* You can apply to convert up to $100,000 of your total spending in all six activities into a non-taxable cash payout instead of claiming tax deduction. This option may be more beneficial for businesses with low or no taxable income.

* The maximum cash payout is:

• A sum of $60,000 (60% x $100,000) for each YA from YA 2013 to YA 2015;

• A total of $60,000 for YA 2011 and YA 2012 combined (30% x combined spending cap of $200,000).

Cash Payout Option

To qualify for cash payout, your business must:

• have employed at least three local employees (Singapore Citizens or Permanent Residents with CPF contributions, excluding sole-proprietors and partners under contract for service); and

• carry on business operation in Singapore.

* You can enjoy 400% tax deduction on up to $400,000 of your spending each year in each of the six activities.

* This means a tax deduction of up to $1.6 million ($400,000 x 400%) for each activity per YA.

* In addition, you can combine your spending across YAs for each activity to enjoy the maximum PIC benefits as follows:

400% Tax Deduction

Combined $800,000 $1,200,000spending cap peractivity

Maximum $3.2 million $4.8 milliontax deductionper activity

YA 2011& 2012

2013to 2015

($400,000 x 2) ($400,000 x 3)

($800,000 at 400%)

($1.2 million at 400%) Note: Please deduct any government grant

or subsidy given on your investment and claim PIC benefits only on the net spending.

Other Qualifying ActivitiesThe PIC scheme supports investments in Productivity and Innovation. Businesses, including sole-proprietors, can enjoy tax savings in the form of Cash Payout and/or Tax Deduction, and receive a PIC Bonus when they invest in any of these six productivity improvement activities:

What is PIC?

Acquisition or Leasing of PIC IT and Automation Equipment

Training of Employees

Acquisition or In-licensing of Intellectual Property Rights

Registration of Patents, Trademarks, Designs and Plant Varieties

Research and Development Activities

Investment in Design Projects Approved by the DesignSingapore Council

How PIC benefits you?On your spending for accounting years 2010 to 2014 [Years of Assessment (YA) 2011 to 2015]

• Costs of acquiring or leasing PIC IT and automation equipment used in your business.

• PIC IT and Automation equipment refers to:

1. IT and automation equipment that are in the PIC IT and Automation Equipment List available at www.iras.gov.sg ; or

2. Equipment not in the PIC IT and Automation Equipment List but which serve to automate or mechanise business processes and enhance productivity may be approved for PIC on a case-by-case basis. The criteria and application for approval procedure are available at www.iras.gov.sg.

• Computer

• Software

• Printers

• Scanners

• Point-of-sale system

• Personal Digital Assistant

• Computer-aided design system software

• Computer numerical control (CNC) milling machine

• External Training – Training of your employees for the purposes of your business by external service providers.

• In-house Training – Training of your employees for the purposes of your business by your in-house trainers and must be:

a. A Workforce Skills Qualification (WSQ) training course accredited by the Singapore Workforce Development Agency (WDA) and conducted by a WSQ in-house training provider;

b. A course approved by the Institute of Technical Education (ITE) under the ITE Approved Training Centre scheme;

c. On-the-job training by an on-the-job training centre certified by ITE.

d. With effect from YA2012, in-house training not accredited/certified by WDA/ITE, is subject to spending cap of $10,000 per YA*

• Training costs incurred by sole-proprietor/ partner under contract for service do not qualify for PIC benefits. They are business owners and not employees

*Note: Spontaneous consultation, day-to-day problem-solving or meetings and coaching/mentoring sessions between supervisors and subordinates are not considered to be training.

• External training course fees

• Salary and other remuneration paid to in-house trainers for conducting the training

• Rental of training facilities

• Training materials and stationery used for the training

• Meals and refreshments provided during the training

Training of Employees

Examples of qualifying IT and Automation Equipment

Examples of QualifyingCosts that Qualify for PIC

PIC IT and Automation Equipment*

*Note: Cash conversion is on the full acquisition/registration cost of each IPR, subject to the conversion cap.

• Registration cost of patents, trademarks, designs and plant varieties.

• Your business must be the legal and economic owner of the IPR.

• Official fees paid to respective Registry

• Professional fees for registration of IPRs

Qualifying CostsRegistration of Intellectual Property Rights* (IPR)

• Cost of acquiring the legal and economic ownership of the IPR for use in your trade. (Not applicable to Sole-proprietorships)

• Qualifying cost excludes legal fees, registration fees, stamp duty and other costs related to the acquisition.

• Cost incurred on IPR in-licensing from YAs 2013 to 2015

• Patents

• Copyrights

• Trademarks

Examples of IPRs that Qualify for PIC

Acquisition or In-licensing of Intellectual Property Rights *

• 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 objective of acquiring new knowledge or using the results of the study for the production or improvement of materials, devices, products, produce, or processes.

• R&D may be conducted by your business or outsourced to an R&D organisation.

• R&D may be carried out in Singapore or overseas. If the R&D is done overseas, it must be related to your trade in Singapore.

• R&D cost sharing arrangement qualifies for PIC with effect from YA 2012.

• Staff costs and consumables for R&D activities carried out by your business

• 60% of outsourced costs or shared costs deemed to be staff costs and consumables; other percentage should be substantiated by supporting documents

Qualifying CostsResearch and Development (R&D)

• Approved Design Project is administered by DesignSingapore Council.

• The approved design activities may be conducted by your business or outsourced to an approved design service provider.

• More details, including how to apply for approval can be found on DesignSingapore Council’s website athttp://designforenterprises.sg/pic.aspx.

• Staff cost of qualified design professional

• 60% of payments to outsourced approved design service provider deemed as cost of qualified designers; other percentage should be substantiated by supporting documents.

Qualifying CostsApproved Design Project

(do not qualify for IP in-licensing)

*Note: Cash conversion is on the full acquisition cost of each piece ofequipment, subject to the conversion cop.

How PIC benefits you?PIC Bonus

The information presented above is correct as at 2 July 2013.

ExampleFrom YAs 2013 to 2015, PIC bonus, which is a dollar-for-dollar cash bonus, will be provided on top of existing PIC benefits. The PIC bonus is capped at $15,000 over all 3 YAs combined. The PIC bonus is taxable.

Example:

PIC Bonus$8,000

NEW EXISTING

PIC Benefits$32,000 TaxDeductionsOR $4,800 Cash Payout

Businessmakes$8,000 PICinvestment

+-

To qualify for PIC bonus in any of the 3 YAs, your business must:

You do not need to apply for the PIC bonus. IRAS will compute the PIC bonus upon approval of your cash payout claim or upon filing of your Income Tax Return and PIC Enhanced Allowances/Deductions Declaration Form for Sole-proprietors and Partnerships.

•

•

•

have spent a minimum of $5,000 on PIC-qualifying expenditure (net of government grant/subsidy) in the basis period for that YA (i.e. during the accounting year);

have employed at least three local employees (Singapore Citizens or Permanent Residents with CPF contributions, excluding sole-proprietors and partners under contract for service); and

carry on business operation in Singapore.

Claim tax deduction in “Allowable Business Expenses” of the 4-line statement in your Income Tax Return (Form B/Form P). Submit PIC Enhanced Allowances/Deduction Declaration Form for Sole-proprietors & Partnerships www.iras.gov.sg Quick Links > Forms>Individuals

Submit Income Tax Return and PIC Declaration Form by the filing due date of 15 April

Any time after the end of your financial quarter(s), but not later than the filing due date of the Income Tax Return (Form B/ Form P)

Submit PIC Cash Payout Application Formwww.iras.gov.sgQuick Links > Forms > Individuals

400%Tax Deduction

Cash Payout

Sole-Proprietorship A is in the manufacturing business. In year 2012, it invested in a Computer Numerical Control (CNC) cutting machine and sent staff to attend external courses. With the new automated machine, the business is able to automate some of its manufacturing processes and increase production capacity. The external courses help to upgrade the staff’s competency level and improve productivity. The expenditure incurred is as follows:

If the Sole-Proprietor opts for cash payout for the total expenditure of $23,000, the equipment and training costs cannot be claimed as a deduction against his income.

Acquisition of PIC automation equipment: $20,000 (CNC cutting machine)Training: $5,000 (Only $3,000 incurred on training of employees. The balance of $2,000 was for training of the Sole-Proprietor)

TAX STATEMENT

TAX PAYABLE

$19,250 Assuming that the Sole-Proprietor’s chargeable income [CI] for YA 2013 before deducting equipment and training cost is $200,000. His tax payable* is $19,250.

BILL$23,000

Total qualifyingPIC costs:

$20,000 +

$3,000= $23,000Sole-Proprietorship A

TAX SAVINGS

$13,800

The Sole-Proprietor will receive a cash payout of $13,800 ($23,000 x 60%). He will still need to pay tax of $19,250. Effectively, his tax savings is $13,800. In addition, he will receive the maximum PIC bonus of $15,000.How do I apply?

When to SubmitHow to Claim/Apply

* Tax payable is calculated based on the progressive individual income tax rates and YA2013 tax rebate of $1,500.

Apply forCash Payout

Alternatively, the Sole-Proprietor can claim tax deduction on the expenditure incurred.

Claim TaxDeduction

TAX SAVINGS

$14,180($19,250-$5,070)

He will be able to claim a total tax allowance of $92,000 ($23,000 x 400%) and his CI will be further reduced to $108,000 ($200,000 - $92,000). In this case, his tax payable* will be $5,070. Effectively, his tax savings is $ 14,180 ($19,250- $5,070). In addition, he will receive the maximum PIC bonus of $15,000.

Receive $15,000

PIC BONUS +

Receive $15,000

PIC BONUS +

with Productivity &Innovation Credit (PIC)

(For Sole-Proprietors and Partnerships)

For more information on PIC, contact us:Helpline for Self-employed / Partnership: (65) 6351 3534

Email: picredit@iras.gov.sg Website: www.iras.gov.sg ways to boost

your tax savings6