The ‘Productivity and Innovation Credit’ (“PIC”) was introduced in the Singapore Budget 2010 to provide significant tax deductions for investments in a broad range of activities along the innovation value chain. It covers six activities, one of which is ‘Investments in Design’.
The component of the PIC that is related to Investments in Design (“PIC for Design”) aims to encourage pervasive and continuous design innovation in companies in Singapore. It will be administered by the DesignSingapore Council (“DesignSingapore”).
Download the information sheet.
All businesses will be eligible for the PIC, which will be available for 5 years. The qualifying expenditure must be incurred during the basis periods for Years of Assessment (YA) 2011 to 2015.
Businesses can deduct 400% Tax Deductions for the first S$400,000 invested on qualifying Product and Industrial Design Projects (“Design Projects”) from their income, subject to:
For YA 2011 and 2012 - a combined cap of S$800,000 of expenditure; and
For YA 2013 to 2015 – a combined cap of S$1,200,000 of expenditure.
To support small and growing businesses which may be cash-constrained, to innovate and improve productivity, businesses can exercise an option to convert their expenditure into a non-taxable cash payout. They can convert up to $100,000 (subject to a minimum of $400) of their total expenditure in all the six qualifying activities into cash payout.
This PIC cash payout option is available from YA 2011 to YA 2015 at a conversion rate of 30% for YA 2011 and YA 2012; and 60% for YA 2013 to YA 2015. The higher cash conversion rate of 60% was announced in Budget 2012 to further support businesses in investing in innovation and productivity.
For YA 2011 and YA 2012, businesses can opt to convert up to a combined cap of $200,000 qualifying expenditure for all six qualifying activities, into cash payout. The total cash payout for YA 2011 and YA 2012 is therefore a maximum of $60,000 ($200,000 x 30%).
For newly incorporated/registered businesses whose first YA is YA 2012, the expenditure cap for all six qualifying activities is $100,000 and the maximum cash payout is $30,000 for YA 2012.
For YA 2013 to YA 2015, businesses can receive cash payout up to $60,000 ($100,000 x 60%) each year with the higher conversion rate of 60%.
Businesses eligible to opt for the cash payout are sole-proprietorships, partnerships, companies (including registered business trusts) that have:
For more information about the application for cash payouts, please refer to IRAS’ website: www.iras.gov.sg
For YA 2011 and YA 2012
Businesses opting for cash payout have to submit the completed PIC Cash Payout Application Form and relevant annexes to IRAS. They can submit the application anytime after the business’ accounting year-end, but no later than the filing due date of income tax return for that YA.
The cash payout will be made by IRAS within three months from the date of receipt of the original PIC Cash Payout Application Form and applicable annexes. Submission must be complete (in full) at the time of application.
For YA 2013 to YA 2015
As announced in Budget 2012, businesses may opt for the cash payout on a quarterly basis any time after the end of each financial quarter, but no later than the filing due date of income tax return for each YA. IRAS will start the quarterly cash payout in Jul 2012.
The application procedure and revised cash payout application form will be released by 15 Apr 2012.
Businesses can opt to defer a dollar of current YA tax for every dollar of PIC qualifying expenditure incurred for the current financial year, up to a cap of $100,000. This tax will be deferred and is due for payment when the first assessment for the following YA is raised. This tax deferral allows businesses to enjoy their PIC benefits one year in advance.
The election is available for tax payable for YAs 2011 to 2014 based on expenditure incurred in the corresponding financial years 2011 to 2014.
For more information about the application for the tax deferral option, please refer to IRAS' website (www.iras.gov.sg).
For the PIC for Design, businesses can conduct eligible design projects either:
In-house activities of Design Projects [Conducted by Designer(s)]:
100% of the manpower costs to conduct activities of Design Projects will qualify.
Manpower costs refer to any salary, wages and other benefits paid or granted in respect of employment (excluding director’s fees), whether in money or otherwise, to any designer for carrying out activities of the Design Projects.
Where a Designer is not engaged in activities of Design Projects on a full time basis, only that part of the manpower costs attributable to the time spent by the Designer on the activities of Design Projects will be eligible.
For Outsourced activities of Design Projects [Conducted by Design Service Provider(s)]:
60% of the invoiced amount to conduct activities of Design Projects will qualify.
Where a cost breakdown to indicate that manpower costs exceed 60% of the invoiced amount is provided, 100% of the eligible manpower costs for carrying out activities of Design Projects will be eligible. The corresponding conditions for In-house activities of Design Projects done by a Designer will apply (Refer to above).
*Note: Qualifying expenditure on approved Design Projects must be net of grants and subsidies.
For enquiries, please contact:
Design Advisory National Design Centre
111 Middle Road
Opening Hours: Weekdays from 9.30am to 5.30pm
Hotline: +65 6333 3737
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