Productivity/Innovation Credit in Singapore
This article intends to explain the features and provisions of a special scheme in Singapore called Productivity and Innovation Credit Scheme. You will learn how your company, if it qualifies under this PIC scheme, can get tax deductions up to 400% and payout to the tune of 60%. It was in the 2010 budget of the country that this scheme was first introduced. The major objective behind its introduction was to encourage and motivate companies to improve upon their productivity and innovation. Starting from 2011, companies can claim a deduction of up to 400% on money that is spent on activities that qualify under PIC.
Update from 2013 budget
To make it more alluring for companies to invest in activities related with innovation and productivity, government announced a cash bonus that matches the investment of the company starting from S$5000 on activities that qualify under PIC. There is now a cap of S$15000 on this cash bonus under PIC from 2013 till 2015. However, this cash bonus is provided to companies in addition to other benefits that they are entitled to. These benefits include deductions in tax of up to $400000 for expenditure in PIC related activities and a cash bonus of up to 60% on expend it up to$100000 that qualifies under PIC.
Liberal attitude towards automated equipment
Starting from the assessment year 2013, more equipment will automatically qualify for concessions under PIC because of certain changes that have been introduced.
There is now a more liberal view of the equipment that is approved even if it is not in the prescribed list. Such equipment is deemed to have increased productivity of the business. New equipment is allowed even if it is a basic tool if it is perceived as increasing productivity than the equipment that was used earlier. A new term called ‘IT and automation equipment’ is now being used in place of the older ‘automation equipment’. This is reflective of the support that PIC lends to IT software. Equipment that is prescribed now includes a larger list and this list is constantly updated after taking into account the feedback from business houses.
It was a grouse of the businesses that license IP rights that they could not get benefits under PIC. To help such companies, the scope of PIC has been broadened and now licensing costs under IP licensing have been declared to be an investment that qualifies for benefits under PIC. To reflect a change in its policy, the phrase Acquisition of Intellectual Property has been changed to Acquisition and In-Licensing of Intellectual Property. More details are expected to be announced by IRAS in April 2013.
You are rewarded for being productive
It is possible for companies to have a tax saving of up to S$9.6million if they can make a clear cut PIC policy. If they anticipate their income and make investments in productivity and innovation related activities in time, they are rewarded by the Singapore government in no uncertain terms. To take monetary advantage of PIC, companies can invest in R&D, registration of IP, design projects that are approved, employee training, and acquisition of IP.