Budget Day has come and gone, but we'll hearing about the Singapore Budget for at least a few weeks more, with the Budget debate and Committee of Supply debates coming up.
To help you get up to speed with what's new, here's our (non-exhaustive) list of 10 things from Finance Minister Heng Swee Keat's Budget speech that are likely to affect small and medium enterprises.
1. Extension of the Wage Credit Scheme (WCS)
The WCS, which co-funds wage increases for Singaporean employees (earning up to a gross monthly wage of S$4,000) was meant to come to an end in 2017, but will now be extended till 2020. So, if an SME offers its Singaporean workers wage hikes, the government will pay 20 per cent of a 2018 hike, 15 per cent of a 2019 one and 10 per cent of a 2020 increase. [Businesses to get S$1.8b boost over next 3 years]
2. Extension of the corporate income tax rebate
For the tax year of assessment (YA) 2018, the corporate tax rebate will be raised to 40 per cent of tax payable, capped at S$15,000. The rebate will also be extended to YA2019, at a rate of 20 per cent of tax payable, capped at S$15,000. In other words, the rebate's hike and extension are targeted at smaller companies. [Businesses to get S$1.8b boost over next 3 years]
3. Enterprise Development Grant (EDG)
Spring Singapore and IE Singapore are merging to form Enterprise Singapore in April. So, the new EDG is a combination of IE’s Global Company Partnership grant with Spring’s Capability Development Grant, offering up to 70 per cent funding support for activities such as product development and innovation, as well as internationalisation. It will be launched in Q4 2018, on the Business Grants Portal. In the meantime, companies can continue to apply for the two individual grants, both available on the Business Grants Portal. [Innovation, R&D to get shot in the arm]
4. Productivity Solutions Grant (PSG)
This too, is part of the streamlining of grants that the government is undertaking in its bid to simplify grant applications (and tame the proliferation of business grant acronyms). Existing grants that support businesses to buy and use pre-scoped, off-the-shelf technologies have been collapsed into a single Productivity Solutions Grant. It will provide funding support of up to 70 per cent of qualifying costs and can be applied for via the Business Grants Portal from April 1. [Innovation, R&D to get shot in the arm]
5. More generous double tax deduction for internationalisation
The amount of expenses that can qualify for the double tax deduction for internationalisation, without prior approval from IE Singapore or the Singapore Tourism Board, will be raised from S$100,000 to S$150,000 per YA. This will take effect from YA2019. Expenses that qualify include spending on overseas business development trips, study trips, participation in trade fairs abroad and participation in approved local trade fairs. [Innovation, R&D to get shot in the arm]
6. Higher tax deduction rates for IP and R&D expenses
The tax deduction for IP registration fees will be raised from 100 per cent to 200 per cent, capped at S$100,000 of fees a year. The tax deduction for qualifying research and development (R&D) expenses, for R&D done in Singapore, will also be raised from 150 per cent to 250 per cent. [Innovation, R&D to get shot in the arm] This in effect tempers somewhat the steep drop in tax deductions on such activities, following the end of the Productivity and Innovation Credit scheme, as Deloitte explains here.
7. PACT (Partnerships for Capability Transformation)
This is another move to simplify and streamline. At the moment, there are a number of programmes supporting partnerships between companies for various activities: the Economic Development Board (EDB)'s PACT, Spring's PACT and Spring's Collaborative Industry Projects. These will now be collapsed into a single PACT scheme, offering funding support of up to 70 per cent of qualifying costs when companies collaborate to upgrade capabilities or partner each other for business development and internationalisation. This will be administered by EDB and the new Enterprise Singapore.
Update, Mar 2: Pact scheme to support tie-ups amongst SMEs and start-ups
8. Infrastructure Office
An Infrastructure Office will be set up by Enterprise Singapore and the Monetary Authority of Singapore later this year. It aims to bring together local and international partners across the value chain, including infrastructure developers, institutional investors, multilaterals, and legal, accounting, and financial services providers. By providing a platform that allows for the exchange of information on infrastructure opportunities in Asia and facilitates infrastructure investments and financing, the goal is to enable regional players to tap on opportunities.
9. Manpower-related announcements
- Deferred foreign worker levy hikes: Since the marine shipyard and process sectors are still facing weakness, the government has pushed back scheduled hikes in foreign worker levy rates for those sectors by another year.
- Career Trial scheme: An upgraded version of the current Work Trial programme, which provides training and salary support for companies to try out job-seekers with short-term work stints.
- Asean Leadership Programme: A new programme under the existing Leadership Development Initiative, to help Singapore's business leaders build networks and plan for business expansions in South-east Asian markets.
10. GST hike to 9% (2021-2025), GST on imported services (2020)
Less immediate but significant: the goods and services tax (GST) changes. From Jan 1, 2020, GST will be levied on imported services, such as consultancy and marketing services from overseas suppliers, or downloaded music and apps. ['Netflix tax' from 2020 for a new revenue stream] And, Singapore's GST will rise from 7 per cent to 9 per cent, by 2025 latest. [GST up 2 points to 9% - but only from 2021-2025]
Also, you're welcome to join our discussion on which Budget measures will have the greatest impact on SMEs, over at the SMEs of Singapore group.
Finally, these links may be useful: