It is time to tap on the tax deductions provided by PIC to combat inflationary pressures and sustain long term growth says Rikvin consultancy
Singapore (PRWEB) July 06, 2011
Rikvin Consultancy is an agency providing integrated corporate services to Singapore companies and the firm is well sought after for its accounting and tax advisory services. The company recently released a downloadable brief about PIC on its website. The brief contains an overview of the PIC scheme, providing a quick reference with illustration.
Being surrounded by economies that compete based on cost, enhancing the productivity and innovation quotient is increasingly pertinent for Singapore to sustain its competitiveness. Satish Bakhda of Rikvin Consultancy says “Given the present inflationary pressures that is looming over the region, it is essential for enterprises to mitigate the effect by capitalizing on special schemes and the Productivity and Innovation Credit (PIC) provides the right solution by alleviating the tax burden from companies while supporting them to enhance their productivity”.
Cost containment measures will not yield the desired growth and productivity led growth is the key to sustain in the global market place. The costs arising from raised CPF rates and foreign worker levies, rising rentals and operating expenses will be significantly eased if companies invest in training or automation, the costs of which can be assuaged through tax deductions under PIC scheme.
The PIC Scheme was first announced in Budget 2010 with the aim of stimulating enterprises to invest in upgrading their operations and to encourage a wide range of innovation-related activities in Singapore. PIC has been enhanced in Budget 2011 and is applicable for the Year of Assessment (YA) 2011 to 2015.
Elaborating on the PIC scheme Satish Bakhda says “International companies are setting up subsidiaries in Singapore mainly because of the tax rate, however with operating costs going up across the board in the region, the Singapore government has come forward with the generous enhancements to the scheme at the right time. Instead of slashing the headline tax rate, it has mitigated the burden by substantial tax deductions while spurring companies to invest in long-term strategies. Such initiatives will prompt enterprise level growth as well as stimulate the economy as whole. One important aspect of the scheme is that it is inclusive; it brings significant benefit to SMEs by easing their cash flow through deferred taxes and also helps smaller enterprises that do not pay taxes, to work towards productivity and innovation. So enterprises should focus on projects and activities to tap on the enhanced PIC.”
Just to illustrate the quantum of tax savings, he sites a hypothetical case – “A company ABC with a taxable income of S$1million, will be liable to pay a tax of S$170,000, at the prevailing 17% tax rate whereas, the same company, if it had spent S$100,000 towards the acquisition of automation equipment or employee training or on any of the qualifying activities then the effective tax amount after enhanced PIC deduction will be S$102,000 thus a significant savings of S$68,000 per year.”
The six activities along the innovation value chain that will qualify for PIC benefits are:
- Acquisition or leasing of prescribed automation equipment
- Training of employees
- Acquisition of Intellectual Property Rights
- Registration of patents, trademarks, designs and plant varieties
- Research and development activities
- Investment in approved design projects.
The enhanced PIC scheme provides for a tax deduction of 400% ( up from the previous 250%) on the first S$400,000 (up from S$300,000) spent for each of the qualifying activities. The expenditure cap of S$400,000 per year, to be combined during the years 2013-2015 to a total of S$1,200,000, allowing businesses to assuage potential cash flow issues when investing in large research and development projects. The scheme to be available for research and development activities conducted outside Singapore. A cash conversion, where a cash payout of 30% can be received by the business for the first S$100,000 of qualifying expenditure in lieu of a tax deduction. This provision will specifically benefit small businesses which pay little or no tax in Singapore but wish to invest to increase productivity.
The tax payment to be deferred from tax years 2011 to 2014 when companies incur qualifying PIC expenditure. The tax amount that can be deferred will be the lower of the tax payable assessed for the current tax year and the qualifying PIC expenditure incurred in the current financial year, subject to a cap of $100,000.
Rikvin offers company registration and incorporation for entrepreneurs worldwide. Established in 1998, Rikvin specializes in Singapore company registration, Employment Pass, EntrePass and related corporate services. Those wishing to embark on Singapore Productivity and Innovation Credit scheme can contact Rikvin at http://www.rikvin.com for a quick eligibility evaluation.