What is the Productivity & Innovation Credit (PIC) Grant?
The IRAS PIC Bonus encourages small to medium enterprise to take advantage of the PIC scheme to invest in innovation and productivity.
Businesses that spend a minimum of $5,000 in PIC activities in one year will receive a dollar-for-dollar matching cash bonus. The cash bonus will be up to $15,000 over three Years of Assessment (YA 2013 to YA 2015). It will be paid on top of the existing PIC Grant benefits, and is expected to cost over $450 million over three years.
The PIC scheme supports investments in Innovation and Productivity. Businesses investing in productivity improvements can now enjoy huge tax savings under the new PIC Grant Scheme.
The PIC Bonus Grant provides up to 400% tax deduction or 60% cash payout to businesses investing in innovative, process automation equipment and facilities. These include software and hardware investments, as well as training and coaching for employees.
There are two options for businesses in Singapore:
For YA 2011 to YA 2015, you can enjoy 400% tax deduction on up to $400,000 of your investment spending per year in software and hardware investments, as well as employee training and coaching.
This means your business will be permitted to a tax deduction of up to $1.6 million (400% x $400,000) for innovative software and hardware investment that boosts productivity.
Below is an example of tax calculation under the new PIC scheme for your reference:
By spending $ 100,000 in innovative, productivity boosting software and hardware, you can submit an expenditure of $ 400,000 (400% x $100,000) and get up to $68,000 ($400,000 x 17%) in generous tax savings.
So you can benefit from 68% ($68,000 of $100,000) savings on your software
For YA 2011 to YA 2013, you can apply to convert up to $100,000 of your investment spending per year into a non-taxable cash payout at a conversion rate of 60%.
The cash payout is a good option for small and growing business that has employed at least three local employees (Singapore Citizens or Permanent Residents with CPF contributions).
Below is the example of tax calculation for your reference:
By spending $ 100,000 in software and/or hardware, you convert your software and/or hardware investment into cash payout of $60,000 ($100,000 x 60%). So you can enjoy 60% ($60,000 of $100,000) savings on your software and/or hardware costs
PIC Tax Bonus Benefits
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Businesses in Singapore can now benefit from PIC grants up to $60, 000, a noticeable improvement of the former $30,000 sum. These benefits also specified that businesses with software worth $100, 000 will receive grants covering 60% of this cost. This will help you save up to $60,000 when purchasing innovative technology and software.
Businesses that offer training for their employee to improve the productivity and value of their organization worth more than $50,000 will benefit from a PIC bonus grant worth 60% of the invoice. This means that your business could save $30,000 in training their employees and improving your business as a whole.
Singapore innovation and productivity grants also stated that businesses that purchased innovative automation equipment such as iPads to enhance the efficiency for the team members can claim up to $60,000 through a PIC bonus scheme by the IRAS over the next few years until 2015.