Print Page   |   Report Abuse
News & Press: International News

Singapore: Tax authority issues clarification on productivity and innovation credit plus scheme

14 July 2014   (0 Comments)
Posted by: Author: Evelyn Lim
Share |

Authors: Evelyn Lim, Wong Sook Ling and Harsh Shah (BDO) 

Following the announcement of the new PIC+ scheme during the Singapore 2014 Budget in February 2014 (see WWTN March 2014), the Inland Revenue Authority of Singapore (IRAS) has released its clarification on the PIC+ scheme.

In this article we summarise the clarification and its impact on businesses.

A recap

The PIC scheme supports small and medium sized enterprises (SME) in their investments in productivity and innovation by providing enhanced tax deductions or cash payouts.

The PIC+ scheme is an enhancement to the existing PIC scheme which covers years of assessment (YAs) 2011 to YA2015. Under the PIC+ scheme, the expenditure cap for qualifying SMEs has been increased from SGD 400,000 to SGD 600,000 per qualifying activity per YA from YA 2015 to 2018. The combined expenditure cap per qualifying activity for qualifying SMEs has therefore been increased to SGD 1.4 million and SGD 1.8 million for YAs 2013-2015 and YAs 2016-2018 respectively.

A qualifying SME is an entity whose (a) annual turnover is not more than SGD 100 million; or (b) the employment size is not more than 200 workers. This criterion will be applied at the group level if the entity is part of a group.

In addition to companies carrying a trade or business, sole proprietors, partnerships and Singapore branches are also eligible for the scheme.

Clarification from IRAS 

The clarification provided by the IRAS has addressed most of the questions and issues raised following the Budget announcement, and is summarised as follows:

Definition of "worker”/"employee”
An employee is defined as an individual who enters into a contract of service with an employer, where the employer pays the employee a salary, and includes:
––Company directors and part-time employees;
––An individual who works for an entity under a centralised hiring arrangement, i.e. an individual deployed to work for an entity which is not their legal employer.

Definition of "annual turnover”/”revenue”
"Revenue” is income arising from the ordinary activities of a business or the main source of income of a business. The "revenue” is calculated based on the revenue generated during the basis period for the YA, and it is not necessary to have a twelve-month basis period.

Part of a group
A group refers to a parent and its subsidiaries as determined in accordance with the Financial Reporting Standard (FRS) 110 or FRS 27 for financial periods before 1 January 2014. This
includes overseas entities.

At what point in time
The determination of employment size and whether an SME is part of a group is made on the last day of the relevant basis period.

There is no claw-back of PIC+ claims previously allowed when the entity no longer satisfies the SME definition.

The IRAS has further clarified that businesses will have to self-assess their eligibility for the scheme using the following conditions:

––For YA 2015, the business that is claiming the PIC+ has to be a qualifying SME for that YA.

––For YAs 2016-2018, the business can enjoy the PIC+ benefits once it satisfies the conditions to be a qualifying SME in any of the YAs. This would apply even when the business does not meet the qualifying conditions in the subsequent YAs. The only exception to this is when there is a change in the parent of the business or if the business becomes part of a group, when the business will have to re-assess its eligibility for the scheme for the YA relating to the basis period in which there is a change of control.

For greater certainty and flexibility, businesses can choose the basis period in which to ascertain if they are qualifying SMEs in the YAs 2015-2016 as follows:

For an individual who is a sole proprietor or controlling partner of a partnership; and for Singapore Branches, the eligibility criteria, "revenue” and employment size will be determined as follows:

As this is a "self-assessment” exercise, the onus of proof rests with the taxpayer. Taxpayers are advised to maintain all documentary evidence that proves their eligibility under the scheme. These documents may include group structure or consolidated financial statements or separate financial statements of each entity under the group for the relevant financial period if the entity is part of a group, HR records of its employees, and Central Provident Fund records. These documents must be submitted to IRAS upon request.

Our comments 

Most of the clarifications are as expected. A noteworthy observation is the definition of an SME – EITHER the revenue OR the employment size condition. A business with revenue more than SGD 100 m will still qualify for PIC+ scheme if its employment size is below 200, and vice versa. More businesses will therefore fall within the definition of SME and benefit from the scheme.

Interestingly, the definition of employee/ worker has not specifically included contract workers who are employed by employment agencies. In such cases, where there is neither a contract of service with the employer nor any centralised hiring arrangement, businesses may still qualify as SMEs although they effectively exceed the 200 headcount. Watch this space to see if the IRAS issues any further clarification.

The definition of "group” includes overseas entities. This is indeed in line with the policy intent of helping local SMEs, as the Singapore operations of a multi-national company may be small, but the size of the group may exceed the threshold.

The testing point for the employment size at the end of the year appears to simplify the process and ease the administration burden on businesses, as it may be difficult to track the average employment size throughout the year.

As "revenue” is calculated based on the revenue generated during the basis period for the YA, for which is not necessary to have a twelvemonth basis period, any new start up business can choose a first financial period of less than 12 months to maximise its PIC+ benefits.

A more commendable note is the forward looking move that there will be no claw back of PIC+ claims when a business grows and is no longer regarded as an SME.

All in all, the PIC+ Scheme is definitely welcomed by SMEs as this is indeed a generous scheme in addition to the original PIC Scheme. Given the limited available period, businesses must act fast to reap the benefits!

This article first appeared on


Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

Membership Management Software Powered by®  ::  Legal