Strengthen your IP portfolio and claim more than what you spent in tax credit!

Singapore businesses can enjoy tax deductions at 400% of their annual expenditure on certain activities. Acquisition of IP rights and registration of trademarks, patents, designs and plant varieties are 2 activities in the list of 6 prescribed activities which the Singapore government recognizes as critical investments for Singapore businesses to bolster their competitiveness. Previously, you could claim all of your expenditure on these activities against taxable income but Budget 2011 has enhanced the scheme for you to claim 400%, up to $400,000 per activity per year*. This means that if you paid $60,000 to purchase a trademark from another company (treated as 1 activity) and spent another $40,000 in building its registration portfolio in Singapore and overseas (treated as another activity), you can claim $400,000 in tax deductions. If you prefer cash instead of tax deductions, you may apply to convert the tax credit into a non-taxable cash payout at a conversion rate of 30%**. Using the example above, you can apply to be paid $30,000 in cash from the government for the $100,000 you spent.

Another 2 of the 6 prescribed activities also relate to IP. These are for investment spending in research & development, and costs incurred to create new products and industrial designs. The R&D project should involve a systematic or intensive study in the field of science or technology with the object of acquiring new knowledge or using the results for the production or improvement of materials, devices, products, produce or processes. The R&D can be outsourced to overseas organizations as long as any IP rights created will belong to the Singapore company. As for costs incurred to create new products and industrial designs, the project must result in the final design of a physical product, be conducted primarily in Singapore and must result in the creation of new IP in the form of a registered design or a patented invention. Prior approval of the DesignSingapore Council is required. The other 2 prescribed activities under the enhanced PIC scheme are for purchase/lease of prescribed automation equipment and training of employees.

The government also appreciates that the tax deductions/allowances given under the PIC scheme may not be fully utilized within the year of assessment (YA) in question. For this, they have the Tax Deferral Option to allow for unutilized amounts to be offset against other income of the business. You can apply to carry forward to offset against the business income of future YAs, carry back to the immediate preceding YA to offset against the prior year income, or transfer to and offset against the income of a related Singapore company in the group.

The government recognizes the immense value of IP rights to the competitiveness of Singapore businesses and has put forward a comprehensive scheme to encourage local businesses to invests heavily now for long term benefit. You can find out about the PIC scheme from www.iras.gov.sg or get the PIC Guide that will be available from June 2011.





OPAL IP is devoted to helping our clients in the management and protection of their intellectual property ("IP"). We assist our Singapore-based clients in identifying the various IP they possess and helping them customise and implement strategies for their IP portfolio to be effectively managed, exploited and protected within Singapore and beyond