Productivity Innovation Credit (PIC) FAQ
As we are helping our clients, these questions on Productivity Innovation Credit (PIC) keep popping up.
So, here are the answers to your burning questions:
What is PIC?
PIC stands for Productivity Innovation Credit. It is administered by Inland Revenue Authority of Singapore (IRAS). The PIC scheme rewards Singapore companies who innovate and become more productive.
What type of companies qualify?
All business entities qualify, be it sole proprietorship, partnerships or private limited. Newly setup companies also qualify!
Do I need a minimum revenue to qualify?
No. But according to IRAS, it cannot be zero amount. You need to account for 3 months’ of revenue (i.e one quarter).
What is the minimum criterion then?
You need to have 3 employees who are either Singaporean citizens or Singapore Permanent Residents. AND make sure you are paying CPF into their CPF accounts. You as the owner or director is excluded from this head count.
How much CPF should I pay?
That depends on how much you are paying them in terms of their salaries and their age. For CPF contribution rates, go to CPF Board’s website. This CPF calculator is very helpful.
Is there a minimum CPF to be considered as an employee?
Good question. Honestly, we have no idea. It is really up to IRAS’ discretion. However, anecdotal evidence on the ground suggests that CPF contributions which suggest that you are paying CPF just to rig the system is frowned upon and usually are not approved. Basically, think about it, how much is the minimum wage that Singaporeans are getting these days? Even our aunties are being paid above S$1k gross salary.
What if I just hired them?
For previous years, IRAS looked at only your last month for that quarter that you are claiming for PIC. For example, if you are claiming for Second Quarter of 2014 (April to June 2014), IRAS will look at the last month, that is, June’s CPF contributions. This is provided you make your claim in July 2014, which falls into the Third Quarter 2014. But do note that from Year 2015, this has changed. You will need to show you are paying them CPF for the entire quarter, that is 3 months.
Can I hire part-time staff then?
Yes, you can. However, the decision lies with IRAS whether to consider them as legitimate employees or not.
Can I hire them just for the sake of claiming PIC?
No. IRAS takes a very serious view on this. Make sure you are hiring them for your business.
Can I hire my family members, friends and relatives?
Again, this is a leading question and suggests you are trying to rig the system, which IRAS is not too happy about. Make sure you are hiring them for legitimate reasons which your business REALLY needs. You need to convince IRAS of their roles in your business.
What is the difference between PIC Credit and PIC Bonus?
PIC Bonus pays you dollar for dollar on your total spend. Do take note that while PIC Credit has been extended to 2018. PIC Bonus has already ended in 2014.
Are there different types of PIC Credit?
Yes. You have two options for PIC Credit: either 400% tax reductions or 40% cash payout. Most startups and smaller businesses prefer the latter, while larger SMES the former. The PIC scheme will lapse after YA(Year of Assessment) 2018. This means that to be entitled to the PIC Credit, all projects must be completed and invoiced by 31st December 2017.
How does this calculation work out in real life?
For example, if you spend $10,000 on a project. You will get $4,000 back because of PIC Credit.
Are you sure it is that good?
Yes, it is indeed that good. The Singapore government is very generous, so make sure you utilise the scheme well to bring your business to the next level. The PIC Scheme as announced in Budget 2014 will be extended to 2018.
Is there a deadline I must complete the projects then?
Since IRAS goes by Year of Assessment (YA), YA2018 means you need to complete the projects by 2017 to be applicable for PIC Credit (assuming your company’s financial year ends on 31st December 2017).
Is there a limit to the PIC claims?
Yes. For PIC Credit (Cash Payout option), it is $100,000 per year for all qualifying activities. PIC Bonus is over.
Can I buy anything and do anything and the government will pay for it?
No. It does not work like that. The project or qualifying activity must help you and your company innovate and increase productivity.
Then, how can I truly innovate?
For most companies, the easiest route they take is to simply buy a photocopier so that they can push paper faster. But there are better ways to help you innovate and increase your productivity. For Firefish, we look at your existing business processes and systems then we introduce web-based systems to help your business grow faster, stronger and better for the future.
What kind of stuff have you implemented?
For most SMEs, we build a new website with a Content Management System that helps them to update the website easily and fast. For some, they sell to consumers so an E-commerce Website helps them to sell to the world 24/7! And if you have an existing shop, we can introduce a Point of Sales system that works seamlessly with your E-commerce website. We also build customised Mobile Apps on Andriod OS and iOS. Do take a look at our case studies.
I need something a bit more complex for my business. Do you do customised solutions?
Yes, we do! In fact, our customised solutions are designed and built in-house. We do not out-source to a third party vendor to do the programming. We project manage locally and work with our in-house team of programmers.
How do I know if I can claim for my project?
If your project falls under the approved list of projects, it is basically approved. Here’s the current list: Prescribed List of PIC IT and Automation Equipment. And websites which fall under web development are now claimable!
What if it doesn’t fall under the approved list?
Then, you might want to get an in-principle approval from IRAS first. This is the form to fill in: Application for Approval of Equipment for PIC Form
Are the forms difficult to fill in?
No, the forms are not onerous at all. Here are direct links to the more important forms:
To get prior approval on customised solutions: Application for Approval of Equipment for PIC Form
To make claims with PIC Cash Payout option: PIC E-Filing
Can you help us fill them in?
We can advise you. The filling up of the actual forms will have to be done by your side. As we mentioned earlier, it is very easy, so you won’t need an expert to do that. Moreover, in the end, you are accountable for the claim.
Do you help us to do claims?
After you engaged our services to build a website or mobile application, we will advise you accordingly how to make a claim.
What if after we have done our project, IRAS rejected our claims?
Please do understand we are a service provider. Our resources have been spent helping you create something. Our duties have been dispensed and we deserve our dues accordingly.
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The PIC scheme is administered by Inland Revenue Authority of Singapore (IRAS).
All information is subjected to change due to changes in government policy.
Claims are subjected to approval by IRAS.