3. The principal Regulations are amended by inserting, immediately after regulation 5A, the following regulation:“Modifications to provisions of Act in relation to Productivity and Innovation Credit Scheme |
5B.—(1) Where the date of amalgamation falls within the basis period for the year of assessment 2011, the amount of any PIC expenditure under a PIC provision incurred by the amalgamated company during the basis periods for the years of assessment 2011 and 2012 for which a deduction or allowance may be allowed or made to it under that PIC provision for those years of assessment shall be determined as follows:(a) | for the year of assessment 2011, the lower of —(i) | the amount of the PIC expenditure under that PIC provision incurred by the amalgamated company during the basis period for the year of assessment 2011; and | (ii) | an amount computed in accordance with the formula: | is the aggregate of every amount of PIC expenditure under that PIC provision incurred by an amalgamating company during the basis period for the year of assessment 2011 for which a deduction or allowance is allowed or made to that company under that PIC provision, including any such expenditure for which a cash payout is granted to that company under section 37I of the Act; |
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| (b) | for the year of assessment 2012, the lower of —(i) | the amount of the PIC expenditure under that PIC provision incurred by the amalgamated company during the basis period for the year of assessment 2012; and | (ii) | the balance after deducting from $800,000 the aggregate of —(A) | X1 referred to in sub-paragraph (a)(ii); and | (B) | the lower of the amounts specified in sub-paragraph (a)(i) and (ii). |
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(2) Where the date of amalgamation falls within the basis period for the year of assessment 2012, the amount of any PIC expenditure under a PIC provision incurred by the amalgamated company during the basis period for that year of assessment for which a deduction or allowance may be allowed or made to it under that PIC provision for that year of assessment shall be the lower of —(a) | the amount of the PIC expenditure under that PIC provision incurred by the amalgamated company during the basis period for the year of assessment 2012; and | (b) | an amount computed in accordance with the formula: | is the aggregate of every amount of PIC expenditure under that PIC provision incurred by an amalgamating company during the basis period for the year of assessment 2011 or 2012, for which a deduction or allowance is allowed or made to that company under that PIC provision, including any such expenditure for which a cash payout is granted to that company under section 37I of the Act. |
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(3) Where the date of amalgamation falls within the basis period for the year of assessment 2013, the amount of any PIC expenditure under a PIC provision incurred by the amalgamated company during the basis periods for the years of assessment 2013, 2014 and 2015 for which a deduction or allowance may be allowed or made to it under that PIC provision for those years of assessment shall be determined as follows:(a) | for the year of assessment 2013, the lower of —(i) | the amount of the PIC expenditure under that PIC provision incurred by the amalgamated company during the basis period for the year of assessment 2013; and | (ii) | an amount computed in accordance with the formula: | is the aggregate of every amount of PIC expenditure under that PIC provision incurred by an amalgamating company during the basis period for the year of assessment 2013 for which a deduction or allowance is allowed or made to that company under that PIC provision, including any such expenditure for which a cash payout is granted to that company under section 37I of the Act; |
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| (b) | for the year of assessment 2014, the lower of —(i) | the amount of the PIC expenditure under that PIC provision incurred by the amalgamated company during the basis period for the year of assessment 2014; and | (ii) | the balance after deducting from $1,200,000 the aggregate of —(A) | X3 referred to in sub-paragraph (a)(ii); and | (B) | the lower of the amounts specified in sub-paragraph (a)(i) and (ii); |
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| (c) | for the year of assessment 2015, the lower of —(i) | the amount of the PIC expenditure under that PIC provision incurred by the amalgamated company during the basis period for the year of assessment 2015; and | (ii) | the balance after deducting from $1,200,000 the aggregate of —(A) | X3 referred to in sub-paragraph (a)(ii); | (B) | the lower of the amounts specified in sub-paragraph (a)(i) and (ii); and | (C) | the lower of the amounts specified in sub-paragraph (b)(i) and (ii). |
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(4) Where the date of amalgamation falls within the basis period for the year of assessment 2014, the amount of any PIC expenditure under a PIC provision incurred by the amalgamated company during the basis periods for the years of assessment 2014 and 2015 for which a deduction or allowance may be allowed or made to it under that PIC provision for those years of assessment shall be determined as follows:(a) | for the year of assessment 2014, the lower of —(i) | the amount of the PIC expenditure under that PIC provision incurred by the amalgamated company during the basis period for the year of assessment 2014; and | (ii) | an amount computed in accordance with the formula: | is the aggregate of every amount of PIC expenditure under that PIC provision incurred by an amalgamating company during the basis period for the year of assessment 2013 or 2014 for which a deduction or allowance is allowed or made to that company under that PIC provision, including any such expenditure for which a cash payout is granted to that company under section 37I of the Act; |
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| (b) | for the year of assessment 2015, the lower of —(i) | the amount of the PIC expenditure under that PIC provision incurred by the amalgamated company during the basis period for the year of assessment 2015; and | (ii) | the balance after deducting from $1,200,000 the aggregate of —(A) | X4 referred to in sub-paragraph (a)(ii); and | (B) | the lower of the amounts specified in sub-paragraph (a)(i) and (ii). |
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(5) Where the date of amalgamation falls within the basis period in the year of assessment 2015, the amount of any PIC expenditure under a PIC provision incurred by the amalgamated company during the basis period for that year of assessment for which a deduction or allowance may be allowed or made to it under that PIC provision for that year of assessment shall be the lower of —(a) | the amount of the PIC expenditure under that PIC provision incurred by the amalgamated company during the basis period for the year of assessment 2015; and | (b) | an amount computed in accordance with the formula: | is the aggregate of every amount of PIC expenditure under that PIC provision incurred by an amalgamating company during the basis period for the year of assessment 2013, 2014 or 2015, for which a deduction or allowance is allowed or made to that company under that PIC provision, including any such expenditure for which a cash payout is granted to that company under section 37I of the Act. |
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(6) For the avoidance of doubt, the deduction or allowance which may be allowed or made to the amalgamated company under paragraphs (1) to (5) shall be subject to section 37I(14A) of the Act. |
(7) For the purpose of determining the applicability of section 14A(1C), 14DA(5), 14R(4), 14S(2A), 14T(5), 19A(2BA) or 19B(1BA) of the Act (reduction of the expenditure used for computing the deduction or allowance where the person claiming it did not carry on a trade or business during a specified basis period) to an amalgamating company and the amalgamated company in a case where the date of amalgamation falls within the basis period for the year of assessment 2011 or 2012 —(a) | in relation to the amalgamating company, any trade or business carried on by the amalgamated company on or after the date of amalgamation, shall be deemed to have been carried on by the amalgamating company as if the amalgamating company existed on or after that date; and | (b) | in relation to the amalgamated company, any trade or business carried on by any of the amalgamating companies prior to the date of amalgamation, shall be deemed to have been carried on by the amalgamated company as if the amalgamated company existed prior to that date. |
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(8) For the purpose of determining the applicability of section 14A(1D), 14DA(5), 14R(5), 14S(2B), 14T(6), 19A(2BB) or 19B(1BB) of the Act (reduction of the expenditure used for computing the deduction or allowance where the person claiming it did not carry on a trade or business during one or 2 specified basis periods) to an amalgamating company and the amalgamated company in a case where the date of amalgamation falls within the basis period for the year of assessment 2013, 2014 or 2015 —(a) | in relation to the amalgamating company, any trade or business carried on by the amalgamated company on or after the date of amalgamation shall be deemed to have been carried on by the amalgamating company as if the amalgamating company existed on or after that date; and | (b) | in relation to the amalgamated company, any trade or business carried on by any of the amalgamating companies prior to the date of amalgamation shall be deemed to have been carried on by the amalgamated company as if the amalgamated company existed prior to that date. |
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(9) In this regulation —“Productivity and Innovation Credit Scheme expenditure” or “PIC expenditure”, in relation to any PIC provision, means —(a) | in the case of section 14A(1A) or (1B) of the Act, qualifying intellectual property registration costs under that provision; | (b) | in the case of section 14DA(2) of the Act, qualifying expenditure under that section; | (c) | in the case of section 14R(1) or (2) of the Act, qualifying training expenditure under that provision; | (d) | in the case of section 14S(1) or (2) of the Act, qualifying design expenditure under that provision; | (e) | in the case of section 14T(1) or (2) of the Act read with section 14T(6C) of the Act, expenditure on the leasing of any PIC automation equipment under a qualifying lease or procuring cloud computing services under that provision; | (f) | in the case of section 19A(2A) or (2B) of the Act, capital expenditure on the provision of any PIC automation equipment under that provision; and | (g) | in the case of section 19B(1A) or (1B) of the Act, capital expenditure in acquiring any intellectual property rights under that provision; |
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“PIC provision” means any of the following provisions of the Act:(a) | section 14A(1A) or (1B); | (b) | section 14DA(2); | (c) | section 14R(1) or (2); | (d) | section 14S(1) or (2); | (e) | section 14T(1) or (2); | (f) | section 19A(2A) or (2B); | (g) | section 19B(1A) or (1B).”. |
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