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FREQUENTLY ASKED QUESTIONS

ON PRODUCTIVITY AND INNOVATION CREDIT (PIC)
- Overview of PIC
(Updated on 16 May 2014)
___________________________________________________________________________

Overview of Productivity and Innovation Credit (PIC) .......................................................................................... 2
1. Who is eligible for PIC?...................................................................................................................... 2
2. Do investment holding companies qualify for PIC? .......................................................................... 2
3. Do bodies of persons, i.e. clubs, trade associations, management corporations, town councils and
co-operatives qualify for PIC?
New (Updated on 21 Feb 2014)!
......................................................................... 2
4. What is the qualifying period for PIC?
Revised on 21 Feb 2014!
.................................................................... 2
5. Will qualifying expenditure that is fully or partially funded by the Government or a statutory
board qualify for PIC? ........................................................................................................................ 3
6. If I am a newly set up company, can I enjoy both PIC and the tax exemption scheme for new start-
up companies? .................................................................................................................................. 3
7. Do service companies qualify for PIC? .............................................................................................. 3
8. Does PIC apply to companies that are taxed at the concessionary rate? ......................................... 3
9. Our business income is taxable at the prevailing rate and concessionary rate. How will enhanced
deductions be allowed on qualifying expenditure in relation to income streams taxed at different
tax rates? ........................................................................................................................................... 3
10. How will enhanced deductions be allowed on common expenditure and common assets if our
business income is taxable at the prevailing rate and concessionary rate? ..................................... 3
11. How long am I required to keep the supporting documents for my claims under PIC? ................... 4
12. What should I do if I have overlooked the PIC enhanced tax allowances/deductions in the Income
Tax Return? ....................................................................................................................................... 4
13. Has IRAS approved or endorsed consultants to provide advice on or promote the PIC
scheme?
Revised on 16 May 2014!
................................................................................................................. 4


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Overview of Productivity and Innovation Credit (PIC)

1. Who is eligible for PIC?
All businesses are eligible for PIC, if they have incurred expenditure in any of the six qualifying
activities.

Singapore registered branches and subsidiaries of a foreign parent or holding company are also
eligible for PIC.

2. Do investment holding companies qualify for PIC?
Investment holding companies do not qualify for PIC as they do not carry on a trade or business
for tax purposes. These companies own investments such as properties and shares for long term
investment and derive investment income such as dividend, interest or rental.

Find out more about Preparing tax computation for investment holding companies.

3. Do bodies of persons, i.e. clubs, trade associations, management corporations, town councils
and co-operatives qualify for PIC?
New (Updated on 21 Feb 2014)!

Clubs, trade associations and management corporations are normally not considered to be
conducting a commercial or profit-making trade or business.

For clubs and management corporations, where more than 50% of gross revenue receipts are
from members, they will not be deemed as carrying on a business. As such, they will not be able
to claim the 100% allowance or deduction for any of the qualifying PIC activities and
correspondingly, will not qualify for the enhanced tax deductions under PIC.

For trade associations, where more than 50% of receipts, by way of entrance fees and
subscriptions, are from Singapore members who can claim deductions in their tax returns, the
trade associations will be deemed to be carrying on a business. If so, they will be allowed to
claim the enhanced tax deduction under PIC.

Town councils are deemed not to be carrying on a trade or business. As such, they will not
qualify for the enhanced tax deductions under PIC.

Co-operatives registered under the Co-operative Societies Act are exempt from tax under
Section 13(1)(f) of the Income Tax Act. As such, they will not qualify for the enhanced tax
deductions under PIC.

The PIC cash payout and PIC bonus are not available to bodies of persons. It is available only to
companies, partnerships and sole-proprietorships with at least 3 local employees, as the
intention is to focus our help on business enterprises, especially SMEs, with cash-flow needs for
their expenditures on innovation and productivity initiatives.

4. What is the qualifying period for PIC?
Revised on 21 Feb 2014!

The PIC scheme is effective for eight years from YA 2011 to YA 2018.

As an example, if you incurred qualifying expenditure in Nov 2012 and your accounting year
ended on 30 Jun 2013, you are eligible to claim PIC in your Income Tax Return for YA 2014.
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5. Will qualifying expenditure that is fully or partially funded by the Government or a statutory
board qualify for PIC?
The enhanced deductions/allowances under the PIC scheme is computed based on qualifying
expenditure net of the grant or subsidy received.
6. If I am a newly set up company, can I enjoy both PIC and the tax exemption scheme for new
start-up companies?
Yes, if your company meets the conditions under PIC and Tax exemption scheme for new start-
up companies respectively.
7. Do service companies qualify for PIC?
A service company is one which renders services to/on behalf of its related companies.

Service companies that derive arms length fees will qualify for PIC. These companies will need
to prepare their tax computations under the normal tax rules. If a service company wishes to
elect for cost plus mark-up basis of assessment, the company will not qualify for PIC. This is
because an acceptance of mark-up as the chargeable income of the company is net of all
available deductions and allowances (including PIC).

Find out more about Preparing tax computation for company servicing only related companies.
8. Does PIC apply to companies that are taxed at the concessionary rate?
Yes. Even though the income is taxed at concessionary rate, PIC will be applicable as long as the
company incurs qualifying expenditure during the basis period for YA 2011 to YA 2018.
9. Our business income is taxable at the prevailing rate and concessionary rate. How will
enhanced deductions be allowed on qualifying expenditure in relation to income streams
taxed at different tax rates?
For a business whose income is taxable at the prevailing rate (normal income) as well as at one
or more concessionary rate(s) (concessionary income), enhanced deductions are first granted
on qualifying expenditure incurred in relation to the normal income. If the applicable
expenditure cap is not exhausted, enhanced deductions are then granted on qualifying
expenditure incurred in relation to the concessionary income that is subject to tax at the highest
concessionary rate first followed by the next highest rate and so on, until the expenditure cap is
reached.

10. How will enhanced deductions be allowed on common expenditure and common assets if our
business income is taxable at the prevailing rate and concessionary rate?
In general, common expenditure incurred for both the normal and concessionary trade is
allocated to income derived from each trade for tax purposes.

Common expenditure
When computing the PIC benefits, enhanced deductions (excluding enhanced deductions arising
from IPR registration) are first granted on qualifying common expenditure allocated to the
normal income. If the applicable expenditure cap is not exhausted, enhanced deductions are
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then granted on qualifying common expenditure allocated to the concessionary income that is
subject to tax at the highest concessionary rate first followed by the next highest rate and so on,
until the expenditure cap is reached.

Where the IPR registration cost is a common expenditure, the base and enhanced deductions are
determined first before allocating the deductions to each stream of income.

Common assets
Enhanced allowances on common assets (i.e. qualifying equipment and IPRs) are granted on the
full cost of each asset, up to the expenditure cap. The enhanced allowances are then computed
for each qualifying common asset before the 100% base and 300% enhanced allowances are
allocated to each stream of income.

11. How long am I required to keep the supporting documents for my claims under PIC?
The existing record keeping requirements for businesses apply. You are required to maintain all
the supporting documents such as invoices for a period of 5 years.

For example, if you purchase PIC Automation Equipment during the basis period for YA 2014 and
make a claim for cash payout for YA 2014, you are required to keep the relevant documents for
the purchase till 31 Dec 2018.

12. What should I do if I have overlooked the PIC enhanced tax allowances/deductions in the
Income Tax Return?
You can email or write to us within 30 days from the date of your Notice of
Assessment/Allocation of Profit/Loss to Partners, giving us your full name, tax reference number
and details of amendment as stated below.

For sole-proprietors/partnerships:
Please provide us with the revised 4-line statement by including the amount of qualifying PIC
enhanced allowances/deductions under the Allowable Business Expenses of the 4-line
statement. In addition, please complete and submit the PIC Enhanced Allowances/Deductions
Declaration Form for Sole-proprietors & Partnerships (www.iras.gov.sg <Quick links> <Forms>
<Individual>).

For businesses with revenue of $500,000 or more, the completed PIC declaration form is to be
submitted together with a revised tax computation.

For companies:
Please complete the Form for Filing Revised Income Tax Computation(s) available at
(www.iras.gov.sg <Quick links> <Forms> <Business & Employers> <Corporate Tax forms>) and
submit a revised tax computation incorporating the computation of PIC claims.
13. Has IRAS approved or endorsed consultants to provide advice on or promote the PIC scheme?
Revised on 16 May 2014!

IRAS has not appointed any private entity (individual or company) to provide advice on or
promote the PIC scheme. IRAS has also not approved or endorsed any private consultant for this
purpose. Businesses can find out more about the Productivity & Innovation Credit (PIC) scheme
by contacting the SME Centres (Tel: 6898 1800 or www.enterpriseone.gov.sg/smecentre)
or IRAS for further assistance.