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Enacting Formula

 
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New section 37I
31.  The principal Act is amended by inserting, immediately after section 37H, the following section:
Cash payout under Productivity and Innovation Credit Scheme
37I.
—(1)  Subject to this section, where any qualifying person is allowed one or more deductions or allowances under —
(a)
section 14 (in respect of expenditure that falls within the definition of “qualifying training expenditure” under section 14R, “qualifying design expenditure” under section 14S and expenditure on the leasing of a prescribed automation equipment under a qualifying lease under section 14T);
(b)
section 14A;
(c)
section 14D (in respect of expenditure that falls within the definition of “qualifying expenditure” under section 14DA);
(d)
section 14DA;
(e)
section 14R;
(f)
section 14S;
(g)
section 14T;
(h)
section 19A(2), (2A) or (2B) (other than an allowance made in respect of a prescribed automation equipment acquired under a hire-purchase agreement with a payment period that spans over 2 or more basis periods); or
(i)
section 19B (other than a writing-down allowance made in a case where the requirement under section 19B(2A) is waived, or a writing-down allowance made under section 19B(2C), or a writing-down allowance made in respect of any intellectual property right acquired and paid for by instalments under an agreement with a payment period that spans over 2 or more basis periods),
for any year of assessment between the year of assessment 2011 and the year of assessment 2013 (both years inclusive) (referred to in this section as a qualifying year of assessment), he may, in lieu of those deductions or allowances, or any part thereof, which exceeds $1,500, exercise an irrevocable written election for a cash payout computed in accordance with subsection (3) or (4), as the case may be.
(2)  The irrevocable written election under subsection (1) shall —
(a)
be made to the Comptroller by the qualifying person at any time after the end of the basis period for any qualifying year of assessment but before the expiration of the time the qualifying person must deliver a return of his income for that year of assessment or within such extended time as the Comptroller may allow; and
(b)
be accompanied by such information and supporting document to be given in such form and manner as the Comptroller may specify.
(3)  For the year of assessment 2011 and the year of assessment 2012, the amount of cash payout shall be computed in accordance with the formula
A x 7%,
where A is —
(a)
for the year of assessment 2011, the lower of —
(i)
the deductions or allowances or part thereof in respect of which the election is made; and
(ii)
$600,000; and
(b)
for the year of assessment 2012, the lower of —
(i)
the deductions or allowances or part thereof in respect of which the election is made; and
(ii)
the balance after deducting from $600,000 the lower of the amounts specified in paragraph (a)(i) and (ii).
(4)  For the year of assessment 2013, the amount of cash payout shall be computed in accordance with the formula
A x 7%,
where A is the lower of —
(a)
the deductions or allowances or part thereof in respect of which the election is made; and
(b)
$300,000.
(5)  For the purposes of subsections (1), (3) and (4), an individual carrying on one or more trades, professions or businesses through 2 or more firms (excluding partnerships) shall not be granted a cash payout referred to in subsection (1) that exceeds the amount computed in accordance with subsection (3)(a) in the case of the year of assessment 2011, subsection (3)(b) in the case of the year of assessment 2012, or subsection (4) in the case of the year of assessment 2013.
(6)  For the purposes of subsections (1), (3) and (4), the sum of the cash payouts referred to in subsection (1) that may be granted to all the partners of a partnership carrying on one or more trades, professions or businesses, shall not exceed the amount computed in accordance with subsection (3)(a) in the case of the year of assessment 2011, subsection (3)(b) in the case of the year of assessment 2012, or subsection (4) in the case of the year of assessment 2013.
(7)  Where a qualifying person has elected for a cash payout in lieu of a deduction or an allowance under section 14A, 19A(2), (2A) or (2B) or 19B, the election so made shall be treated as having been made on the full amount of the deduction or allowance allowable in respect of the capital expenditure incurred on —
(a)
the grant or registration of each qualifying intellectual property right in each country;
(b)
the provision of each prescribed automation equipment; or
(c)
the acquisition of each intellectual property right,
as the case may be, to which the election relates, net of any grant or subsidy from the Government or a statutory board.
(8)  Notwithstanding subsections (1) and (7), where a qualifying person has incurred capital expenditure on the provision of any prescribed automation equipment for the purpose of leasing such equipment, he shall not be allowed to exercise an election under subsection (1) in respect of any allowance allowable on such expenditure.
(9)  Where an election has been made under subsection (1) in respect of any qualifying year of assessment, any amount of the deduction or allowance referred to in subsection (7) in respect of which the election is made that is in excess of —
(a)
in the case of the year of assessment 2011, $600,000;
(b)
in the case of the year of assessment 2012, the difference between $600,000 and the amount of the deduction or allowance in respect of which an election was made for the year of assessment 2011; or
(c)
in the case of the year of assessment 2013, $300,000,
shall not be available as a deduction or an allowance against the income of the qualifying person for that year of assessment, and shall be disregarded.
(10)  Where a cash payout has been made under this section in lieu of —
(a)
a deduction under section 14A and the intellectual property rights or the application for the registration or grant of the rights for which the deduction is made is sold, transferred or assigned within one year from the date of filing of the application for the registration or grant of such rights; or
(b)
an allowance under section 19A(2), (2A) or (2B) and the prescribed automation equipment for which the allowance is made is sold, transferred, assigned or leased out within one year from the provision of such prescribed automation equipment,
the following provisions shall apply:
(i)
the qualifying person shall give notice in writing to the Comptroller of such sale, transfer, assignment or lease in the manner specified by the Comptroller within 30 days from the date of such sale, transfer, assignment or lease; and
(ii)
the cash payout in respect of the intellectual property rights, the application for the registration or grant of such rights, or the prescribed automation equipment shall be recoverable by the Comptroller from the qualifying person as a debt due to the Government.
(11)  Where a cash payout has been made to a qualifying person under this section in lieu of a writing-down allowance under section 19B, and any of the following events occurs within 5 years from the acquisition of the intellectual property rights:
(a)
the intellectual property rights for which the writing-down allowance is made come to an end without being subsequently revived;
(b)
all or any part of the intellectual property rights for which the writing-down allowance is made are sold, transferred or assigned;
(c)
the qualifying person permanently ceases to carry on the trade or business for which the intellectual property rights are used,
then the following provisions shall apply:
(i)
the qualifying person shall give notice in writing to the Comptroller of such event in the manner specified by the Comptroller within 30 days from the date of such event; and
(ii)
an amount computed in accordance with the following formula shall be recoverable by the Comptroller from the qualifying person as a debt due to the Government:
Amount
of cash
payout
x
(5 – Number of complete years the intellectual
property rights were held by the qualifying person)
 
5
(12)  Where any tax, duty, interest or penalty is due under this Act, the Goods and Services Tax Act (Cap. 117A), the Property Tax Act (Cap. 254) or the Stamp Duties Act (Cap. 312) by the qualifying person to the Comptroller of Income Tax, the Comptroller of Goods and Services Tax, the Comptroller of Property Tax or the Commissioner of Stamp Duties, the amount of cash payout made by the Comptroller to the qualifying person shall be reduced by the amount so due.
(13)  Any amount reduced under subsection (12) shall be deemed to be tax, duty, interest or penalty paid by the qualifying person under the relevant Act and shall (if it is due under an Act other than this Act) be paid by the Comptroller to the Comptroller of Goods and Services Tax, the Comptroller of Property Tax or the Commissioner of Stamp Duties, as the case may be.
(14)  For the purposes of sections 14, 14A, 14D, 14DA, 14R, 14S, 14T, 19A(2), (2A) and (2B) and 19B, the deductions or allowances made to a qualifying person shall be reduced by the amount in respect of which an election for a cash payout has been made under this section by the qualifying person.
(15)  Where a qualifying person has received a cash payout under subsection (1) —
(a)
in respect of any deduction or allowance under any of the sections referred to under subsection (1) that is subsequently disallowed;
(b)
without having satisfied all of the requirements in this section (excluding the requirements in subsections (10) and (11)) for the payout; or
(c)
that is in excess of that which may be given to it under this section,
the amount of the cash payout or the excess amount of the cash payout, as the case may be, shall be recoverable by the Comptroller from the qualifying person as a debt due to the Government.
(16)  The amount to be repaid under subsection (10), (11) or (15) shall be payable at the place stated in the notice served by the Comptroller on the qualifying person within 30 days after the service of the notice.
(17)  The Comptroller may, in his discretion and subject to such terms and conditions as he may impose, extend the time limit within which payment under subsection (16) is to be made.
(18)  Sections 86(1) to (6), 87(1) and (2), 89, 90 and 91 shall apply to the collection and recovery by the Comptroller of the amounts recoverable under subsections (10), (11) and (15) as they apply to the collection and recovery of tax.
(19)  Unless disallowed by the Comptroller under subsection (20), where the Comptroller has recovered any amount under subsection (15)(b) or (c), the amount of the relevant deduction or allowance referred to in subsection (14) shall be increased by an amount determined in accordance with the formula
A
,
7%
 
where A is the amount recovered by the Comptroller under subsection (15)( b) or (c).
(20)  The Comptroller may disallow the increase under subsection (19) if he is satisfied that the qualifying person has —
(a)
provided the Comptroller with any information or document, in connection with an election under subsection (1), which is false or misleading in a material particular;
(b)
omitted any material particular from any information or document given in connection with an election under subsection (1);
(c)
prepared or maintained or authorised the preparation or maintenance of any false books of account or other records or falsified or authorised the falsification of any books of account or records in connection with an election under subsection (1); or
(d)
made use of any fraud, art or contrivance whatsoever or authorised the use of such fraud, art or contrivance, in connection with an election under subsection (1).
(21)  In this section —
“local employee”, in relation to a qualifying person who elects for a cash payout under subsection (1), means any Singapore citizen or Singapore permanent resident, but excludes —
(a)
a shareholder who is also a director of the qualifying person if the qualifying person is a company within the meaning of section 4 of the Companies Act (Cap. 50); and
(b)
a partner under a contract for service of the qualifying person if the qualifying person is a partnership;
“qualifying person” means any company or firm (including a partnership) that —
(a)
carries on a trade or business in Singapore; and
(b)
employs and makes contributions to the Central Provident Fund in respect of not less than 3 local employees based on the payroll for the last month (or such other month as the Comptroller may determine) of its basis period for the qualifying year of assessment in question.”.