At the occasion of the presentation of the 2014 budget on Friday 21 February 2014, the Finance Minister of Singapore, Mr. Tharman Shanmugaratnam, has announced new initiatives and enhancements related to the PIC Scheme. Here is an overview on the key and latest updates about the PIC Scheme and R&D additional tax deductions.
The PIC Scheme will be extended for 3 years till YA 2018 to give businesses more time to put in place productivity improvements. This extension will cost S$ 3,6 Bn to the government.
The PIC+ Scheme is introduced to provide additional support to SMEs who are making more substantial investments to transform their businesses.
With effect from YA 2015 and under the PIC enhanced tax deductions/allowances, the expenditure cap for SMEs will be increased from S$ 400,000 to S$ 600,000 per YA per qualifying activity
Qualifying businesses, ie. SMES, for the PIC+ scheme are sole-proprietorships, partnerships and companies with:
• annual turnover of not more than S$ 100 million, or
• employment size of not more than 200 workers (this criterion applied at the group level if the business is part of a group).
With effect for YA 2016 to YA 2018, IRAS has refined the three-local-employees condition for PIC cash payouts. Businesses applying for the cash payout option will need to have 3 CPF contributions for all three months in a quarter or for the last three months of the combined consecutive quarters to which the cash payout option relates to.
FY 2014 is the last financial year to benefit from the tax deferral option.
Among other items, website development costs are eligible to the PIC Scheme from YA 2014 including costs incurred for the one-time registration of a domain name for the website.
Pure examination fees without training inquired qualify for the PIC Scheme provided it was incurred for the purposes of the claimant’s trade or business.
The R&D claim form has evolved and it is now required to submit a description of R&D projects to IRAS whatever the amount claimed. In addition, the government highlights the constitution of a panel of scientific and industrial experts for the review of R&D claims upon taxpayer’s approval.
Furthermore, the government has announced the extension of the 50% additional R&D tax deductions for 10 years till 2025 to encourage private R&D. Those tax deductions are not capped. To attract businesses to conduct large R&D projects in Singapore, the further tax deduction subjected to EDB approval will be extended for five years till 31 Mar 2020. The above additional/further tax deductions are in addition to the enhanced tax deductions under the PIC scheme.
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