Income Tax – What are the indicators suggesting that you could be asked to participate in an unacceptable PIC arrangement?


From our recent experience, there has been an ever-increasing concern about vendors, salespersons and PIC consultants approaching taxpayers and offer to help them claim PIC cash pay-out.  You should understand that where an incorrect PIC cash payout claim is made based on wrong advice by vendors, salespersons and consultants, you will still have to pay a penalty and/or face imprisonment because you are ultimately responsible for the accuracy of your PIC application.

This post summarises what vendors, salespersons and PIC consultants might promise taxpayers and explains the implications to taxpayers.

“No need to pay if PIC cash Payout is not approved by IRAS”

This means that there is no genuine business need for the expenditure and that it was made merely to obtain the PIC cash payout.  This is not acceptable.  Even if the claim is approved, IRAS may, within the next 5 years, check and ask for records to prove that the expenditure was genuine and payment was made.  Taxpayer will have to refund the PIC cash payout if he is not able to produce sufficient records to prove the above. Penalties may apply.

 “Just sign on the form, we will settle the PIC claim for you”

Taxpayer is  ultimately responsible for the accuracy of his claims even if the vendor had helped him submit the claims.  Taxpayer will also  bear the penalties if the PIC claim is found to be incorrect.

“I can help you set up the business and find three employees for you”

Taxpayer should not set up a business or hire three employees merely for the purpose of making a PIC cash payout claim. He is  ultimately responsible for the accuracy of your claims even if the vendor had helped him submit the claim. Taxpayer will also  bear the penalties if the PIC claim is found to be incorrect.

 “To meet the PIC condition, you just need to find any three persons and pay them CPF in that month”

Hiring three employees purely for the purpose of meeting the PIC condition is not acceptable. It must be to meet genuine business needs.  Taxpayer will bear the penalties if IRAS subsequently finds that the three employees were not hired for genuine business purposes.

 “The three local employees can include part-timers”

While a part-timer can be considered  one of the three local employees, it is not acceptable to hire part-timers for the purpose of meeting the PIC conditions and not for meeting any genuine business need.  Taxpayer will bear the penalties if IRAS subsequently finds that the part-timers were not hired for genuine business purposes.

“I can help you set up a business and after claiming PIC cash payout, you just need to close off the business.”

Taxpayer should not set up a business or hire three employees merely for the purpose of making PIC claims. Taxpayer will bear the penalties if IRAS finds that you are abusing the PIC scheme by making use of fraudulent arrangements to obtain PIC benefits.

What does this mean to you if you were involved in promoting PIC scheme?

IRAS says that it will keep a close watch on claims linked to promoters of abusive PIC arrangements. Once detected, IRAS will subject these claims to close scrutiny and may disallow claims linked to promoters of abusive PIC arrangements. As a result of the amendment to the Income Tax Act, IRAS has now enhanced power to  subject the promoters of abusive PIC schemes to criminal investigations.

If you have any questions, please conatc

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