6 Costly Mistakes When Forgetting to Use the PIC Grant
- Posted by admin
- 20 December 2017
The PIC grant often gets a bad reputation, but this useful scheme can help businesses ease their tax burden or take advantage of cash payouts to improve productivity.
The Productivity and Innovation Credit, or PIC, grant provides tax deductions, cash payouts and other benefits to Singaporean businesses. The goal is to encourage businesses to try out new technologies or to boost productivity without having to resort to cheaper labor.
Under the PIC scheme, businesses can take advantage of 400% tax deductions for qualifying expenses incurred when performing any of the Six Qualifying Activities. Some qualifying businesses may also convert eligible expenditures up to $100,000 for each Years of Assessment into cash, at a 60% conversion rate.
Many businesses overlook these 6 less-obvious uses for the PIC grant, and wind up making costly mistakes in the process.
1. Cloud Computing Services
Many businesses are transitioning to cloud-based platforms, but most don’t realize that a PIC grant can be used to cover the cost of transitioning to cloud services.
If you’re currently using cloud services as part of your business operations, talk to your accountant to see if these costs qualify for PIC benefits.
2. Leasing or Buying IT Equipment
If you’re running a business that sells IT software or equipment, you can get a PIC grant when leasing or purchasing equipment. Many business owners assume that the grant can only be used when buying equipment outright, but you may use it when leasing.
A PIC grant may also cover the cost of leasing your office software.
The equipment must be listed on the PIC IT and Automation Equipment List for it to qualify. Check with the IRAS to see the list of qualifying equipment.
3. Creating Your Website
Most business owners are unaware that PIC benefits can be claimed on web development costs – but only if you’re building a new website.
Businesses can claim PIC benefits on the cost to design and develop the website as well as the one-time fee to register the domain. But there is one stipulation here: the website must be up and running (i.e. accessible online). Benefits cannot be claimed on a website that is still in development.
Any changes or enhancements to the website (e.g. content re-writing, maintenance, updates and support) are considered a revamp of your existing website and do not qualify for PIC benefits. There are a few exceptions to this rule, however. If you are adding e-commerce functions or enhancing your website to make it mobile responsive, the costs of these developments would qualify for PIC benefits because they are considered software development.
4. Purchasing or Licensing Intellectual Property
Costs incurred in the acquisition of IPRs (intellectual property rights) can also qualify for PIC benefits, but only if a company or partnership is making the claim.
In order to qualify, the acquirer of the IPR must be granted legal and economic ownership of the IPR by the seller of the intellectual property rights.
If licensing an IPR, business can claim PIC benefits on the costs incurred to license the property for use in their operations.
IPRs can include patents, trademarks, copyrights, registered designs, and other forms of intellectual property. The IRAS website has a complete list of the properties covered under PIC.
5. Registering Your Own Intellectual Property
If you plan on registering trademarks, patents, plant varieties and designs, the costs associated with this process may qualify for PIC benefits.
Benefits can only be claimed if you acquire the economic and legal ownership of a qualifying IPR. If you prefer the cash payout, you may not opt for partial conversion. Cash payouts are done on a “per registration basis” on the complete cost of the IPR registration up to the maximum expenditure permitted.
If costs associated with the registration of the IPR exceed the maximum expenditure cap, the excess expenditure will be forfeited and will not qualify for deduction claims against the business’s income.
6. In-House Employee Training
The costs you incur for training your employees will qualify for PIC benefits, and this may include in-house training. As per the IRAS, training can be performed by company personnel or external trainers.
For YA 2012 to YA 2018, qualifying costs associated with in-house training from sources not accredited by the ITE (Institute of Technical Education) and WDA (Workforce Development Agency) will also qualify for PIC benefits. The cap is $10,000 per YA.
No prior approval from the IRAS is required for training to qualify for PIC.
The PIC scheme allows businesses to lower their tax burden, but many fail to take full advantage of the program. While some activities are an obvious choice for PIC benefits, these six lesser-known activities can also help you save money on your taxes while boosting production. Be sure to talk to your accountant about claiming PIC benefits if you engage in any of these activities.