Singapore's Productivity and Innovation Credit abuse

1Summary

Singapore's Productivity and Innovation Credit (PIC) scheme gave enhanced tax deductions for spending on several kinds of activity, including research and development (R&D). From the year of assessment (YA) 2011, a qualifying business could instead elect to convert part of that spending into a cash payout.1 The cash option was available for expenditure up to YA 2018, when the scheme expired.12

The payout was widely used and, in a minority of cases, abused. In 2016 the Ministry of Finance told Parliament that about 102,000 companies had benefited from the PIC, that IRAS had investigated or audited about 71,000 cash payout claims, and that 1,500 of those required clawback.3 It said that "for a scheme with such a wide reach, 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".3

IRAS's news releases record how false claims were made and who helped. They describe vendors who issued false or inflated invoices, people who provided the particulars of persons who were not employees, and promoters who took a share of the payouts.456 Parliament responded in 2014 with powers to deny benefits from abusive arrangements and a new offence for promoting them.78 Courts imposed penalties of up to four times the payouts involved and terms of imprisonment on several intermediaries.569

This paper sets out what the official record shows. It names no claimant, promoter, consultant or firm, cites court decisions by neutral citation only, and makes no recommendation for Singapore.

2The scheme and its cash payout

2.1The cash option

Section 37G of the Income Tax Act 1947 allowed a "qualifying person" that had incurred expenditure qualifying for a PIC deduction or allowance to make an irrevocable written election for a cash payout in place of the deduction, for expenditure incurred in the basis periods for YA 2011 to YA 2018. The selected expenditure had to be at least S$400.1 The qualifying deductions included those for R&D expenditure, alongside training, design, automation equipment and intellectual property.1

The conversion rate changed over the life of the scheme. The Act records the rates as follows.1

Expenditure incurred	Cash payout rate	Expenditure cap for conversion
YA 2011 or YA 2012	30 percent	S$200,000 across the two years
YA 2013 to YA 2016	60 percent	S$100,000 a year
YA 2017 or YA 2018, on or before 31 July 2016	60 percent	S$100,000 a year
YA 2017 or YA 2018, on or after 1 August 2016	40 percent	S$100,000 a year

Figure 1. PIC cash payout rates and caps, from section 37G of the Income Tax Act 1947. A simplified summary; it is not legal or tax advice for Singapore.1

From YA 2013 to YA 2015 a separate PIC bonus matched qualifying expenditure dollar for dollar, up to S$15,000 in total over the three years, for businesses that spent at least S$5,000 and met the same employee condition.10

2.2The local employee condition

A "qualifying person" had to carry on a trade, profession or business in Singapore and employ, and make Central Provident Fund contributions for, at least three local employees, meaning Singapore citizens or permanent residents. A shareholder who was also a director did not count. For YA 2016 to YA 2018 the condition had to be met in all three months of each quarter.1 This condition features in many of the recorded abuses.

2.3Why the scheme changed

In the Budget 2014 statement the Minister for Finance extended the PIC to YA 2018 at a cost of S$3.6 billion, noting that two out of three SMEs with turnover above S$1 million had claimed benefits.11 In the Budget 2016 statement he lowered the cash payout rate from 60 percent to 40 percent for expenditure from 1 August 2016, as part of the "tapering of broad-based measures" and a move "towards more targeted measures", and confirmed that the PIC would expire after YA 2018.12 The Budget 2016 statement gave that policy reason, not abuse, for the lower rate.12

3The scale of abuse recorded by the Ministry of Finance

The Ministry's answers to parliamentary questions give the only aggregate figures found for this paper.

Date of answer	What the Ministry said
1 March 2016	About 102,000 companies had benefited, 70 percent of active companies in IRAS's records for YA 2014. IRAS had investigated or audited about 71,000 claims, around 30 percent of cash payout claims for YA 2011 to YA 2015, and 1,500 required clawback. For YA 2011 to YA 2014, S$11 million had been clawed back and S$8 million recovered. For YA 2014 alone, of 10,000 claims investigated or audited, S$7 million was clawed back from 500 cases.3
5 April 2016	As at 31 December 2015, IRAS had investigated 488 cases for fraud under the PIC. Eight cases, involving S$213,000 of cash payouts, had been prosecuted, and three were pending trial. "The 11 court cases do not involve consultants."13
8 January 2018	IRAS had prosecuted 13 cases for fraud under the PIC. PIC applications were checked upfront against pre-determined criteria for signs of possible gaming, supported by analytics, field intelligence and a whistle blowing platform; higher risk cases could involve examination of invoices and payment evidence and field visits.14

Figure 2. Ministry of Finance answers to parliamentary questions on PIC abuse.31314

Three points stand out. First, the Ministry described abuse as coming from a minority within a scheme with very wide take up.3 Second, clawbacks, mostly handled administratively, far outnumbered prosecutions: 1,500 claims required clawback by March 2016, and IRAS had prosecuted 13 PIC fraud cases by January 2018.314 Third, as at early 2016 none of the court cases then brought involved consultants.13 The cases that did involve intermediaries, described below, were reported later.

4How the payout was abused

IRAS's releases, the Ministry's answers and the 2014 consultation describe a small number of recurring methods.

False employees. Claimants who did not meet the three local employee condition listed people who were not their employees, sometimes making Central Provident Fund contributions for them to make the employment appear real. IRAS described these as including "friends, relatives, retirees and unemployed persons", some of whom "might not have known that their names had been used".5 The Ministry gave the example of "a group of taxpayers" who "had hired each other as employees and paid each other just enough to satisfy the three-local employee condition".3

Expenditure that was not incurred. Claims were made for equipment or software that was never bought or delivered, supported by false invoices or other documents.415

Inflated prices. Vendors issued invoices at prices above what the claimant actually paid, so that the payout covered more than the real cost. In one case IRAS described, a vendor issued two quotations for each sale, one at the actual price and one inflated; the claimant paid the inflated price and the difference was refunded through a false purchase; IRAS said the effect was that the claimant would get the machine for free.16

Backdating. In another case a business was registered two days after its claim was made, and the business commencement date, the purchase invoice and Central Provident Fund contributions were backdated.17

The Ministry's 2014 consultation on the draft amending Bill described abusive arrangements "where vendors issue invoices, or prepare the necessary paperwork such that businesses make cash payout claims for equipment which is not in use (e.g. equipment is not constructed or delivered)".18

5The role of intermediaries in the recorded cases

5.1How IRAS described promoters

In a 2018 release IRAS described what it called a typical fraudulent PIC arrangement. A promoter "may assist claimants by providing false documentation to help support the expenditures declared", such as "false employment contracts, working timesheets, payment vouchers, product flyers or brochures, quotations and invoices", and where claimants did not meet the employee condition, "would provide the names and particulars of up to three unrelated persons". It added: "In return for facilitating the false PIC claims, the PIC promoter may take a cut from the PIC cash pay-outs given to the claimants."5

5.2The cases IRAS reported

The following table summarizes the IRAS releases reviewed for this paper that concern people other than the claimant. It records each person's role only as IRAS described it.

Release	Role recorded by IRAS	What the release records	Outcome
19 February 2016	Computer hardware and software retailer and its director	Prepared a false sales invoice to support another business's claim for automation equipment	Company: penalty of four times the payout and a fine; director: 12 days' jail and a penalty of four times the payout4
12 February 2018	Business owner who sold software to claimants	Assured buyers they would be reimbursed through a PIC payout and supplied particulars of unrelated persons as employees	7 months' jail and a penalty of three to four times the payouts5
5 March 2019	Sole proprietor of a consultancy and investment business	Assisted 13 individuals, including by creating false invoices and filling in forms with the particulars of persons not employed by them	18 months and 4 weeks' jail; penalties totaling S$688,8006
8 January 2020	Former company director	Submitted false information to obtain payouts and bonuses; a claimant director "recruited into" the arrangement was separately convicted	14 months' jail and a penalty of four times the amounts9
27 March 2020	Director of a machinery wholesaler	Assisted 83 business entities with 173 false or inflated invoices; payouts of S$2.7 million	46 months' jail and a penalty of S$5.75 million, four times the payouts16
31 March 2021	Sole proprietor who held himself out "as a PIC consultant"	Charged with assisting 49 individuals to make 58 false claims totaling S$1,122,744; convicted on the first three charges	36 months' jail and a penalty of S$295,27219

Figure 3. IRAS releases on PIC cases involving people who assisted claimants. Names are omitted. Amounts and sentences are as reported by IRAS.

Two of these records describe how the intermediary was paid. In the 2021 case IRAS stated that "upon a successful claim on these fabricated expenditures", the person "would receive 50% of the PIC monies disbursed", and that when IRAS audited the claims he "provided template responses to the claimants to handle queries from IRAS".19 In a 2018 High Court decision on the professional discipline of a claimant convicted of a PIC offence, [2018] SGHC 265, the Court recorded that the claimant had agreed to pay the promoter "50% of the amount that he would receive from the IRAS, if his PIC claim was successful".20 IRAS also announced in 2017 that 14 individuals whose claims were linked to the person in the 2021 case would be charged.15

5.3What these records do and do not show

These are criminal cases about fabricated or inflated claims. The payment the records describe was a share of a payout obtained by fraud, not a fee for professional work on a genuine claim. They are not evidence about how advisers on legitimate PIC or R&D claims were paid, or about the conduct of advisers generally, and this paper does not treat them as such. They do show that, in the cases IRAS chose to publicize, the intermediary's reward depended on a payout being made, and that some intermediaries supplied the documents that made the payout possible.519

6The legislative response

6.1The 2014 amendments

Introducing the Income Tax (Amendment) Bill 2014 on 3 November 2014, the Senior Minister of State for Finance told Parliament that IRAS "has come across abusive arrangements aimed at artificially creating or inflating PIC claims, especially where cash payouts are involved". She said that while "such cases constitute a minority of PIC claims, additional measures are necessary", and listed three:7

requiring PIC automation equipment to be in use before a cash payout could be claimed on it;
strengthening the Comptroller's powers to deny PIC benefits arising from abusive arrangements; and
"imposing penalties on intermediaries who promote or facilitate PIC claims for such abusive arrangements".

The Ministry's earlier consultation explained that the in use requirement targeted vendors who prepared paperwork for equipment not yet built or delivered, and that IRAS would waive it case by case for cash strapped SMEs that needed the payout to pay for the equipment.18

6.2Abusive arrangements

Section 37K lets the Comptroller disallow, and recover as a debt due to the Government, the part of a PIC deduction, cash payout or bonus that results from an abusive PIC arrangement.8 An arrangement is a PIC arrangement if obtaining a PIC benefit, or a higher one, was one of its purposes. It is abusive if it uses "artificial, contrived or fraudulent steps", if it results in consideration above open market value without a bona fide commercial reason, or if there is otherwise no bona fide commercial reason for it apart from the PIC benefit.8 The section's examples include buying more equipment than the business needs and two businesses selling each other equipment that performs the same function.8 It applies to arrangements made on or after 27 November 2014.8

6.3The promoter offence

Section 37L makes it an offence to promote a PIC arrangement "knowing or having reasonable grounds to believe that the arrangement is abusive", punishable by a fine of up to S$10,000, imprisonment of up to three years, or both.21 A person promotes an arrangement if the person "designs, facilitates, organises or manages" it, or publishes or communicates information to induce or encourage others to enter it.21 If an arrangement is proved to use an artificial, contrived or fraudulent step capable of achieving the PIC purpose, that purpose is presumed unless the contrary is proved; and consideration above market value that cannot be justified by trade practice is presumed to lack a bona fide commercial reason.21 The Comptroller may compound the offence.21

6.4The general offences for false information

Separately, section 37M (numbered 37J in earlier editions of the Act, as the court records and IRAS releases cite it) sets four tiers of offence for false information given in a PIC cash payout election:2220

Subsection	Conduct	Penalty on conviction
37M(1)	Giving false information or omitting a material particular	A penalty equal to the payout
37M(2)	The same, without reasonable excuse or through negligence	Double the payout, plus a fine of up to S$5,000 or up to 3 years' imprisonment, or both
37M(3)	Willfully, with intent to obtain "or to assist another person to obtain" a payout not due, giving false information or a false answer	Treble the payout, plus a fine of up to S$10,000 or up to 3 years' imprisonment, or both
37M(4)	With the same intent, keeping false records or using "any fraud, art or contrivance"	Four times the payout, plus a fine of up to S$50,000 or up to 5 years' imprisonment, or both

Figure 4. Offences for false information in a PIC cash payout election, from section 37M of the Income Tax Act 1947.22

The penalty is measured by the payout made or that would have been made "if the offence had not been detected", excluding any amount to which the person was entitled.22 An individual convicted of repeated offences faces a minimum of six months' imprisonment.22 Where false information is given "by or on behalf of any person", the person who gave it is presumed to have intended to obtain or help obtain the payout.22 The 2021 release records that the person who held himself out as a PIC consultant was prosecuted under the fourth tier, which reaches anyone who acts with intent to assist another person to obtain a payout.1922

[2018] SGHC 265 explains the structure: the four subsections are "tiers" of offence of escalating severity, graded by the mental state of the offender, and "fraud or dishonesty is not a constituent element" of the second tier.20

7The Enterprise Innovation Scheme that followed

The PIC was followed by the Enterprise Innovation Scheme (EIS), introduced in Budget 2023.23 Its cash payout is smaller. A business may convert up to S$100,000 of qualifying expenditure a year at 20 percent, so the payout is capped at S$20,000; IRAS says it is "to help small, growing businesses defray the costs of their innovation activities".23 The employee condition is tighter: at least three full-time local employees, each earning at least S$1,400 a month, for at least six months of the basis period.24 IRAS disburses the payout "after IRAS has assessed and verified the claims", and may audit later and recover payouts not due.23

Section 37S reproduces the four tiers of offence for false information in an EIS election, including the limbs that reach anyone who acts to "assist another person to obtain" a payout.25 The Act's list of provisions shows sections 37R and 37S for the EIS and no EIS section equivalent to the PIC promoter offence in section 37L.26

Feature	PIC cash payout	EIS cash payout
Period	Expenditure in YA 2011 to YA 20181	Expenditure in YA 2024 to YA 202824
Rate	30, 60, then 40 percent1	20 percent23
Annual cap on converted expenditure	S$100,000 from YA 20131	S$100,00023
Employee condition	At least 3 local employees1	At least 3 full-time local employees earning at least S$1,400 a month for 6 months24
Offences for false information	Four tiers, section 37M22	Four tiers, section 37S25
Specific promoter offence	Section 37L21	None identified26

Figure 5. The PIC and EIS cash payouts compared. A simplified summary; it is not legal or tax advice for Singapore.

8What the record does not show

Use of the promoter offence. The IRAS releases reviewed report prosecutions under the false information offences. This paper found no published prosecution under section 37L.
How advisers on genuine claims were paid. No official source reviewed records the fee arrangements of advisers who prepared legitimate PIC or R&D claims.
The share of abuse involving intermediaries. The Ministry's aggregate figures do not say how many clawbacks or investigations involved an intermediary, and its 2016 answer that the court cases then brought did not involve consultants predates the later cases described above.313
R&D claims specifically. The aggregate figures cover all PIC activities. No breakdown for R&D expenditure was found.
Adviser registration. No statutory registration or licensing scheme for paid tax advisers in Singapore was identified for this paper.

9What the facts show

The PIC cash payout turned tax deductions, including R&D deductions, into cash for any business with three local employees, at rates that reached 60 percent.1 The Ministry of Finance described abuse as a minority problem in a scheme used by about 102,000 companies, but IRAS investigated or audited about 30 percent of cash payout claims and required clawback in 1,500.3

The recorded methods were simple: employees who were not employees, purchases that did not happen, and prices that were inflated.3416 In the cases IRAS publicized, intermediaries such as vendors and people presenting themselves as consultants supplied false documents, and in at least two records took or were promised half of the payout.1920 These were shares of payouts obtained by fraud, not fees for professional work on genuine claims. Courts imposed penalties of up to four times the payouts and prison terms of up to 46 months on intermediaries.1619

Parliament responded by targeting arrangements and the intermediaries who promote them, as well as the claimants.7821 The EIS that followed keeps the offences that reach people who assist, with a smaller payout and a tighter employee test, and no specific promoter offence was identified for it.23242526

References

Attorney-General's Chambers, Income Tax Act 1947 (Singapore Statutes Online, current version), section 37G(1), (2A), (3), (4), (19) and (21). https://sso.agc.gov.sg/Act/ITA1947?ProvIds=pr37G- (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, 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 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 promoter of fraudulent PIC claims to seven months' imprisonment (12 February 2018), sections "Facts of the Case" and "PIC Promoters Abusing the PIC Scheme". IRAS news release, 12 February 2018 (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
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
Inland Revenue Authority of Singapore, news release on a sentence of 14 months' imprisonment for a promoter of fraudulent PIC claims (8 January 2020). IRAS news release, 8 January 2020 (accessed 11 October 2026). Back
Attorney-General's Chambers, Income Tax Act 1947 (Singapore Statutes Online, current version), section 37H(1) and (2). https://sso.agc.gov.sg/Act/ITA1947?ProvIds=pr37H- (accessed 11 October 2026). Back
Ministry of Finance, Budget 2014 Statement, paragraphs C.12 and C.13 and the paragraph on take up of the PIC. https://www.singaporebudget.gov.sg/data/budget_2014/download/FY2014_Budget_Statement.pdf (accessed 11 October 2026). Back
Ministry of Finance, Budget 2016 Statement, paragraphs B.115 and B.116. https://www.singaporebudget.gov.sg/data/budget_2016/download/FY2016_Budget_Statement.pdf (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
Ministry of Finance, Fraudulent Claims for Government Schemes (reply to parliamentary questions, 8 January 2018), paragraphs 5 to 7. https://www.mof.gov.sg/news-resources/newsroom/fraudulent-claims-for-government-schemes/ (accessed 11 October 2026). Back
Inland Revenue Authority of Singapore, news release announcing charges against 14 individuals for false PIC claims (17 February 2017). https://www.iras.gov.sg/news-events/newsroom/14-will-be-charged-in-court-for-false-pic-claims (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). https://www.iras.gov.sg/news-events/newsroom/machinery-wholesaler-behind-pic-sham-jailed-46-months-and-ordered-to-pay-5-75-million-in-penalties (accessed 11 October 2026). Back
Inland Revenue Authority of Singapore, news release on a sole proprietor convicted of a false PIC claim involving backdated documents (15 July 2016). https://www.iras.gov.sg/news-events/newsroom/business-and-management-consultancy-owner-convicted-of-pic-fraud (accessed 11 October 2026). Back
Ministry of Finance, Public Consultation on Draft Income Tax (Amendment) Bill 2014 (4 July 2014), note 3. https://www.mof.gov.sg/news-resources/newsroom/public-consultation-on-draft-income-tax-amendment-bill-2014/ (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, paragraphs 4, 6 to 9 and 13. https://www.elitigation.sg/gd/s/2018_SGHC_265 (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 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 3.1, 5.8, 5.9 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), section 37R(1) and (34). https://sso.agc.gov.sg/Act/ITA1947?ProvIds=pr37R- (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
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

Cite this paper

Summary

1Summary

2The scheme and its cash payout

2.1The cash option

2.2The local employee condition

2.3Why the scheme changed

3The scale of abuse recorded by the Ministry of Finance

4How the payout was abused

5The role of intermediaries in the recorded cases

5.1How IRAS described promoters

5.2The cases IRAS reported

5.3What these records do and do not show

6The legislative response

6.1The 2014 amendments

6.2Abusive arrangements

6.3The promoter offence

6.4The general offences for false information

7The Enterprise Innovation Scheme that followed

8What the record does not show

9What the facts show

References

About this paper

Cite this paper

Summary

1Summary

2The scheme and its cash payout

2.1The cash option

2.2The local employee condition

2.3Why the scheme changed

3The scale of abuse recorded by the Ministry of Finance

4How the payout was abused

5The role of intermediaries in the recorded cases

5.1How IRAS described promoters

5.2The cases IRAS reported

5.3What these records do and do not show

6The legislative response

6.1The 2014 amendments

6.2Abusive arrangements

6.3The promoter offence

6.4The general offences for false information

7The Enterprise Innovation Scheme that followed

8What the record does not show

9What the facts show

References

About this paper

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