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.

Source: https://www.iras.gov.sg/irasHome/page04.aspx?id=13838

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:

https://www.iras.gov.sg/irashome/uploadedfiles/e-Tax_Guide/etaxguides_CIT_Revised%20PIC%20e-Tax%20Guide%20_2012_08_17.pdf

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.