Singapore Budget 2017 — A Comprehensive Guide for SMEs
The yearly Budget announcement is one of the most anticipated events for business owners in Singapore. In particular, SME owners look forward to help to run their businesses better. Here’s what SMEs specifically should take note of with the Budget 2017 announcement.
General Business Support Schemes
1. Wage Credit Scheme
The scheme is expected to pay over S$600 million to businesses this March to help them cope with rising wages. Roughly 70% of these businesses will be SMEs.
2. Special Employment Credit
It will continue to provide employers with support for wages of older workers until 2019. Over S$300 million will be paid out in FY2017, to benefit 370,000 workers. The re-employment age will be raised from 65 to 67 years with effect from 1 July 2017, applicable to workers younger than 65 on that date.
Employers whose workers are not covered under this scheme can turn to the Additional Special Employment Credit scheme, which will be extended until the end of 2019. Employers will receive wage offsets of up to 3% for workers earning under S$4000 per month. Taken together with Special Employment Credit, employers will receive support of up to 11% for the wages of eligible older workers.
3. SME Working Capital Loan
The scheme, in which the Government co-shares 50% of loan risks (up to S$300,000 per SME), will continue to be available for the next two years.
4. Corporate Income Tax (“CIT”) Rebate
The CIT Rebate will be enhanced for the year, with the cap raised from S$20,000 to $25,000 at the same rebate rate of 50% tax payable for YA2017.
It will also be extended an additional year to YA2018, at a reduced rate of 20% tax payable, capped at S$10,000 rebate.
5. Productivity and Innovation Credit (“PIC”) Scheme
The popular PIC scheme will not be extended, despite its high take up rates and recommendations put forward by auditing company KPMG, and ASME (Association for Small and Medium Enterprises).
You may (and should, if eligible) convert qualifying expenditure at a non-taxable cash payout rate of 40%, or claim 400% deduction on qualifying expenditure.
For more information on the PIC scheme, refer to our post on Budget 2016, or contact us for more information on how you can receive support from the PIC scheme when implementing SAP Business One.
6. SMEs Go Digital Programme
We have often emphasised the importance and potential of digital transformation, so the S$80 million programme comes as a relief for businesses that are still in the early stages of digitalisation.
a. Industry Digital Plans
SMEs in the retail, food services, wholesale trade, logistics, cleaning, and security sectors, can look forward to the Industry Digital Plans initiative. They will receive step-by-step advice on technologies to use at each growth stage.
b. SME Centres and the SME Technology Hub
Once they are ready to start evaluating different software solutions for their business needs, they can seek help from business advisors or Info-communications and Technology (ICT) vendors and consultants at SME Centres, who will provide advice on pre-approved off-the-shelf solutions.
More digitally advanced firms can get specialist advice from a new SME Technology Hub to be set up by IMDA (Info-communications Media Development Authority of Singapore).
c. ICT Advice and Funding
Once you’ve made up your mind to start using an ICT (info-communications and technology) solution, you will be able to receive advice and funding support. If SAP Business One is your solution of choice, you can also approach the BOS team for help.
7. Data and Cybersecurity
The Cyber Security Agency (CSA) will train cybersecurity professionals alongside professional bodies to help you keep your data safe.
8. A*STAR Operation and Technology Road-mapping
A*STAR already performs road-mapping with businesses in order to identify how technology can help them to innovate and compete. The Budget provides for an expansion of these efforts to support 400 companies over the next 4 years.
9. Easier Access to Intellectual Property (IP)
The Intellectual Property Office of Singapore (IPOS) and Intellectual Property Intermediary will analyse and bundle complementary IP from Singapore and overseas.
The Headstart programme will also allow SMEs to co-develop IP with A*Star to enjoy royalty-free, exclusive licenses for 36 months (previously 18 months).
10. Tech Access Initiative
To further encourage and ease the innovation process, A*STAR will provide access to advanced equipment for prototyping and testing, on top of user training and advice.
Reaching Overseas Markets
11. International Partnership Fund
The S$600 million fund will co-invest with local firms to help them scale-up pursue growth internationally.
12. Internalisation Finance Scheme
Government schemes will be enhanced to improve project finance for locals companies providing infrastructure developments in emerging economies, in order to bridge gaps in their financial markets. This will be done by sharing risks with financial institutions, and providing a share of risk insurance coverage. Since 2012, S$2.4 billion has been committed to finance overseas projects.
13. Global Innovation Alliance
a. Innovators Launchpads
The Innovation Launchpads will create opportunities for local entrepreneurs and business owners to connect with mentors, investors, and service providers in selected overseas markets.
b. Welcome Centres
With Welcome Centres, foreign companies can team up with local partners to co-innovate, test new products, and expand in the region.
14. SkillsFuture Leadership Development Initiative
The Leadership Development Initiative aims to support companies in grooming leaders to help firms expand overseas. Promising individuals (800 over 3 years) will be sent on specialised courses and overseas to develop insights and connections to help their businesses scale up globally.
SME owners should continue to maximise their employees’ potential and get them digitally-ready by training them on and off the job. New measures have been introduced in tandem with SkillsFuture for this purpose.
Training under SkillsFuture initiatives will become more accessible, with shorter modular courses and greater use of e-learning. Union members can get subsidies for selected courses through the NTUC-Education and Training Fund, in addition to funding support under SkillsFuture.
Employers who develop training programmes for their workers will also be able to claim funding support under SkillsFuture.
16. National Jobs Bank
The National Jobs Bank will be enhanced to ensure skilled workers are matched appropriately to maximise their skillsets and deliver better job matching services.
Launched last year, Industry Transformation Maps (ITMs) are described as integrated platforms or “live” plans bringing Trade Associations & Chambers (TACs), unions, and the Government together to identify ways to transformation 23 sectors. 6 (Precision Engineering, Logistics, Food Manufacturing, Food Services, Hotels, and Retail) were launched since 2016, with 17 more to be launched this year.
The 23 sectors (comprising approximately 80% of our economy):
Other Support / Changes
18. Foreign Worker Levy (FWL)
Foreign worker levy increases were deferred in the past year for the Marine and Process sectors, and will be deferred for an additional year (from 1 July 2017 to 30 June 2018).
Levy rates for Marine sector Basic tier R1 and R2 will remain at S$300 and S$400 respectively, while levy rates for Process sector Basic tier R2 workers and MYE-Waiver tier R2 workers will remain at S$450 and S$750 respectively.
Foreign work levy increases in the Construction sector will proceed as announced in Budget 2015, from 1 July 2017 to 30 June 2019. The levy will rise from S$650 to S$700 for basic tier R2 workers.
There are no changes to work permit levies in the Manufacturing and Services Sector, as well as for S Pass holders.
19. Public Sector Infrastructure
S$700 million worth of public sector infrastructure projects will be brought forward to FY2017 and FY2018 in order to support the Construction sector. Local firms may bid for and participate in these projects.
Other Tax Changes
20. Withholding Tax (“WHT”) Exemption
The qualifying period for WHT exemption on payments made to non-resident non-individuals for structured products offered by Financial Institutions (FIs) will be extended until 31 March 2021.
21. Intellectual Property
IP income will be incentivised under a new IP Regime named the IP Development Incentive (IDI), due to take effect on or after 1 July 2017. IP income will be removed from the scope of Pioneer Services/Headquarters Incentive, and the Development and Expansion Incentive Services/Headquarters for new incentive awards approved on or after 1 July 2017. Existing incentive recipients will continue to be covered under their existing incentive awards until 30 June 2021.
22. Global Trader Programme (GTP)
The GTP will be enhanced to facilitate and encourage more trading activities in Singapore. From (or after) 21 February 2017,
Qualifying transactions need not be carried out with qualifying counterparties; instead, the concessionary tax rate of 5% or 10% on qualifying income will be granted to approved global trading companies on income derived from qualifying transactions with any counterparty.
The concessionary tax rate will now also be granted to approved global trading companies on physical trading income derived from transactions in which the commodity is purchased for the purposes of consumption in Singapore, or for the supply of fuel to aircraft or vessels within Singapore.
On top of that, the concessionary tax rate will also be granted to approved global trading companies on physical trading income attributable to storage in Singapore or any activity carried out in Singapore which adds value to commodity by any physical alteration, addition, or improvement (including refining, blending, processing, or bulk-breaking).
The substantive requirement to qualify for the GTP will also be increased.
23. Accelerated Depreciation Allowance for Energy Efficient Equipment and Technology (ADA-EEET) Scheme
Introduced in 1996 to accelerate the writing down period on capital expenditure incurred for certified energy efficient and energy saving equipment, the ADA-EEET scheme will be withdrawn after 31 December 2017.
24. Writing Down Allowances (WDA) for Intellectual Property Rights (IPRs) for Media and Digital Entertainment (MDE)
After the last day of the basis period for YA2018, approved MDE companies may no longer claim WDA for capital expenditure incurred on IPRs pertaining to MDE content (e.g. films, television programmes, or games). Under the existing scheme, they may continue to claim WDA over a writing-down period of 5, 10, or 15 years (previously 2 years).
25. International Arbitration Tax Incentive (IArb)
The IArb Tax Incentive, which grants approved law practices 50% tax exemption on qualifying incremental income from the provision of legal services in connection with international arbitration, will lapse after 30 June 2017.
26. Approved Building Project
The scheme, which grants property tax exemption for up to 3 years on land under development, will lapse after 31 March 2017.
Other more indirect policies that may aid your business (depending on your industry) include the Public Sector Construction Productivity Fund, which will allow Government agencies to procure innovative and productive construction solutions.
Investment in shared infrastructure will also facilitate networking, pooling of resources, and sharing of knowledge between industry players. For example, the upcoming growth cluster in Punggol will co-locate cyber security and digital industries, alongside the nearby Singapore Institute of Technology.
We cover the Budget announcement every year, in order to provide our readers with the most essential information to help them run their businesses better.
We hope you found our recap of the Budget 2017 announcement useful. To stay up to date on SME news, SAP Business One updates, and tips to run your business better, subscribe to our blog below!
Originally published at www.blueoceansys.com.sg on February 24, 2017.