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FAQ: 2014 Updates for Innovation and Capability Voucher (ICV) and Productivity and Innovation Credit (PIC) Scheme
The recent Budget 2014 saw several key announcements. The two of note to SMEs are the expanded Innovation & Capability Voucher and the extension of the PIC scheme. Here's what you should know about the two.
SMEs will be most pleased to know that the Singapore government heeded the feedback from the public and have expanded several key schemes. Among the enhancements and extensions to current schemes are the improvements to the Innovation & Capability Voucher (ICV) and the Productivity & Innovation Credit (PIC) Scheme.
The Expanded ICV
From the 1 March 2014, the government expanded the scope of the ICV "beyond consultancy services to support implementation of solutions in the four capability areas of innovation, productivity, human resources development, and financial management."
This expansion was done in consultation with an SME workgroup and comes with an increase $10 million of government funding, taking the total amount set aside for the ICV up to $42 million.
According to SPRING Singapore, the reason for the expanded scope of the ICV is because "SMEs may not necessarily require consultancy services to diagnose a problem or propose solutions," and "the enhanced ICV would allow SMEs who want to implement solutions to meet their business challenges but face resource constraints, to take their first step towards capability upgrading."
How the ICV works
SMEs can apply for a maximum of two vouchers each valued at $5,000 under the four capability areas mentioned above. These vouchers are then used for the redemption of consultancy services provided by pre-approved service providers.
In addition to consultancy, SMEs can now also apply for a maximum of two further $5,000 vouchers for the adoption and implementation of mandated solutions from the categories of:
1) equipment & hardware
2) technical solutions
3) professional services
4) design & renovation
Under the wide scope of capability areas, potential areas where SMEs can look into utilising the vouchers include consultancy projects such as conducting technology feasibility studies, implementing ISO certification, productivity improvement projects, implementing learning and development programs and much more.
The maximum number of vouchers per SME is capped at eight. Each project should last no longer than 6 months.
To find out more about the ICV (including areas which you can utilise the ICV) and to apply, visit the SPRING website.
The PIC scheme Extended
The popular Productivity & Innovation Credit (PIC) Scheme has been extended by another three years to 2018 at a cost of $3.6 billion to the government. For qualifying companies who have yet to apply for PIC scheme, you should understand that the scheme allows SMEs to enjoy 400% tax deduction/allowances (to 2015) and/or 40% cash payout for investment in productivity and innovation improvements in six qualifying areas.
For the tax deduction option, SMEs can claim up to 400% tax deductions on up to $400,000 of their expenditure on qualifying activities:
- Acquisition and leasing of PIC Information Technology (IT) and Automation Equipment (this is the most commonly claimed activity);
- Training of employees;
- Acquisition and In-licensing of Intellectual Property Rights;
- Registration of patents, trademarks, designs and plant varieties;
- Research and development activities;
- Design projects approved by DesignSingapore Council.
Under the cash payout option, SMEs can opt to convert up to S$100,000 of their expenditure in the qualifying areas into a non-taxable payout at a rate of 40% of expenditure.
Do not forget the PIC Bonus given on top of the tax deduction or cashback received by SMEs. The PIC Bonus gives businesses a dollar-for-dollar matching cash bonus capped at $15,000 for the three years ending 2013 to 2015.
The PIC+ scheme
In addition to extended the PIC scheme till 2018, the government also introduced the PIC+ scheme to assist firms that make more substantial investments to transform their businesses. The new scheme will raise the expenditure cap of the current PIC scheme to $600,000 from year of assessment 2015. As such, SMEs will be able to claim 400% tax deductions for up to $1.8 million.
There are terms and conditions for each option selected and SMEs should get all details about the PIC and PIC+ scheme at the IRAS website.
If you are utilising the PIC scheme for the first time or require a refresher on the ins and outs of the scheme, sign up for a free PIC seminar organised by IRAS.
To find out about the other key changes announced in Budget 2014, read our myBusiness coverage.
Read on for more on Singapore Budget 2014:
- Singapore Budget 2013: Key Initiatives Impacting SMEs
- Singapore Budget 2014: Frequently Asked Questions
- Singapore Budget 2014: Update on the Latest Developments
- Singapore Budget 2014: 7 Key Points for SMEs
- Singapore Budget 2014: Potential challenges for Singapore SMEs
- Singapore Budget 2014: FAQ for ICV and PIC Schemes