The Singaporean government has moved this week to tighten the requirements around the cash claims under the popular PIC scheme.
First introduced in 2010, the PIC scheme allows qualifying Singaporean companies to claim either up to a 400% tax rebate or a 60% cash refund for investment in capital and activities that are deemed to increase the productivity of their business.
The scheme has become very popular in the SME community particularly with the introduction of the PIC Bonus in 2012 – providing an additional 100% cash bonus up to $15,000 annually on top of the current 60% rebate already in place.
The scheme has been subject to some manipulation and abuse in recent times whereby companies have been “bending” the requirements simply to access the rebate on offer. Abuse has ranged from employing “phantom staff” to qualify and purchasing equipment not for business use.
Among the new requirements now in place are:
- Equipment needs to be physically on the company’s premises or its possession
- Be deployed for business purposes
- Applicants able to clearly articulate the intended use and purpose if so required by IRAS
In essence, the company must now be in a position to justify the expenditure incurred and that it is actually in the business and fit for purpose.
Harsh penalties apply for convicted abusers of the scheme with up to 3 years jail and fines of $10,000. Penalties apply not only to the Company’s Directors but also to intermediaries that the Directors may have engaged or have assisted with the claim on the Company’s behalf.
I would encourage businesses to continue accessing the PIC scheme as rebate offers continue to be enticing and supporting business development and productive advancements. However, Directors need to be vigilant and not be putting themselves in a position of exposure for wrongful and erroneous claims. Carefully consider your plan and action requirements surrounding the scheme and ensure it is fit-for-purpose.
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