In the November 2010 issue of IP Pulse (Singapore), we reported on the Productivity and Innovation Credit (“PIC”) scheme announced by the Singapore Government in Budget 2010. (See “New tax deductions for intellectual property related expenses” by S. Sharma & Huang Wenshan)
As a quick recap, the PIC scheme provides significant tax deductions for investments in a broad range of activities along the innovation value chain, including registration and acquisition of intellectual property (“IP”).
Notably, qualifying IP registration costs include official fees paid for (i) filing a patent, trade mark or design application or application for grant of protection of a plant variety in Singapore or an equivalent registry elsewhere; (ii) obtaining a search and examination report for a patent application or an examination report for grant of protection of a plant variety; and (iii) obtaining grant of a patent. Additionally, professional fees paid to an agent for (i) filing a patent, trade mark or design application or application for grant of protection of a plant variety, in Singapore or elsewhere; (ii) preparing documents for the purposes of the Patents Act, Trade Marks, Registered Designs Act or Plant Varieties Protection Act (e.g., drafting of a patent specification) or the IP law of any other country relating to such IP; and (iii) advice on the validity or infringement of a patent, registered trade mark, registered design or grant of protection of a plant variety.
Under the original scheme, businesses were entitled to deduct 250% of their expenditure on each of 6 qualifying activities from their taxable income, with the tax deductions capped at S$300,000 of expenditure for each activity. Certain eligible businesses may convert up to S$300,000 of their PIC a year into a cash grant of up to S$21,000. Businesses also had the option of combining the annual expenditure cap for each category for Year of Assessment (YA) 2011 and YA2012, such that deduction could be claimed up to a combined cap of S$600,000 expenditure per activity.
As part of Budget 2011 unveiled on 18 February 2011, the PIC scheme has since been given a significant boost.
Under the enhanced scheme, up to 400% of the first S$400,000 of expenditure for each activity is deductible. This means that where the annual expenditure cap is combined for YA2011 and YA2012, the combined cap is increased from S$600,000 to S$800,000 expenditure per activity. Additionally, for YA2013 to YA2015 deduction is available for expenditure up to a combined cap of S$1,200,000 per activity. The cash grant limit for the cash payout option has also been increased – from S$21,000 to S$30,000 for the first S$100,000 of expenditure. The scheme has also been extended to R&D expenditure abroad, whilst it previously applied only to R&D performed in Singapore.
This aggressive move by the Singapore Government is expected to encourage businesses to move toward productivity enhancing strategies. As the tax savings can be significant, businesses should consider taking advantage of the scheme if they have not already done so, taking care over various conditions and claw-back provisions that could apply.