Many local SMEs have asked if they can cliam PIC for their new website design and development project. Here's more about how you can utilize the PIC for web design and development investment:
Website Development Costs from YA 2014 to YA 2018
PIC (Productivity and Innovation Credit Scheme) benefits may be claimed on capital expenditure incurred on developing a website, including costs incurred for the one-time registration of a domain name for the website.
What is PIC?
The PIC scheme was introduced to encourage productivity and innovation activities in Singapore. It provides support to businesses that make investments to improve their productivity.
This post has been extremely popular since it was published in 2016 thus we want to provide important updates to the information about the PIC scheme.
The PIC scheme has benefited many businesses since its introduction and has been instrumental in kick-starting the productivity drive. As announced in Budget 2016, the PIC scheme will lapse after YA 2018. However, businesses may continue to enjoy 100% deductions/allowances on the expenditure incurred subject to existing tax rules.
Businesses may elect for cash payout on qualifying expenditure incurred in the basis period of YA 2018. The eligibility for PIC is determined based on the date when the expenditure is incurred and not the date of submission of the cash payout application.
You can submit your cash payout claim anytime after the end of your financial quarter, but not later than the income tax filing due date of YA 2018.
To qualify for cash payout, your business must:
- have employed at least three local employees (Singapore Citizens or Permanent Residents with CPF contributions, excluding sole-proprietors, partners under contract for service and shareholders who are directors of the company) in the relevant month(s); and
- carry on business operation in Singapore.
Under the PIC Scheme, businesses enjoy 400% tax deductions/allowances for qualifying expenditure incurred in any of the Six Qualifying Activities from the Years of Assessment (YAs) 2011 to 2018. Eligible businesses can also exercise an irrevocable option to convert qualifying expenditure of up to $100,000 for each YA into cash, at a conversion rate of 60%.
From 1 Aug 2016, the following changes to PIC Cash Payout Scheme will take effect:
1. Reduction of cash payout rate for qualifying expenditure incurred on or after 1 Aug 2016 from 60% to 40% (the cash payout rate is not determined by the date of submission of the cash payout application); and
2. Compulsory e-Filing of cash payout applications. Hardcopy applications will not be accepted from 1 Aug 2016.
What are some examples of qualifying and non-qualifying website development costs?
Examples of qualifying website development costs include:
- One-time registration of domain name;
- Cost of developing or purchasing the website, including design fees;
- Software application development costs; and
- Hardware and server costs.
Examples of non-qualifying costs include:
- Renewal or purchase of domain name;
- Web hosting services;
- Online advertising/ marketing services (e.g. providing Search Engine Optimisation (SEO) services, Search Engine Marketing (SEM) services, etc);
- Routine updates; and
- Maintenance and support services
Can the revamp of an existing website qualify for PIC?
The revamp of an existing website does not qualify for PIC as it is not provision of a new website. However, if there are costs incurred on the addition of e-commerce functions to the website or enhancing it to become mobile responsive, these costs will be eligible for PIC as such enhancements are regarded as software development which falls within category 4 of the PIC IT and Automation Equipment Prescribed List. Other website revamp or enhancement costs such as routine updating, re-writing of contents, maintenance and support services do not qualify for PIC.
Must my software/ website development be completed before I can make PIC claims?
For claiming of PIC cash payout:
You cannot claim PIC cash payout if the software/ website is under development. The claim can only be made when the software/ website is fully developed. However, if the development is by modules and the completed module can function independently, you can claim PIC cash payout after each module is completed.
From YA 2016, to qualify for cash payout on PIC IT and Automation equipment, businesses will need to show that the equipment is in use by the business at the point when they elect for cash payout. This condition reinforces the objective of encouraging businesses to increase their productivity by using automation equipment in their businesses. For businesses with genuine cashflow difficulties and are not able to secure the delivery of the equipment before payment is made, IRAS may waive the requirement for the equipment to be “in use” on a case-by-case basis.
For claiming of enhanced allowance:
To claim enhanced allowance over one year under Section 19A(2), the software/ website must be fully developed and installed before the enhanced allowance can be claimed.
To claim enhanced allowance over three years under Section 19A(1), the software/ website does not need to be fully developed and installed before the enhanced allowance can be claimed. The cost incurred in the related YA will qualify for enhanced allowance over three years.
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