Making False PIC Claims – Penalized $180,000
Recently, a company director submitted a false Productivity and Innovation Credit (PIC) claim and was charged in Courts. He made claims in order to receive the cash payout of $60,000 for his company.
He will be sentenced on 21 February for the offence. Meanwhile, the court has ordered them to pay fines of $8,000 and penalties of $180,000.
PIC Scheme Objectives
The PIC scheme was introduced to support and help businesses that invest in productivity and innovation improvements. Businesses can enjoy a 400% tax deduction or 30% cash payouts for investments under the six qualifying activities. In Budget 2013, something called the PIC Bonus was implemented to provide businesses a dollar-for-dollar matching cash bonus. This is over the existing cash payout and/or PIC tax deductions.
To qualify for the PIC cash payouts, businesses in Singapore must have:
- Active business operations in Singapore;
- Incurred PIC-qualifying expenditure during the basis period of the qualifying YA; and
- Employed and made CPF contributions for a minimum of three local employees. These three local employees are not sole-proprietors in sole proprietorship business, partners in a partnership and shareholders who are directors of the company.
In this case, Director had made false PIC claims
This person made a false declaration in a PIC cash payout application form that the company had purchased PIC automation equipment for $168,000, and that this company met the qualifying conditions for the cash payout.
IRAS’ investigations revealed that the company had not incurred these expenses on the equipment. The company also did not meet the condition of making CPF contributions or employing at least 3 local employees in the relevant period. In fact, this company had never been in active business operations.
IRAS do take serious view of any abuse of PIC Scheme
IRAS takes a serious view of taxpayers who defraud the Singapore government. Offenders convicted of PIC fraud will have to pay penalties of up to 4 times the amount of cash payout fraudulently obtained, and a fine of up to $50,000 and/or imprisonment of up to 5 years.
Examples of what IRAS regards as abuse of the PIC scheme are as per the following:
- Claiming PIC using false documents or records, where no such expenses were incurred or where the actual amount of expenditure incur was lower;
- Creating a shell company to make PIC claims on purchase of equipment from a related company, where no such purchase were made and where the automation equipments continue to be owned and used by the related company;
- Claiming PIC based on collusion with a third party to purchase automation equipment, when the selling party is not the legal owner of the equipment and was merely leasing or renting it;
- Using phantom employees to meet the PIC qualifying condition of having made CPF contributions for three or more local employees;
- Engaging in arrangements that seek to artificially inflate PIC claims such as purchase/lease arrangements bundled with non-qualifying costs (for example, offering a high cash back for trade-in of an old asset);
- Artificially inflating the staff cost allocated to software development.
Reminder from J Accounting Services
J Accounting Services would like to remind the public to submit proper PIC claim. Making false claims can lead to serious consequences. Hence, for those of you who might be looking for a reliable and professional accounting firm to help you with your PIC cash payout claims, look no further! J Accounting Services has certified public accountants with years of experience who can help you with that.
