Singapore's Productivity and Innovation Credit abuse (brief)

Key points

The PIC let businesses with at least three local employees convert up to S$100,000 a year of qualifying spending (S$200,000 across YA 2011 and YA 2012), including R&D, into cash at rates of 30, 60 and later 40 percent.1
By 2016 IRAS had investigated or audited about 71,000 cash payout claims, around 30 percent of those for YA 2011 to YA 2015, and 1,500 required clawback.2
IRAS releases record vendors and people presenting themselves as consultants who supplied false invoices or employee particulars, in two records for half of the payout.345 These were shares of payouts obtained by fraud, not fees for professional work on genuine claims.
In 2014 Parliament created powers against abusive PIC arrangements and a specific promoter offence; the EIS that followed keeps the offences for assisting false claims but has no identified promoter offence.6789

The scheme

Section 37G of the Income Tax Act 1947 allowed a qualifying business to elect a cash payout in place of PIC deductions, including R&D deductions, for expenditure in YA 2011 to YA 2018. The rate was 30 percent for YA 2011 and YA 2012, 60 percent from YA 2013, and 40 percent for expenditure from 1 August 2016. The business had to carry on business in Singapore and employ, with Central Provident Fund contributions, at least three local employees.1 The Budget 2016 statement lowered the rate as part of the "tapering of broad-based measures", and confirmed that the scheme would expire after YA 2018.10

The scale of abuse

In March 2016 the Ministry of Finance told Parliament that about 102,000 companies had benefited, and that "it is expected that some taxpayers will try to game the system through artificial and contrived arrangements even as the majority of claims are genuine".2 IRAS had investigated or audited about 71,000 claims; 1,500 required clawback, and S$11 million had been clawed back for YA 2011 to YA 2014.2 By January 2018 IRAS had prosecuted 13 PIC fraud cases.11 In April 2016 the Ministry said the 11 court cases brought or pending at that point did "not involve consultants".12

How it was done

The recorded methods were listing people who were not employees to meet the three employee condition, claiming for purchases that never happened, and inflating invoice prices.21314 IRAS described a typical promoter as providing "false employment contracts, working timesheets, payment vouchers, product flyers or brochures, quotations and invoices" and the particulars of "up to three unrelated persons", and said the promoter "may take a cut from the PIC cash pay-outs".3

Intermediaries in the record

Release	Role recorded by IRAS	Outcome
2016	Computer retailer and its director who prepared a false invoice	Director jailed 12 days; penalties of four times the payout13
2018	Software seller who supplied employee particulars to buyers	7 months' jail; penalty of three to four times the payouts3
2019	Consultancy proprietor who assisted 13 individuals	Over 18 months' jail; penalties of S$688,80015
2020	Machinery wholesaler's director who assisted 83 entities	46 months' jail; penalty of S$5.75 million14
2021	Person who held himself out "as a PIC consultant"	36 months' jail; penalty of S$295,2724

Names are omitted. Sources: IRAS news releases.

In the 2021 case IRAS stated that the person "would receive 50% of the PIC monies disbursed" on a successful claim.4 In [2018] SGHC 265, the High Court recorded that a convicted claimant had agreed to pay a promoter "50% of the amount that he would receive from the IRAS, if his PIC claim was successful".5 These were shares of payouts obtained by fraud, not fees for work on genuine claims, and they are not evidence about advisers generally.

The response

Introducing the 2014 amendments, the Senior Minister of State for Finance said IRAS had "come across abusive arrangements aimed at artificially creating or inflating PIC claims, especially where cash payouts are involved", and that while these were "a minority of PIC claims", additional measures were necessary, including "penalties on intermediaries who promote or facilitate PIC claims for such abusive arrangements".6

Section 37K lets the Comptroller disallow and recover benefits from abusive PIC arrangements made on or after 27 November 2014.7 Section 37L makes it an offence to promote a PIC arrangement "knowing or having reasonable grounds to believe that the arrangement is abusive", with a fine of up to S$10,000, up to three years' imprisonment, or both.8 Section 37M sets four tiers of penalty for false information, from one to four times the payout, and the willful tiers reach anyone who acts to "assist another person to obtain" a payout.16

The Enterprise Innovation Scheme now offers a 20 percent cash payout on up to S$100,000 a year, capped at S$20,000, paid after IRAS has "assessed and verified the claims".17 Section 37S applies the same four tiers to EIS elections, and the Act's list of provisions shows no EIS equivalent of section 37L.918

What the record shows

The PIC cash payout was widely used and abused by a minority, mainly through false employees, fictitious purchases and inflated invoices.23 In the cases IRAS publicized, intermediaries supplied the false documents and, in two records, took or were promised half the payout; courts imposed penalties of up to four times the payouts and prison terms.4514 Parliament targeted abusive arrangements and their promoters, and the scheme that replaced the PIC pays less and keeps the offences for those who assist.781718 No official source reviewed records how advisers on genuine claims were paid.

References

Attorney-General's Chambers, Income Tax Act 1947 (Singapore Statutes Online, current version), section 37G(1), (4), (19) and (21). https://sso.agc.gov.sg/Act/ITA1947?ProvIds=pr37G- (accessed 11 October 2026). Back
Ministry of Finance, Investigations to Productivity and Innovation Credit Scheme Claims (reply to parliamentary question, 1 March 2016). https://www.mof.gov.sg/news-resources/newsroom/investigations-to-productivity-and-innovation-credit-scheme-claims/ (accessed 11 October 2026). Back
Inland Revenue Authority of Singapore, news release on the sentencing of a promoter of fraudulent PIC claims to seven months' imprisonment (12 February 2018). IRAS news release, 12 February 2018 (accessed 11 October 2026). Back
Inland Revenue Authority of Singapore, news release on the sentencing of a promoter of fraudulent PIC claims to 36 months' imprisonment (31 March 2021). IRAS news release, 31 March 2021 (accessed 11 October 2026). Back
Supreme Court of Singapore, High Court decision [2018] SGHC 265, paragraph 4. https://www.elitigation.sg/gd/s/2018_SGHC_265 (accessed 11 October 2026). Back
Ministry of Finance, Second Reading Speech by Mrs Josephine Teo, Senior Minister of State for Finance and Transport, on the Income Tax (Amendment) Bill 2014 (3 November 2014), paragraph 12. https://www.mof.gov.sg/news-resources/newsroom/second-reading-speech-by-mrs-josephine-teo-senior-minister-of-state-for-finance-and-transport-on-the-income-tax-amendment-bill-2014/ (accessed 11 October 2026). Back
Attorney-General's Chambers, Income Tax Act 1947 (Singapore Statutes Online, current version), section 37K. https://sso.agc.gov.sg/Act/ITA1947?ProvIds=pr37K- (accessed 11 October 2026). Back
Attorney-General's Chambers, Income Tax Act 1947 (Singapore Statutes Online, current version), section 37L. https://sso.agc.gov.sg/Act/ITA1947?ProvIds=pr37L- (accessed 11 October 2026). Back
Attorney-General's Chambers, Income Tax Act 1947 (Singapore Statutes Online, current version), section 37S. https://sso.agc.gov.sg/Act/ITA1947?ProvIds=pr37S- (accessed 11 October 2026). Back
Ministry of Finance, Budget 2016 Statement, paragraph B.115. https://www.singaporebudget.gov.sg/data/budget_2016/download/FY2016_Budget_Statement.pdf (accessed 11 October 2026). Back
Ministry of Finance, Fraudulent Claims for Government Schemes (reply to parliamentary questions, 8 January 2018), paragraph 7. https://www.mof.gov.sg/news-resources/newsroom/fraudulent-claims-for-government-schemes/ (accessed 11 October 2026). Back
Ministry of Finance, Cases of Fraud in Productivity and Innovation Credit Scheme (reply to parliamentary question, 5 April 2016). https://www.mof.gov.sg/news-resources/newsroom/cases-of-fraud-in-productivity-and-innovation-credit-scheme/ (accessed 11 October 2026). Back
Inland Revenue Authority of Singapore, news release on the conviction of two companies and a director for a false PIC claim (19 February 2016). https://www.iras.gov.sg/news-events/newsroom/two-companies-and-a-director-convicted-for-making-fraudulent-pic-claim (accessed 11 October 2026). Back
Inland Revenue Authority of Singapore, news release on the sentencing of a machinery wholesaler's director for assisting false PIC claims (27 March 2020). IRAS news release, 27 March 2020 (accessed 11 October 2026). Back
Inland Revenue Authority of Singapore, news release on a sole proprietor sentenced for assisting 13 others to make fraudulent PIC claims (5 March 2019). https://www.iras.gov.sg/news-events/newsroom/sole-proprietor-jailed-and-penalised-for-assisting-13-others-in-making-fraudulent-pic-claims (accessed 11 October 2026). Back
Attorney-General's Chambers, Income Tax Act 1947 (Singapore Statutes Online, current version), section 37M. https://sso.agc.gov.sg/Act/ITA1947?ProvIds=pr37M- (accessed 11 October 2026). Back
Inland Revenue Authority of Singapore, IRAS e-Tax Guide: Enterprise Innovation Scheme (Third Edition, published 31 August 2026), paragraphs 5.8 and 6.9. https://www.iras.gov.sg/docs/default-source/e-tax/etaxguide_cit_enterprise-innovation-scheme.pdf?sfvrsn=3a36afd3_12 (accessed 11 October 2026). Back
Attorney-General's Chambers, Income Tax Act 1947 (Singapore Statutes Online, current version), table of contents, Part 9. https://sso.agc.gov.sg/Act/ITA1947 (accessed 11 October 2026). Back