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

Transcription

1 Productivity and Innovation Credit Scheme Presentation by Inland Revenue Authority of Singapore Slides updated as at 7 Apr 2014 For PIC seminars held in Apr 2014

2 Agenda Overview of Corporate Tax Basis of Assessment Filing Obligations Productivity and Innovation Credit (PIC) Scheme Overview Tax Benefits (including PIC+ Scheme) How to Claim PIC Pointers - Completing Cash Payout Application Form What Qualifies for PIC Q&A

3 Basis 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 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

4 Filing Obligations When to file Notification of filing requirement Estimated Chargeable Income (ECI) 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 Company will receive a reminder letter to file the ECI in the last month of the accounting period Income Tax Return (Form C/Form C-S) If you are filing Form C Submit 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 Submit paper Form C-S by 30 Nov or e-form C-S # by 15 Dec of each year 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) 4 * 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

5 Filing 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 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

6 Productivity and Innovation Credit (PIC) Scheme 6

7 Overview of PIC Scheme Introduced in Budget 2010; enhanced in Budget 2011, 2012, 2013 and 2014 Encourage businesses to invest in productivity and innovation activities All businesses benefit, especially SMEs 7

8 Overview 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

9 Tax Benefits under PIC 400% tax deductions/allowances on expenditure on each of 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 for accounting years 2010 to 2017 (YAs 2011 to 2018*) PIC Bonus (YAs 2013 to 2015) * Budget 2014 Enhancement 9

10 400% Tax Deductions / Allowances 10

11 Tax 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 2011 and 2012 (Combined) 2013 to 2015 (Combined) 2016 to 2018* (Combined) Expenditure Cap per Activity Tax Deduction per Activity $800,000 $3,200,000 (400% x $800,000) $1,200,000 $4,800,000 (400% x $1,200,000) $1,200,000 $4,800,000 (400% x $1,200,000) 11 * Budget 2014 Enhancement

12 Tax Deductions / Allowances 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 1 st YA is 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

13 Tax Deductions / Allowances 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/ In-licensing Training 400% deduction/allowances on up to $1.2M expenditure IP Registration Automation Design 13

14 Tax Deductions / Allowances Example (YA 2014) Assume did not claim PIC on training in YA 2013 Expenditure on staff training = $1,300,000 Total tax deductions = $4,900,000 $1,200,000 $4,800,000 (400% x $1,200,000) $100,000 $100,000 (remain 100% deduction, as cap exceeded) 14

15 New! PIC+ Scheme 15

16 PIC+ Scheme 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: YA Max. annual cap 400, , , , , ,000 Max. combined cap* $1,400,000 # $1,800,000 * Only if you are carrying on a trade or business for the relevant YAs. Otherwise, the combined cap is reduced accordingly. # 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

17 PIC+ Scheme Example (YA 2015) Assume did not claim PIC on training in YAs 2013 and 2014 Expenditure on staff training = $1,500,000 Total tax deductions = $5,700,000 $1,400,000 $5,600,000 (400% x $1,400,000) $100,000 $100,000 (remain 100% deduction, as cap exceeded) 17

18 PIC+ Scheme 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 Expenditure conversion cap under the cash payout option remains unchanged, at $100,000 for all 6 activities per YA 18

19 PIC+ Scheme 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 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 19

20 PIC+ Scheme 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: 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

21 How to determine eligibility for YA 2015 PIC+ Scheme Year of Assessment Basis period for the YA Meet conditions? OR Meet conditions? Qualifying SME? Yes Qualifying PIC+ +200k 21

22 How to determine eligibility for YA 2016 PIC+ Scheme Year of Assessment Basis period for the YA Meet conditions? OR Meet conditions? Qualifying SME? Yes Qualifying PIC+ +600k * * Assume no change in business parent or business does not become part of a group in YA 2017 &

23 PIC+ Scheme 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 23

24 PIC+ Scheme 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 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

25 How 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 25

26 Tax Deductions / Allowances Carry back to offset income of immediate preceding YA Unutilised tax deductions/ allowances Transfer - Group Relief System (companies) - between spouses* (individuals) Carry forward to offset income of future YAs Note: Subject to shareholding test and other relevant conditions under current rules * From YA 2016, the transfer between spouses will be phased out 26

27 Cash Payout Option 27

28 Cash Payout Option Option to convert expenditure of up to $100,000 in all 6 activities per YA At 30% (YAs 2011 & 2012) / 60% (YAs 2013 to 2018*) cash payout rate $100,000 60% $60,000 Expenditure incurred during the basis period for YA 2014 Expenditure converted is not tax deductible Cash payout is non-taxable Cash Payout for YA 2014 * Budget 2014 Enhancement 28

29 Cash Payout Option Years of Assessment Expenditure Cap for All 6 activities Maximum Cash Payout 2011 and 2012 $200,000 $60,000 (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

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

31 Cash Payout Option Conditions for cash payout option New! 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 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 Note: The 3-local-employee condition does not apply to 400% tax deductions/allowances 31 * Budget 2014 Enhancement

32 How to Claim Cash Payout Cash payout How When Submit: PIC cash payout application form; and Hire-purchase template (where applicable) After the end of each quarter or combined quarters in the accounting year but not later than the income tax filing due date 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. 32

33 Pointers: Completing Cash Payout Application Form 33

34 Pointers Cash Payout Application Form Click here for link to new cash payout application form 34

35 Pointers Cash Payout Application Form 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 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 35

36 Pointers Cash Payout Application 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 55 Newton Road Revenue House Singapore 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 36

37 Pointers Cash Payout Application Form 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 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. 37

38 PIC Bonus 38

39 PIC 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 over the 3-year period from YAs 2013 to 2015 PIC Bonus is given on top of existing PIC benefits 39

40 PIC 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: 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 Carrying on business operations in Singapore ^ 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 40

41 PIC Bonus Example Company Description YA 2013 YA 2014 YA 2015 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 41

42 PIC 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

43 Application of the 3-local-employee condition (From YAs 2013 to 2015) 43

44 3-local-employee condition (Cash Payout & PIC Bonus) YAs 2013 to 2015 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 exercised Quarter 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 application 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 44

45 3-local-employee condition (Cash Payout & PIC Bonus) YAs 2013 to 2015 Example 2: Business Y has a Dec accounting year-end and it opts for cash payout at the end of 1 st, 3 rd and 4 th quarters. Year of Assessment 2015: Quarters Jan Mar 2014 Apr Jun 2014 Jul Sep 2014 Oct Dec 2014 Cash payout option exercised Quarter 1 Quarters 2 & 3 combined Quarter 4 Relevant month for determining 3-local-employee condition Mar 2014 Sep 2014 Dec 2014 When to submit cash payout application From Apr 2014 From Oct 2014 From Jan 2015 Deadline to submit cash payout application 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 45

46 3-local-employee condition (PIC Bonus - For a business claiming enhanced deductions/allowances) Example 3: Business Z has a Dec accounting year-end and it opts for enhanced deductions/allowances. Year of Assessment 2015: Accounting period Jan Dec 2014 Enhanced deductions / allowances Relevant month for determining 3-local -employee condition Deadline to submit 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 Dec 14 46

47 New! Application of the 3-local-employee condition (From YAs 2016 to 2018) 47

48 3-local-employee condition (Cash Payout) YAs 2016 to 2018 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 2016: Quarters Jan Mar 2015 Apr Jun 2015 Jul Sep 2015 Oct Dec 2015 Cash payout option exercised Quarter 1 Quarter 2 Quarter 3 Quarter 4 Relevant months for determining 3-local-employee condition Jan Mar 2015 Apr Jun 2015 Jul Sep 2015 Oct Dec 2015 When to submit cash payout application From Apr 2015 From Jul 2015 From Oct 2015 From Jan 2016 Deadline to submit cash payout application By income tax return filing due date 15 Apr 2016 for sole-proprietor and partnership 30 Nov 2016/ 15 Dec 2016 (e-file Form C-S) for company 48

49 3-local-employee condition (Cash Payout) YAs 2016 to 2018 Example 2: Business Y has a Dec accounting year-end and it opts for cash payout at the end of 1 st, 3 rd and 4 th quarters. Year of Assessment 2016: Quarters Jan Mar 2015 Apr Jun 2015 Jul Sep 2015 Oct Dec 2015 Cash payout option exercised Quarter 1 Quarters 2 & 3 combined Quarter 4 Relevant months for determining 3-local-employee condition Jan Mar 2015 Jul Sep 2015 Oct Dec 2015 When to submit cash payout application From Apr 2015 From Oct 2015 From Jan 2016 Deadline to submit cash payout application By income tax return filing due date 15 Apr 2016 for sole-proprietor and partnership 30 Nov 2016/ 15 Dec 2016 (e-file Form C-S) for company) 49

50 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 YAs 2013 to 2018: income tax return by the filing due date: 30 Nov Relevant month/months for determining 3-localemployee condition For sole-proprietor/ partnership, submit income tax return and PIC declaration form by the filing due date: 15 Apr Last month of the basis period of the relevant YA After the end of each quarter or combined quarters in the accounting year but not later than the income tax filing due date 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

51 Capping of Expenditure/Payout for Taxpayers with Multiple Businesses 51

52 Individuals with Multiple Businesses Individual A Individual A Individual B Business 1 Business 2 Expenditure cap applies regardless of the number of businesses A has as a sole-proprietor Partnership Business A separate expenditure cap is applicable on the partnership 52

53 Companies that Own Partnership Businesses Company A Company A Company B Business Expenditure cap applies Partnership Business Separate expenditure cap applies 53

54 What Qualifies for PIC 54

55 Training of Employees 55

56 Training of Employees External training All external training qualify Qualifying Expenditure Includes Course fees to any external training service provider E.g. registration or enrolment fees, examination fees, tuition fees and aptitude test fees Rental of external training premises Qualifying Expenditure Excludes Accommodation, travelling and transport expenses of employees attending the training Overheads like imputed rental and utilities Meals and refreshments provided during the courses Training materials and stationery 56

57 Training of Employees 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

58 Training of Employees 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 group setting, with prepared materials and handouts Exclude informal sessions such as spontaneous consultation, day-to-day problem solving and coaching sessions 58

59 Training of Employees In-house training Qualifying Expenditure Includes Salaries and other remuneration (excluding director fees) paid to inhouse trainers for course delivery Rental of external training premises Meals and refreshments provided during the courses Training materials and stationery Qualifying Expenditure Excludes Salaries and other remuneration paid to in-house trainers for other duties including preparation of training material Salaries and other remuneration paid to employees providing administrative support Absentee payroll Accommodation, travelling and transport expenses Overheads like imputed rental and utilities 59

60 Training of Employees Example on the $10,000 cap WSQ Accredited ($ 000) In-house Non- WSQ accredited ($ 000) External ($ 000) Total ($ 000) Salaries of in-house trainers Training materials Course fees for employees Total based on hours spent on conducting courses Amount qualifying for PIC benefits (Capped at $10,000) based on hours spent on conducting courses 60

61 Training of Employees 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; 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

62 Training of Employees 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 deduction 300% of up to $1,200K expenditure Total 11 Jan Mar 13 $250k 100k $250k 100k $250k x 300% = $750k $100k x 300% = $300k $1,000k 400k 350K 1,050K 1,400K YA 2014 Tax Computation (assuming no tax disallowable items) Net Profit Before Tax $1,850k Less: Enhanced deduction for training costs (1,050k) Adjusted Profit Before Capital Allowances 800k 62

63 Training of Employees If opt to convert $100,000 of training costs to cash payout: Training Date Training cost incurred Cost Converted Base deduction 100% Enhanced deduction 300% Total 11 Jan 13 $250k $250k $250k x 300% = $750k $1,000k 22 Mar k 100k K 750K 1,000K YA 2014 Tax Computation (assuming no tax disallowable items) Net Profit Before Tax $1,850K Add: Expenditure converted into cash 100k Less: Enhanced deduction for training costs (750k) Adjusted Profit Before Capital Allowances 1,200k Cash payout = 60% x $100k = $60k 63

64 New! Training of Employees 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 to Employee is recharged by Business H to Business D Reimbursed Employee s wages & training expenses Business H Business D Wages, Training Employee Employment contract Deployed to work 64 * Budget 2014 Enhancement

65 Training of Employees 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 purposes of satisfying 3-local-employee condition 65

66 Training of Employees Individuals deployed under centralised hiring arrangement 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 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

67 Training of Employees Individuals deployed under centralised hiring arrangement 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; 2) The corporate structure and centralised hiring practises are adopted for bona fide commercial reasons; and 67

68 Training of Employees Individuals deployed under centralised hiring arrangement Qualifying conditions 3) (a) For purpose of claiming PIC on training expenses The related party (Business H) does not claim deductions on the training 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

69 Training of Employees (Summary) Without PIC With PIC (YAs 2011 to 2018) In-house 100% revenue deduction External 400% tax deduction subject to expenditure cap 1, 100% deduction on balance exceeding the cap Qualifying Expenditure for Training of Employees including qualifying agents - Remuneration for course delivery - Rental of external premises - Refreshments - Training materials - Course fees paid - Rental of external premises - Refreshments - Training materials Cash Payout Option (YAs 2013 to 2018) PIC Bonus Convert expenditure at 60% subject to cap 2 PIC Bonus of up to $15,000 over 3-year period from YAs 2013 to Total expenditure cap for YAs 2011 and $800,000 for each of the six activities Total expenditure cap for YAs 2013 to $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 69 2 Maximum expenditure for YAs 2013 to $100,000 per annum for all six activities taken together

70 PIC IT and Automation Equipment 70

71 PIC 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 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 applies 71

72 PIC IT and Automation Equipment Current Automation Equipment in PIC IT and Automation Equipment List" includes: Facsimile Optical character reader Laser printer Mainframe/Computers Milling machines Office system software Automatic storage and retrieval system of warehouses Injection mould machines Automotive navigation systems Automated kitchen equipment for the purpose of food processing (for F&B industry only) Interactive shopping carts 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. 72

73 New! PIC IT and Automation Equipment With effect from YAs 2014 to 2018, PIC IT and Automation Equipment List" has been expanded: Description Item 37 Website Budget 2014 Enhancement Website development costs 100% write-off will apply under 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

74 Cloud Computing Payments Qualifying for PIC Enhanced Deduction Source: IDA 74

75 Flowchart on PIC IT and Automation Equipment IT and Automation Equipment Yes Capital Allowance Write-down over 1 year, 3 years or tax working life of asset (Refer to the PIC IT and Automation Equipment List*) In PIC IT and Automation Equipment List* Approved cases * Refer to IRAS website at <For Companies><Productivity and Innovation Credit> Capital Allowance Write-down over 3 years or tax working life of asset No Case by-case approval, subject to meeting criteria Rejected cases Does not qualify for PIC Continue with current Capital Allowance treatment 75

76 PIC IT and Automation Equipment 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: 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

77 PIC IT and Automation Equipment Case-by-case approval 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, 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

78 PIC IT and Automation Equipment Case-by-case approval Example of automation equipment approved on a case-bycase basis Microsoft Office el Worksh 78

79 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. 4. If you are applying for more than 1 such equipment, please use a separate form for each equipment. 5. 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. 6. The claim for PIC should not be made in your tax return or cash payout application form until approval has been granted. 7. Please submit the completed form to IRAS at 55 Newton Road, Revenue House, Singapore Part A - Taxpayer Particulars 1. For all businesses (including sole-proprietorships): Name of business : Tax reference no. of business : 2. For Sole-proprietors only: Name of Sole-proprietor : Tax reference no. of Sole-proprietor : Part B - Details 1. Year of Assessment of claim : Productivity and Innovation Credit (PIC) Application for Approval of Equipment for PIC (From Year of Assessment 2013) Please complete this form if you are applying for approval of equipment for PIC from Year of Assessment This form may take you 15 minutes to complete. Please read the IRAS website on "Application for Approval of Equipment for PIC" at - Businesses For Companies Productivity and Innovation Credit. 2. Accounting Period : 01/01/2013 (dd/mm/yyyy) to 31/12/2013 (dd/mm/yyyy) B1. Details of automation equipment (Please attach a separate sheet if you need more space.) 1. Detailed description of the equipment (e.g. name, model, function & specification) and to provide photographs where applicable. Equipment: CCTV Function: Detailed specifications as provided by manufacturer ABC Pte Ltd X Date of purchase/lease period (dd/mm/yyyy), (if applicable) 01/03/ Cost of equipment $ 5,200 4a. Is the equipment a basic tool used in the business? Please mark "X" in the appropriate box x Yes No (E.g. washing machine and dryer are basic tools used in the laundry business) If you have indicated "Yes" in 4a above, please complete 4b: 4b. Has the equipment been used in the business before? Yes No If you have indicated "Yes" in 4b above, please complete 4c: 4c. 5. Does the equipment increase productivity as compared to existing equipment used in the business? 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. Yes No The CCTV replaces the need for security guards to monitor incidences of theft etc. 6. How does the equipment increase or enhance productivity of the business (for example in terms of reduced man-hours, more output or improved work processes)? The equipment reduces the number of security guards required from 5 to 3. Part C - Declaration I declare that the information given is true and complete. Signature : Full name of authorised person : Mr XXX Date (dd/mm/yyyy) : 15/3/2013 Name of contact person & Mr XXX Designation : Director number : Under the Singapore Income Tax Act, penalties will be imposed for making a false or incorrect declaration. If you require further clarification, please call our helpline at (for companies) / (+65) (for sole-proprietorship/partnership) or send an to picredit@iras.gov.sg.

80 PIC IT and Automation Equipment E.g. Capital allowances (CA) under PIC for YA 2014 Assume no CA claimed under PIC for YA 2013 Equipment Cost Base CA 100% Enhanced CA 300% on expenditure of up to $1.2M Total A Note 1,240k 1: Portion of Equipment A that (Note qualifies 1) for enhanced allowance = $610k ($800k cap less cost of Equipments B & C) B $340k 400k C 500k 1,240k 900k $340k 400k $300k x 300% = $900k 400k x 300% = 1,200k $1,240k 1,600k 500k 500k x 300% = 1,500k 2,000k Total CA for YA ,840k Note 1: Portion of Equipment A that qualifies for enhanced allowance = $300k ($1,200k cap less cost of Equipment B & C) 79

81 PIC IT and Automation Equipment 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

82 PIC IT and Automation Equipment 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

83 PIC IT 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

84 PIC IT 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

85 PIC IT and Automation Equipment Example - Automatic waiver Acquired $1,500,000 worth of qualifying equipment in Jun 2013 (Enhanced allowances claimed in YA 2014 on cost of $1,200,000) Holding period less than one year Jan 2013 Dec 2013 Dec 2014 Disposed of equipment costing $100,000 in Jan 2014 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

86 PIC IT and Automation Equipment (Summary) Purchase Lease Without PIC 100% accelerated CA 100% revenue deduction With PIC (YAs 2011 to 2018) 400% allowances/deductions subject to expenditure cap 1, 100% allowances/deductions on balance exceeding the cap Qualifying Expenditure Cost of equipment Lease payments Minimum Ownership Period 1 year from the date of purchase N.A. 2 Cash Payout Option (YAs 2013 to 2018) Per equipment basis Convert expenditure at 60% subject to cap 3 Convert expenditure at 60% subject to cap 3 PIC Bonus PIC Bonus of up to $15,000 over 3-year period from YAs 2013 to Total expenditure cap for YAs 2011 and $800,000 for each of the six activities Total expenditure cap for YAs 2013 to $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 85 Equipment cannot be sub-leased within the same basis period of the YA 3 Maximum expenditure for YAs 2013 to $100,000 per annum for all six activities taken together

87 Case Study 1: 400% Tax Deduction/Allowance + PIC Bonus ABC Fashion Pte Ltd runs a retail outlet Investments in accounting year ) 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 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) Tax deduction/allowance $12,000 (Total Expenses) x 400% (YA 2014) $48,000 Choose your Benefits! A) 400% Tax Deduction B) Cash Payout UP TO $8,160 TAX SAVINGS based on corporate tax rate of 17% RECEIVE $12,000 PIC BONUS 86

88 Case Study 2: CASH PAYOUT + PIC Bonus ABC Fashion Pte Ltd runs a retail outlet Investments in accounting year ) 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 PIC Cash Payout Application Form 1) Apply any time after the end of the financial quarter(s), 2) But not later than 30 Nov / 15 Dec 2014 (e-file Form C-S) Cash Payout Calculation $12,000 (Total Expenses) x 60% (YA 2014) $7,200 Choose your Benefits! A) 400% Tax Deduction B) Cash Payout RECEIVE $7,200 CASH PAYOUT RECEIVE $12,000 PIC BONUS 87

89 Acquisition/In-licensing of Intellectual Property 88

90 Acquisition of Intellectual Property Qualifying expenditure Acquisition cost of patent, copyright, trademark, registered designs, geographical indication, layout design of integrated circuit, trade secret and 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, customerbased 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

91 Acquisition of Intellectual Property 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 90

92 Acquisition of Intellectual Property 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 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 business 91

93 In-licensing of Intellectual Property 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 are covered under leasing of PIC automation equipment. Qualifying expenditure means license fees and excludes expenditure for the transfer of ownership of any those rights and legal fees and other incidental costs arising from the licensing of such rights 92

94 Acquisition/In-licensing of Intellectual Property (Summary) Acquisition In-Licensing Without PIC 100% WDA over 5 years 100% revenue deduction With PIC (YAs 2011 to 2018) 400% allowances/deductions subject to expenditure cap 1, 100% allowances/deductions on balance exceeding the cap Qualifying Expenditure Cost of IPR License fees Minimum Ownership Period 1 year from the date of acquisition N.A. Cash Payout Option (YAs 2013 to 2018) Per IPR basis Convert expenditure at 60% subject to cap 2 Convert expenditure at 60% subject to cap 2 PIC Bonus PIC Bonus of up to $15,000 over 3-year period from YAs 2013 to Total expenditure cap for YAs 2011 and $800,000 for each of the six activities Total expenditure cap for YAs 2013 to $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 93 2 Maximum expenditure for YAs 2013 to $100,000 per annum for all six activities taken together

95 Registration of Intellectual Property (Patents, Trademarks, Designs and Plant Varieties) 94

96 Registration of Intellectual Property Qualifying expenditure 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

97 Registration 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; $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 applies 96

98 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

99 Registration of Intellectual Property (Summary) Without PIC 100% deduction on patenting costs With PIC (YAs 2011 to 2018) 400% tax deduction subject to expenditure cap 1, 100% deduction for balance exceeding cap Qualifying Expenditure Minimum Ownership Period Cash Payout Option (YAs 2013 to 2018) PIC Bonus Official fees paid to Registry and professional fees 1 year 2 from the date of filing Per filing basis. Convert expenditure at 60% subject to cap 3 PIC Bonus of up to $15,000 over 3-year period from YAs 2013 to Total expenditure cap for YAs 2011 and $800,000 for each of the six activities Total expenditure cap for YAs 2013 to $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 98 2 Even if filing is unsuccessful, IPR is still subject to 1 year ownership period 3 Maximum expenditure for YAs 2013 to $100,000 per annum for all six activities taken together

100 Research & Development 99

101 Research & Development 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

102 Research & Development What is R&D? Novelty New in relation to creation or improvement of products, processes or knowledge 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

103 Research & Development 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

104 Research & Development 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 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

105 Research and Development Qualifying expenditure 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) 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&D 104

106 Research & Development (Summary) Without PIC 100%/150% tax deduction With PIC (YAs 2011 to 2018) Qualifying Expenditure Cash Payout Option (YAs 2013 to 2018) PIC Bonus 400% tax deduction of qualifying expenditure subject to expenditure cap 1. For the balance exceeding the cap and all other R&D expenses, deduction will be 100%/150% Staff costs and consumables (if outsourced, 60% of invoiced costs) Convert at 60% of expenditure subject to cap 2 PIC Bonus of up to $15,000 over 3-year period from YAs 2013 to Total expenditure cap for YAs 2011 and $800,000 for each of the six activities Total expenditure cap for YAs 2013 to $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 Maximum expenditure for YAs 2013 to $100,000 per annum for all six activities taken together

107 Approved Design Project 106

108 Approved Design Project 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