Businesses can claim 400% Tax Credits for Going Cloud
For every $1,000 spent on Cloud Computing, businesses can get $680 in tax savings. Over 20,000 businesses had benefited in 2011.
Companies planning to invest in business IT and cloud solutions such as Google Apps can now enjoy the benefits of an ongoing “Great Singapore Sale”.
Helen Tan from Digital Life, The Straits Times, has provided an excellent coverage on the Productivity and Innovation Credit (PIC) Scheme. The PIC Scheme allows companies to claim a 400% tax deduction on IT expenditures up to SGD400,000.
For every $1 spent on IT innovations, a company can claim up to four times its expenditure, or $4, against its taxes as a Productivity and Innovation Credit.
The Productivity and Innovation Credit will be valid until 2014 with a capped sum of $400,000 a year.
The Inland Revenue Authority of Singapore (IRAS) administers this tax incentive programme to help companies invest in productive and innovative technologies..
How it works
If a company has spent $1,000 on IT, it can claim $4,000 as a tax deduction on that purchase.
A corporate tax of 17 per cent on $4,000 would give $680 as tax deductions. This means $680 savings on that $1,000 spent.
The cap applies to six Qualifying Activities for each year of assessment (YA).
The Qualifying Activities are:
- Buying or leasing automation equipment such as IT software and hardware;
- Staff training;
- Acquiring intellectual property;
- Registering intellectual property;
- Research and development; and
- Approved design projects.
This special IT tax credit will be valid from YA2011 to YA2015, which means it covers expenditure incurred from 2010 to 2014. IRAS allows eligible IT spending for the first two assessment years to be combined - a total of $800,000 - as new IT projects usually need more investment from the start.
More innovation, more support
Businesses can significantly benefit from the flexibility of the PIC Scheme. If a company spends $600,000 in the first year and claim tax deduction on that, the next year, it can claim on the balance. The other three remaining years can also be combined, said IRAS. So if you missed out on tax deductions in the first year, plan to take advantage of the credit in the remaining years, said Mr Abhijit Ghosh, a tax partner with PwC Singapore. Multinational companies can claim millions in tax deductions on the PIC Scheme. The PIC Scheme can also benefit small and medium-sized enterprises (SMEs) with cash to invest in infrastructure and training. As of last November, it had received 22,000 claims for tax deductions and 1,600 cash option requests for YA2011.
Going On The Cloud
Since the inclusion of cloud computing as one of the expenditures that SMEs can claim tax credits for, SMEs now have an incentive to boost productivity by taking advantage of the rapidly developing cloud computing tools and services available in the market with lesser concern about the costs.
The benefit of businesses adopting cloud computing in their business processes is that the cloud computing service providers run the infrastructure for them with world-class SLAs, while businesses are able to focus on information flows and value-added innovations for the company.
Apart from enterprise-level cloud computing, new business technologies such as tablets, smartphones, web analytics and mobile productivity apps can also qualify as tax claimable expenses.
For more information on how you can reap these benefits, you can contact us here.
