Are you planning to create an online shop or incorporate eCommerce features like an online shopping cart to your existing website? Find out if your eCommerce website qualifies to claim for the IRAS Productivity & Innovation Credit (PIC) Scheme!
For a business to grow, it must consistently reach new customers and communicate effectively with existing ones. Creating an online shop allows a retail store to do just that. It breaks through the geographical limitations of a retail store and increases sales of its products and services. An online shop is an electronic commerce website which allows consumers to buy products or services directly from the seller via the Internet using a web browser. It is a virtual retail store that resides in the Internet.
1. Claiming PIC Grant for Your Online Shop
An online shop is claimable for PIC grant if it is a new website. Expenditures on your online shop qualifies under ‘Acquisition & Leasing of PIC IT & Automation Equipment,’ which is one of the six activities that qualify for PIC. The one-time registration cost for the domain name of your online shop can also be put up for reimbursement.
If your business is revamping its website to facilitate online shopping for consumers, it does not qualify for PIC claim. But the expenditure incurred to incorporate e-commerce features to your website is claimable for PIC because such enhancements are considered as software development. Find out specifically what e-Commerce features are, from our article ‘Can I Claim PIC for eCommerce Website?‘
2. PIC Grant Qualifying Conditions for Businesses
Other than having a qualifying expenditure, your business itself needs to meet qualifying conditions in order to claim for PIC. A business can opt to claim for either PIC+ Scheme (tax deductions/allowances) or Cash Payout for their online shop expenditure. Both claim options come with different qualifying conditions.
|Tax Deductions/Allowances||To qualify for the PIC+ Scheme, businesses must have (a) active business operations in Singapore, (b) incurred qualifying expenditure and are entitled to PIC during the basis period of qualifying YA and (c) a revenue that is not more than $100 million or an employment size that is not more than 200 employees. This criteria will be applied at the group level if the business is part of a group.|
|Cash Payout||To qualify for the PIC Cash Payout, businesses must have (a) active business operations in Singapore (b) incurred qualifying expenditure and are entitled to PIC during the basis period of qualifying YA (c) meets the three-local-employee condition and (d) minimum qualifying expenditure of $400 for each cash payout option application.|
3. Why are there More PIC Claims Made for Online Shops?
Millennials have led a change in purchase trends. Technology, the availability of mobile phones and devices, is the catalyst to the dramatic increase in online shopping. People no longer have to step out of their houses to buy the things they need. Every business wants a piece of the pie. Businesses recognise the value of an online shop and they invest in building an e-commerce website. They make PIC claims to help defray the expenses for setting up their online stores. Compare the differences between an online shop and retail shop to see if your business needs it.
|COST||Setting up an online store is usually cheaper than a retail storefront. The business only has to make a one-time expenditure to design and develop its e-commerce website. The cost of an e-commerce website is usually less expensive compared to opening a retail shop. Recurrent costs for an online shop would include domain name renewal, web-hosting and email hosting. They usually cost a couple of hundreds per annum and it is a negligible amount for a business.||The costs for setting up a retail store include renovation, shop rental, expenditure on facilities/equipment and the payment of utility bills. The total cost to upkeep a retail store is very much higher, compared to an online store.|
|MANPOWER||An online store has a single presence. It is omnipresent on the Internet. It can be made present wherever your consumers are. An online business requires minimal manning because of its single-presence nature.||For every retail store the business has, it requires at least a staff to run the shop. In order to widen a business’ reach, it has to open new stores. The more stores a business has, the more labour-intensive it gets.|
|INVENTORY||The number of products/services an online shop can feature is almost unlimited. The more robust your eCommerce website is, the more products/services it can display.||The amount of inventory a retail store can hold is limited by the shop’s space. A bigger shop space allows a business to feature more products but it translates to a higher rental cost compared to getting a robust eCommerce website.|
|WAREHOUSING||An online business only requires a centralised location to hold its products and merchandise. Goods can be dispatched directly from the warehouse to the consumers.||A sizeable retail business usually owns a centralised warehouse. The individual retail shops will then hold minimal stock at their respective premises to provide for the consumers. Boutique retail shops would probably stock all their products and merchandise within the premise.|
|COMPETITION||Generally, an online shop will face greater competition compared to a retail shop. In Singapore, there are only a handful of popular search engines to top (Google, Bing, etc) and a limited number of commonly used social media platforms (Facebook, Instagram, Twitter, LinkedIn, etc) to market on. To gain impressions for your brand, the online shop has to rely on Search Engine Marketing (SEM), social media marketing and whatnot.||A retail shop can choose whether they’d want to face competition for their business. To avoid competition, the retail business merely have to locate its store where there are few or no competitors. A retail shop can also choose to face competition and cluster with businesses of the same nature. When businesses do that, they make the location, a stronger attraction to consumers. It increases human traffic and the probability of consumers deliberately travelling down to the location to purchase products/services.|
|CONSUMER||An online shop meets the needs of millennial consumers who embrace the Internet and online shopping. It is the solution for your business to cater for the change in consumer behaviour. An online store readies your business to face consumers who are tech-savvy. The consumer base is vast for an online shop.||A retail store satisfies the needs of consumers who are not tech-savvy and do not like to shop for things online. It provides for consumers who like instant gratification and people who need to physically touch and experience the products themselves. The consumer base is limited to the catchment area of the retail shop.|
|MARKETING||Marketing efforts are absolutely needed for online shops. If an online shop does not engage in marketing, it is nothing but an online business presence lost in the abyss of the Internet. Consumers will never find the business and it’ll get zero impressions and sales if it does not engage in marketing activities.||Marketing efforts help improve sales for retail shops though they are not vitally a need. You make sales as long as you keep your shop opened, your products/services are good and you have favourable human traffic.|
Are you all hyped up at the thought of owning an online shop? Find out how you can develop your website and claim for PIC via our infographics! Share this article with budding entrepreneurs and business owners who needs an online store!
Note: PIRR Creatives does not represent Inland Revenue Authority of Singapore (IRAS) nor the PIC. The approval and payment of the respective claims lie within the sole discretion of IRAS. For an accurate and complete read about the PIC, please visit the IRAS website.