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PIC Grant and its impact on Organizations

The Singapore government introduced the PIC grant or Productivity and Innovation Credit grants, which aims as a breather to the SMEs and start-ups that find it challenging to invest in productivity and communication tools essential to their growth. PIC grant was first introduced in 2011, to be in practice till 2015. Then, it extended till 2018 for the start-ups to save on the primary investment until they can establish themselves in the market.

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Also read: Productivity Solutions Grant: How It Can Help Your Business

Table of Contents

What is PIC Grant?

PIC Grant is meant to cover the establishment expenses of start-ups. So that, they can move forward with innovative ideas to improve productivity and thereby become successful. This grant was a novel initiative by the Singapore Government. The aim is to encourage start-up IT establishments and cover their initial costs until they complete the phase.

Under this option, the IT establishments can enjoy up to 60% tax deduction or up to 40% cash payout on the qualifying activities identified by the IRAS. Similarly, the ICV is the Innovation and Capability Voucher scheme to provide a $5000 voucher scheme. SMEs can use this voucher to upgrade in Innovation, Human Resources, Productivity, and Finance Management.

Also, they can use the voucher to implement integrated business solutions that improve business processes in terms of hardware, design, or renovation. All establishments located in Singapore, with at least 30% local shareholding, with annual sales less than S$100, and employees less than 200 can benefit from ICV.

pic grants
source: freepik.com

How do the SMEs benefit from PIC Grant?

SMEs can utilize the PIC grant in implementing automation equipment, acquiring intellectual property & its registration for R&D in selected fields, employee training to improve productivity, web & mobile design and development, and establishing an e-commerce portal for CRM and CMS.

The firms can claim the PIC Grant through Tax Deductions or Cash Payouts as specified by the IRAS. For different YAs, the scheme announced is different. The firms have to comply with the requirements for each period as specified by the IRAS. The organization can gain up to 400% tax deduction upon its expenditure under the Qualifying Expenses recognized by the IRAS.

Who are Involved in the PIC ?

PIC has its expert panels of web and mobile designers who help the industries by creating attractive design interfaces and developing a platform for showcasing their products and services. This benefit can boost the business to a great extent, and hence PIC is providing the necessary guidance and support. E-Commerce has revolutionized the global market. The PIC ensures that Singapore firms also benefit from the revolution by joining the global market.

PIC provides extended support for the Singapore-based qualifying firms to start an e-Commerce portal, thereby entering the global market. PIC also includes CRM and CMS to engage with the customers constantly. It will build up brand recognition in the worldwide market.

Conditions for PIC Grant Eligibility

Use of PIC Grant is usually only for those organizations in Singapore that carry out specific businesses directly by IRAS. Further, these firms should employ at least 3 Singapore citizens or Permanent Residents of Singapore to be eligible for PIC. In addition, they have to purchase and put the IT and automation equipment to use during the particular YA or Year of Assessment as regulated by IRAS from 2016 onwards.

pic grants
source: freepik.com

Reduction of PIC Grant from 60% to 40%

Of late, the PIC Grant has been misused by specific individuals and groups who try to make it a successful business. As a result, IRAS has recently reduced the PIC Grant from 60% to 40% of the expenses incurred on qualifying activities to curb this tendency.

The IRAS had initially intended to make the PIC Grant available till 2015 only. It was then extended till 2018. This reduction is one of the ways the government plans to continue to support the start-ups. The objective is to keep improving their technology and productivity to survive in the highly competitive global market and thereby succeed. For every $100000 spent on qualifying activities, the firms can avail of a 60% cash payout till 31st July 2016 and then onwards 40%.

The SMEs that have not yet availed of the PIC Grant can take advantage of the situation as the government allows them to apply for PIC Grant on backdated expenses. Any establishment that comes under the eligibility criteria for PIC Grant. It can apply for the same this year and claim the previous year’s eligible costs. So, it will continue to enjoy the privileges till 2018.

Disadvantages of reducing the PIC Grant & How to overcome them

A 20% cut in the PIC Grant has been a big blow to the SMEs using this facility since its inception. But the scheme, which is effective until 2015 will get an extension until 2018. As a result, the SMEs can enjoy the tax deductions and cash payouts for another three years, an added advantage.

With the added support of PIC for establishing e-commerce portal, the web, and mobile development and in CRM and CMS. The SMEs can make full use of technology and PIC support. It will reach out to a bigger audience across the globe and thereby target a higher revenue. Furthermore, since the reduction will be in effect for expenses incurred after April 1, 2016. SMEs can take preventive measures to cost control. In addition, the enhanced tax rebates for the SMEs will be a relief to the reduction of the PIC Grant.

Action against PIC Grant abuse

To discourage and stop the fraudulent and abusive use of PIC Grant, the IRAS has introduced strict laws against the offenders. The offenders will have to pay the penalty of up to four times the PCI Grant fraudulently availed and an additional fine of $50,000 and/or imprisonment of up to 5 years. The law applies to the offenders and those who willfully assist the offenders in obtaining the grant.

Also read: All You Need to Know About the Enterprise Development Grant

Conclusion

After we understand about Productivity and Innovation Credit grants, in this era we should know about Productivity Solutions Grant. PSG is the solution for any sector business, for example, retails, F&B, wholesale, construction, logistic, etc. The purpose of the application of the Productivity Solutions Grant is to kick-start business growth for any agile company. HashMicro as the best ERP System in Singapore that provides PSG for your enterprise. Let’s move your business experiences with PSG Solutions by HashMicro.

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