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Tuesday, May 7, 2013

Growing your business with PIC

PIC stands for Productivity and Innovation Credit. It took me the past few months to really study through all the documents on the IRAS website, to ponder, think through, calculate, before I make the application.

In short, it is a very powerful grant by the government to grow your business's productivity.

It can be applied in 6 areas
1) Acquisition and leasing of PIC Information Technology (IT) and Automation Equipment;
2) Training of employees;
3) Acquisition and In-licensing of Intellectual Property Rights;
4) Registration of patents, trademarks, designs and plant varieties;
5) Research and development activities; and
6) Design projects approved by DesignSingapore Council.

Basically, I think (1) and (4) applies to most businesses, especially (1).
A computer, a photocopier, modems, hard disk storages, display TVs, all count towards (1).


For businesses with big profits, you probably don't even need to read this post. Just go ahead with the 400% tax deductions. For small businesses who don't make much profits, the 60% cash payout option makes more sense.

In layman terms, 60% cash payout means IRAS pays 60% of the expenditure made in the 6 qualifying activities. That means for every $1000 invested into (1), IRAS pays you $600, subjected to a maximum investment of $100k per year per activity. Well, my really small tuition business will not exceed that definitely.

As of budget 2013, a new scheme called PIC Bonus is implemented. Well, luckily I waited till past this budget before I made any decision. In short, IRAS gives dollar for dollar on the expenditure, subjected to a cap of $15k.

A graphical scheme is displayed below.

It looks nice on the surface, but of course, there is a catch to this.
1) The PIC Bonus is taxable! So the $15k will be considered part of revenue!
However, the PIC Cash Payout is not considered part of revenue. Additionally, the purchase of the equipments cannot be counted towards capital allowance.

2) Contributions to 3 local employees' CPF needed in the last month of the quarter. Owners, shareholders and directors of the business is not included.
The criteria is pretty comprehensive . More details can be found here:

Part-time and full-time employees are both applicable to the 3 local employees criteria, provided all are Singaporeans or Singapore PRs.


From a business perspective, it makes sense to spend time studying this, and to invest wisely into improving the business productivity with this grant.

16 comments:

  1. For a moment, I thought you are writing about microcontrollers :)

    ReplyDelete
    Replies
    1. This?

      http://en.wikipedia.org/wiki/PIC_microcontroller

      LOL

      Delete
  2. a) Did you claims on salary?
    b) Did you claims on Training Services?
    c) Did you claims on Technology Services?

    SMEs Under-Claim because they do not claim for Salary Expenses

    A lot of SMEs, a lot of accountants & a lot of tax agents do not claim for salary expenses. There are various reasons.

    1) They do not know about it - They do not know that salary expenses can be claimed.

    2) IRAS requires more clarification - It is also true that IRAS requires more clarification on projects that involve salary expenses claims.

    And if you are claiming for salary expenses, do you think it is easier to claim for S$ 300,000 of expenses in the 3 financial years?

    You may be doing Development Work without Knowing It. If you do not claim, you miss out potentially S$ 195,000 of funding support from Government.

    Email me to find out more on how to claim on the above.

    ReplyDelete
    Replies
    1. No worries, after spending 3 plus months on this, and going down to IRAS a few times to clarify certain doubts, I'm pretty sure I have done the requirements. Tuition business is rather straightforward.

      Delete
  3. Actually I'm not so familiar with PIC but I think it has a big contribution and role to help develop and grow small businesses and enterprises. Thanks for this.

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