In this blog post, I will explain on how PIC enhanced deduction works and the conditions that companies need to fulfil in order to claim PIC enhanced deduction. Following this, on the next blog post, I will talk more on the maximum amount that companies can claim for enhanced deduction for each year.
How does enhanced deduction work?
As explained in my previous article – ‘’PIC cash payout and PIC enhanced deduction (Brief explanation)’’, when you have incurred expenses on PIC qualifying items (e.g. bought a laptop, rental of multifunctional copier machine or send your employee to training), you can elect to claim up to 300% additional enhanced deductions on these qualifying expenses.
FGH Pte Ltd rents a multi-functional copier for S$5,000 per annum.
It can claim S$15,000 of enhanced deduction (S$5,000 x 300%) against its chargeable income, not against the Company tax payable.
(Chargeable income is the net income that you used to multiply the corporate tax rate, 17% to get your Company tax payable. Call or email me if you are interested to know more on calculation of chargeable income)
What are the conditions my company need to fulfill in order to claim enhanced deduction?
As compared to PIC cash payout, the conditions for claiming enhanced deduction are relatively easy to meet
- Carry on active business operation in Singapore; and
- Incurred PIC qualifying expenditure during the business year.
While condition 2 is straightforward, do take note that for condition 1, if your company is dormant or is purely an investment holding company, it will not qualify for PIC enhanced deduction.