What is cash payout?
Cash payout is one of the options under the Productivity and Innovation Credit (PIC) scheme. The Inland Revenue Authority of Singapore (IRAS) will return businesses 60% of the money spent on total claimable under the scheme. The total expenditure for each Year of Assessment (YA) claimable is capped at $100,000. For example, if a business spends $200,000 on qualified activities, the business is able get back only $60,000 ($100,000 (capped value) x 60%).
400% Tax Deductions/ Allowances is another option in the PIC scheme. Business can opt for one of the choices if they feel that they can benefit from that particular scheme more than other.
What are the 6 qualified activities that are claimable?
Qualified activities in the PIC scheme refers to activities invested by the business that enhance productivity and innovation.
Below here are the 6 qualifying activities:
- IT and Automation
- Training of employee
- Acquisition and in-licensing of Intellectual Property Rights
- Registration of Intellectual Property Rights
- Research & Development activities
- Approved Design Projects
Who is eligible to claim cash payout?
All business that are registered through Accounting and Corporate Regulatory Authority (ACRA) such as sole-proprietorships, partnerships and companies are eligible to claim cash payout.
What are the requirements for cash payout?
- Incurred qualifying expenditure (Revenue), Expenditure has to fall under the Year of Assessment (YA) claimed.
- For example, if laptops are purchased in 2013, PIC claimed will be in YA 2014
- Active business operations in Singapore
- Contributing CPF to at least 3 local employees for three months consecutively
- Centralised Hiring Arrangements and the 3-Local-Employee Condition
From YA 2014, below here are the qualifying conditions that will regard individuals as employees of the business:
- Claimant is able to produce supporting documents to prove employees are working solely in the claimant entity
- Corporate structure and centralised hiring practices are adopted for bona fide commercial reasons
- Employee whose cost has been recharged will not contribute to the requisite headcount of the related party
Equipment to be “In Use” at point of Cash Payout Election
From YA 2016, businesses will need to show that IT and Automation equipment is in use by the business at the point when they elect for cash payout. The objective of this condition is to encourage businesses to increase their productivity level by using IT and Automation equipment in their businesses.
One exemption is when businesses with genuine cash-flow difficulties and are not able to secure the delivery of the equipment before payment is made, IRAS may waive the requirement for the equipment to be “in use” on a case-by-case basis, subject to conditions.
Things to note when applying for cash payout option
- Qualifying expenditure cannot be claimed as tax deductions/allowances, once it is converted to cash
- Election to convert qualifying expenditure to cash is irrevocable.
- $400 is the minimum qualifying expenditure for each application
- Qualifying expenditure to be converted to cash is the amount net of grant or subsidy by the Government or any statutory board, and includes grant or subsidy pending approval.