42. The principal Act is amended by inserting, immediately after section 37IB, the following sections:“Enhanced deduction or allowance under Productivity and Innovation Credit Plus Scheme |
37IC.—(1) A person who —(a) | during the basis period for the year of assessment 2015, 2016, 2017 or 2018, has incurred any expenditure mentioned in the first column of the following table; | (b) | is a qualifying person for that year of assessment within the meaning of the regulations made under subsection (3); and | (c) | has made an application in accordance with subsection (2), |
shall be entitled to an enhanced deduction or allowance under the provision in the second column (in the case of the year of assessment 2015) or the third column (in the case of any of the other years of assessment) of the table that corresponds to that expenditure, computed in accordance with the regulations made under subsection (3): |
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| | | | Year of assessment 2016, 2017 or 2018 |
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1. | Qualifying intellectual property registration costs as defined in section 14A |
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| | | | | 2. | Qualifying expenditure as defined in section 14DA |
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| | | | | 3. | Qualifying training expenditure as defined in section 14R |
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| | | | | 4. | Qualifying design expenditure as defined in section 14S |
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| | | | | 5. | Expenditure on the leasing of any PIC automation equipment, or procuring of cloud computing services as defined in section 14T |
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| | | | | 6. | Expenditure on the licensing from another of any qualifying intellectual property rights as defined in section 14W |
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| | | | | 7. | Capital expenditure on the provision of any PIC automation equipment |
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| (including any capital expenditure treated as capital expenditure incurred on the provision of PIC automation equipment under section 19A(16A)) |
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| | | | | 8. | Capital expenditure on acquiring any intellectual property rights |
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(2) The application under subsection (1)(c) —(a) | shall be made to the Comptroller at the time of lodgment by the qualifying person of the return of income for that year of assessment or within such extended time as the Comptroller may allow; and | (b) | shall be accompanied by such information and supporting document, given in such form and manner, as the Comptroller may specify. |
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(3) The Minister may make regulations —(a) | to define a qualifying person for each year of assessment for the purposes of subsection (1); | (b) | to provide for the computation of the amount of the enhanced deduction or allowance under that subsection; and | (c) | to make provisions generally for giving effect to or for carrying out the purposes of this section. |
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(4) All regulations made under subsection (3) shall be presented to Parliament as soon as possible after publication in the Gazette. |
(5) To avoid doubt, an enhanced deduction or allowance referred to in subsection (1) is a deduction or allowance under the applicable provision under the second or third column of the table in that subsection, and the provisions of section 14A, 14DA, 14R, 14S, 14T, 14W, 19A or 19B (whichever is applicable) shall apply to the deduction or allowance. |
(6) In this section, “person” means a company or firm (including a partnership). |
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37ID.—(1) Notwithstanding the provisions of this Act, the Comptroller may disallow an amount referred to in subsection (2) of a claim for —(a) | a PIC enhanced deduction; or | (b) | a PIC cash payout, |
and disallow the payment of an amount referred to in subsection (2) of a PIC bonus based on that claim, if the Comptroller has reasonable grounds to suspect that the claim arises from an abusive PIC arrangement. |
(2) The amount of the PIC enhanced deduction, PIC cash payout or PIC bonus that may be disallowed under subsection (1) is the amount resulting from the PIC arrangement being abusive as defined under subsection (10). |
(3) Notwithstanding the provisions of this Act, the amount referred to in subsection (4) of a PIC cash payout or PIC bonus paid to a person that was based on a claim that arose from an abusive PIC arrangement shall be recoverable by the Comptroller from the person as a debt due to the Government. |
(4) The amount of the PIC cash payout or PIC bonus that is recoverable under subsection (3) is the amount resulting from the PIC arrangement being abusive as defined under subsection (10). |
(5) The amount that is recoverable under subsection (3) shall be payable at the place stated in the notice served by the Comptroller on the person within 30 days after the service of the notice. |
(6) The Comptroller may, in his discretion, and subject to such terms and conditions as he may impose, extend the time within which payment under subsection (3) is to be made. |
(7) 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 amount recoverable under subsection (3) as they apply to the collection and recovery of tax. |
(8) In this section, an arrangement is a PIC arrangement if the obtaining of a PIC cash payout, PIC bonus or PIC enhanced deduction, or a higher amount of a PIC cash payout, PIC bonus or PIC enhanced deduction, was the purpose or one of the purposes of the arrangement (referred to in this section as the relevant purpose). |
(9) In this section, a PIC arrangement is abusive if —(a) | it consists or makes use of one or more artificial, contrived or fraudulent steps that is intended to achieve the relevant purpose; | (b) | the arrangement results in the consideration paid or payable for the property or services in question being of a greater value than the open market value of the property or services, and there is no bona fide commercial reason for the difference in the values apart from the relevant purpose; or | (c) | in any other case, there is no bona fide commercial reason for entering into the arrangement or a transaction forming part of the arrangement apart from the relevant purpose. |
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(10) In this section, the amount of PIC enhanced deduction, PIC cash payout or PIC bonus resulting from a PIC arrangement being abusive is —(a) | if the arrangement is abusive by reason of subsection (9)(a), the amount that results or has resulted from the use of the artificial, contrived or fraudulent step or steps, excluding any amount the person concerned is entitled to if the step or steps had not been used; | (b) | if the arrangement is abusive by reason of subsection (9)(b), the amount that corresponds to the difference in the values mentioned in that provision; or | (c) | if the arrangement is abusive by reason of subsection (9)(c), the full amount. | (i) | A enters into a contract for training for his employees. The right to training may be exchanged for goods. Expenditure for the goods is not eligible for a PIC cash payout. A exchanged the right to training for those goods and made a claim for a PIC cash payout in respect of the expenditure. The contract and the exchange together form an abusive PIC arrangement. The amount of the PIC cash payout that results from the arrangement being abusive for the purposes of subsections (1) and (3) is the full amount of the payout. |
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| (ii) | A, in order to obtain a higher amount of PIC cash payout, purchases more equipment than he needs for his business. The purchase of the excess equipment is an abusive PIC arrangement. The amount of the PIC cash payout that results from the arrangement being abusive for the purposes of subsections (1) and (3) is the amount corresponding to the price paid for the excess equipment. |
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| (iii) | A and B, in order to help each other obtain a PIC cash payout, sell to each other equipment that performs the same function. The sales are abusive PIC arrangements. The amount of the PIC cash payout that results from the arrangement being abusive for the purposes of subsections (1) and (3) is the full amount of the payout. |
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| (iv) | A enters into a contract for training for his employees. The contract price for the training includes both the value of the training and the value of other goods to be given to the trainees. Expenditure for those goods is not eligible for a PIC cash payout. The purpose for setting the price for the training in this way is to enable a higher PIC cash payout to be paid to A. The contract is an abusive PIC arrangement. The amount of the PIC cash payout that results from the arrangement being abusive for the purposes of subsections (1) and (3) is the amount corresponding to the price for those other goods. |
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(11) This section applies only to arrangements made or entered into on or after the date of commencement of section 42 of the Income Tax (Amendment) Act 2014. |
(12) In this section —“arrangement” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable); |
“PIC bonus” means a payment under section 37IA; |
“PIC cash payout” means a payment under section 37I; |
“PIC enhanced deduction” means a deduction or an allowance under section 14A(1B) or (1BA), 14DA(2), 14R(2) or (2A), 14S(2) or (2AA), 14T(2) or (2A), 14W(1) or (4), 19A(2B) or (2BAA), 19B(1B) or (1BAA), or 37IC. |
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Promoters of abusive PIC arrangements |
37IE.—(1) A person who promotes any PIC arrangement knowing or having reasonable grounds to believe that the arrangement is abusive shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $10,000 or to imprisonment for a term not exceeding 3 years or to both.(2) In subsection (1), a person promotes a PIC arrangement if the person —(a) | designs, facilitates, organises or manages that arrangement or any part of that arrangement; or | (b) | publishes, disseminates or communicates any information, by any means or in any form, for the purpose of inducing or encouraging (whether directly or indirectly) any other person to enter into the arrangement or any transaction forming part of the arrangement. |
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(3) In subsection (1), a PIC arrangement is abusive if —(a) | it consists or makes use of one or more artificial, contrived or fraudulent steps that is intended to assist any person who enters into the arrangement or a transaction forming part of the arrangement to achieve the relevant purpose; | (b) | the arrangement will result in the consideration payable for any property or services being of a greater value than the open market value of the property or services, and there is no bona fide commercial reason for the difference in the values apart from the relevant purpose; or | (c) | in any other case, there is no bona fide commercial reason for a person to enter into the arrangement or a transaction forming part of the arrangement apart from the relevant purpose. |
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(4) The examples of abusive PIC arrangements in section 37ID(10) apply for the purposes of subsection (3). |
(5) Where, in any proceedings for an offence under subsection (1), it is proved that the arrangement in question consists or makes use of an artificial, contrived or fraudulent step which is capable of assisting any person who enters into the arrangement or a transaction forming part of the arrangement to achieve the relevant purpose, then it is presumed that the step is intended for the relevant purpose, unless the contrary is proved. |
(6) Where, in any proceedings for an offence under subsection (1), it is proved that —(a) | the arrangement in question will result or has resulted in the consideration paid or payable for any property or services being of a greater value than the open market value of the property or services; and | (b) | the difference in the values cannot be justified on the basis of any prevailing practice of the trade, profession or business concerned (not being a practice adopted for the purpose of achieving the relevant purpose), |
then it is presumed that there is no bona fide commercial reason for the difference in the values apart from the relevant purpose, unless the contrary is proved. |
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(7) The Comptroller may compound any offence under subsection (1). |
(8) In this section —“PIC arrangements”, “PIC cash payout”, “PIC bonus” and “PIC enhanced deduction” have the respective meanings given to them in section 37ID; |
“relevant purpose” means the purpose of obtaining a PIC cash payout, PIC bonus or PIC enhanced deduction, or a higher amount of PIC cash payout, PIC bonus or PIC enhanced deduction.”. |
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