · PICBonus(YAs2013to2015) * Budget 2014 Enhancement 9. 400% Tax Deductions / Allowances