Responsibilities of a GST-registered Business

1. Charge & Account for GST on Standard-Rated Supplies

As a GST-registered business in Singapore, you have the responsibility to charge and account for Goods and Services Tax (GST) on standard-rated supplies. Standard-rated supplies refer to goods and services made within Singapore, and the current GST rate is 8%. However, there are specific changes in the GST regime to note:

• As of January 1, 2020, GST is applicable to Business-to-Business (B2B) supplies of imported services under the Reverse Charge regime and Business-to-Consumer (B2C) supplies of imported digital services under the Overseas Vendor Registration regime.
• Starting from January 1, 2023, GST will be extended to imported low-value goods and B2C imported non-digital services.

It’s essential to understand these changes and correctly charge GST in accordance with the prevailing regulations. However, for relevant supplies that are subject to customer accounting (e.g., local sales of prescribed goods exceeding $10,000 in value), you should not charge GST to your GST-registered customer. Instead, your customer will account for the GST as their output tax.

2. File GST Returns & Pay Tax Due

Compliance with GST regulations requires that you file accurate GST returns and pay the tax due in a timely manner. Here are the key points to note:

• All GST returns must be submitted via mytax.iras.gov.sg within one month from the end of each accounting period. It’s crucial to check your filing due date on myTax Portal and file the return even if there are no transactions to report.
• Late filing or non-filing of GST returns is considered an offence and may result in penalties, including fines of up to $5,000 and the possibility of imprisonment for up to 6 months.
• Timely payment of tax due is also essential. Tax must be paid within one month from the end of each accounting period. If you are on a GIRO plan for GST payment, deductions will occur on the 15th day of the month after the payment due date.
• Non-payment or late payment of GST can lead to penalties. A 5% penalty is levied on the unpaid tax amount by the due date. Additional penalties may be imposed for unpaid tax remaining overdue for more than 60 days.

3. Keep Proper Business & Accounting Records

Maintaining proper business and accounting records is a fundamental requirement for GST-registered businesses. These records must be retained for at least five years, even if your business ceases operations or is deregistered from GST. Keeping accurate records is not only necessary for compliance but also for efficient business management and decision-making.

4. Display Prices with GST

When displaying prices, advertisements, publications, or quotations to the public for goods and services, it’s mandatory to include GST in the prices. If both GST-inclusive and GST-exclusive prices are presented, the GST-inclusive price should be displayed at least as prominently as the GST-exclusive price. Non-compliance with these requirements can result in fines of up to $5,000.

5. Issue Tax Invoices with GST Registration Number

For your standard-rated supplies, you are required to issue tax invoices or customer accounting tax invoices. If the total amount payable for your supply, including GST, does not exceed $1,000, you may issue a simplified tax invoice. Ensure that your GST Registration Number is included on all tax invoices, simplified tax invoices, and receipts.

6. Notify IRAS of Changes

In the event of any changes to your business circumstances, you are obligated to inform the Comptroller within 30 days. These changes encompass alterations in your GST mailing address, business constitution or ownership, changes in partner(s) or their particulars, and the establishment of new partnership businesses with the same composition of partners. Timely reporting of such changes is crucial for maintaining accurate records with the authorities.

7. Account for GST at the Time of De-Registration

When your GST registration is cancelled, you must account for GST on business assets held on the last day of registration if GST was previously claimed on these assets and the total market value of these assets exceeds $10,000. Such assets include inventories, fixed assets, non-residential properties, and goods imported under various GST schemes.

8. Obligations for Voluntary Registrants

If your registration for GST is voluntary, you must adhere to specific obligations, including using GIRO for payment and refund of GST, maintaining GST registration for at least two years, full compliance with the responsibilities of a GST-registered business, making taxable supplies within 2 years (if not initially making taxable supplies at the point of registration), and other conditions that may be imposed by IRAS. Special conditions apply for businesses registered under the overseas vendor registration pay-only regime.

9. Obligations for Compulsory Registrants

For businesses with compulsory GST registration, you must comply with any conditions imposed by IRAS to safeguard revenue. In cases where businesses pose a risk to revenue, IRAS may impose specific conditions on their GST registration. The Comptroller may cancel the compulsory GST registration if evidence suggests participation in or support of a Missing Trader Fraud arrangement.

Conclusion

In conclusion, the responsibilities of a GST-registered business in Singapore are not to be taken lightly. They serve as the cornerstone of a well-functioning tax system, ensuring that taxes are collected and remitted accurately and on time. These responsibilities are not only legal obligations but also opportunities for businesses to demonstrate their credibility, enhance their financial management, and contribute to the country’s economy.

Engaging a corporate service provider can be a strategic move to manage your GST responsibilities effectively. These professionals are well-versed in the intricacies of GST regulations and can offer expert guidance in ensuring compliance. They can assist in filing accurate GST returns, maintaining proper accounting records, and handling the complexities of the tax system. By partnering with a corporate service provider, businesses can streamline their GST-related tasks, reduce the risk of errors, and free up valuable time and resources to focus on their core operations.

In this ever-evolving business landscape, managing your GST responsibilities with the assistance of experts can lead to greater efficiency and peace of mind, allowing your business to flourish while staying in full compliance with Singapore’s tax laws.

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What is the Enterprise Development Grant (EDG)?

The EDG is a financial assistance program initiated by the Singaporean government through Enterprise Singapore. Its primary aim is to support businesses in their efforts to transform, innovate, and expand. The grant provides funding to cover qualifying costs such as consultancy, software, equipment, and staff training. By doing so, the EDG empowers SMEs to strengthen their capabilities, stay competitive, and explore new opportunities both in Singapore and beyond.

Local small and medium-sized enterprises (SMEs) can receive funding for up to 50% of their eligible costs. Starting from April 1, 2023, SMEs may also qualify for increased support, with sustainability-related projects potentially receiving up to 70% funding until March 31, 2026. For additional information, please consult the Enterprise Sustainability Programme page for comprehensive details.

Eligibility for the EDG

Before you embark on your EDG journey, it’s crucial to understand the eligibility criteria. To be considered, your business should:

• Be registered and operating in Singapore: The grant is primarily intended for businesses incorporated in Singapore.
• Have a minimum of 30% local shareholding: The company possesses a minimum of 30% local equity, determined through direct or indirect ownership by Singaporean(s) and/or Singapore PR(s), as ascertained by the ultimate individual ownership structure. This emphasises the commitment to supporting local enterprises.
• Holds a strong financial status: The company is in a sound financial position to initiate and successfully conclude the project. Standard financial metrics, such as the current ratio, will be employed for the evaluation process.

Key Features of the EDG

The Enterprise Development Grant (EDG) offers a range of features that can significantly benefit businesses in their growth and development efforts:

Core Capabilities:

This category is designed to provide businesses with the essential building blocks for growth and transformation. Projects within this category are focused on bolstering various facets of your business operations. They encompass the following areas:

• Business Strategy Development: Under this category, companies can elevate their business development efforts, fortify the management of intellectual property assets, optimise Research and Development (R&D) operations, and integrate sustainable practices into their processes.
• Financial Management: This category equips businesses to refine their financial performance and empowers management teams with enhanced skills to effectively oversee company assets and resources.
• Human Capital Development: Businesses can utilise this category to enhance their teams with the necessary skills as they expand and support the growth of their business.
• Service Excellence: Within this category, businesses can enhance the quality of their services and products by gaining a deeper understanding of their customers’ needs and comprehending the decision-making processes of their clientele.
• Strategic Brand and Marketing Development: This category facilitates differentiation from the competition and the effective reach of your target audience by implementing strategies that distinguish your brand and enrich your marketing offerings.

Innovation and Product Development:

The Innovation & Productivity category empowers businesses to instigate revolutionary change through innovation, streamlined processes, and novel business models. This category is dedicated to unleashing the potential of technology and optimising resource utilisation to amplify both efficiency and performance. Projects within this category encompass:

• Automation: In this segment, companies can enhance resource efficiency by implementing automation and leveraging technological solutions, such as adopting advanced accounting software to automate all their bookkeeping needs.
• Process Redesign: This category aids companies in reimagining their business processes by conducting a comprehensive assessment of existing workflows, pinpointing areas for improved efficiency, and subsequently embarking on automation or technology transformation initiatives.
• Product Development: This facet focuses on fostering innovation and realising innovative concepts by creating state-of-the-art technology and products, with the ultimate goal of achieving successful commercialisation.

Market Access:

Market access offers assistance to businesses embarking on their journey into foreign markets, simplifying and supporting their expansion initiatives. It is specifically tailored to offset the expenses linked to global expansion. Projects encompassed within the Market Access category consist of:

• Mergers and Acquisitions (M&A): This segment extends comprehensive assistance for the strategic planning, evaluation of potential M&A endeavours, and the facilitation of post-M&A integration processes.
• Pilot Project and Test Bedding: Within this category, businesses can enter new geographical or product markets by establishing a track record and conducting thorough product testing to ensure a successful launch.
• Standards Adoption: This category aids those looking to enhance their business competitiveness both locally and internationally by embracing pertinent standards, thus bolstering trust in their products and services.

The Application Process

The application process for the EDG is structured and consists of several stages:

Pre-application:

Businesses need to gather all the necessary documents and information required for the application. This includes details about the project, financial information, and compliance documents.

Application Submission:

Applicants complete the online application form and provide all the required documentation. It’s essential to ensure that all information is accurate and complete to increase the chances of approval.

Evaluation:

Once the application is submitted, it undergoes a thorough evaluation. This assessment includes verifying the eligibility of the business, assessing the project’s scope, and determining its potential impact on the business.

Approval:

Upon successful evaluation, businesses will receive an In-Principle Approval (IPA) letter. This indicates that the project has been accepted and is eligible for EDG funding.

Claiming:

After implementing the project and incurring eligible expenses, businesses can submit a claim to receive the grant funds. Proper documentation and adherence to reporting requirements are essential to facilitate this process.

Process for Submitting EDG Grant Claims

The procedure for submitting EDG grant claims involves the following steps:

• Access the Business Grants Portal (BGP).
• Upload the required documents specified for the claim.
• Select an auditor from the pre-approved panel to conduct the claim audit.
• Fill out the claim application thoroughly and submit it.
• Following the claim submission, an EDG officer may get in touch with you to seek clarification regarding project deliverables. Additionally, the chosen auditor may contact you to verify the claims made.
• Upon successful processing and approval of the claim, the grant amount will be transferred to your designated company account through the GIRO (General Interbank Recurring Order) system.

Maximising Your EDG Grant

To maximize the benefits of the EDG grant, consider the following strategies:

Thorough Planning:

Clearly define your project’s scope, objectives, and expected outcomes. A well-thought-out plan increases the likelihood of success.

Choose the Right Consultants:

If you plan to use consultants for your project, ensure they possess the expertise and experience required to drive your project’s success.

Proper Documentation:

Maintain detailed records of all project-related expenses and activities. Accurate documentation is vital for the claiming process.

Regular Reporting:

Stay on top of reporting requirements and timelines to ensure compliance with the grant’s terms and conditions.

Continuous Improvement:

Recognize that the EDG is not a one-time opportunity. Consider how you can integrate ongoing improvements into your business strategy to sustain growth and development.

By understanding the key features of the EDG, navigating the application process, and implementing these strategies, businesses can harness the full potential of this government grant to drive their growth, innovation, and global competitiveness.

Conclusion

The Enterprise Development Grant (EDG) is a powerful resource for Singaporean SMEs seeking to enhance their capabilities, innovate, and expand. Understanding its intricacies and how to make the most of this opportunity is crucial for business success. By meeting the eligibility criteria, thoroughly planning your projects, and staying diligent in your application and reporting, you can unlock the potential of the EDG and propel your business to new heights.

One key to successfully navigating the EDG application process is seeking expert assistance. Corporate service providers, with their specialised knowledge and experience, can be invaluable partners in this journey. They can guide you through the intricacies of the EDG, ensuring that your application is thorough, accurate, and aligned with your business goals. Their expertise in documentation and compliance can help you avoid common pitfalls and streamline the application process.

The post Understanding the Enterprise Development Grant (EDG): A Comprehensive Guide (2023) appeared first on Timcole Accounting.

The SGE Initiative provides customised and targeted support to businesses across several crucial areas:

• Strengthening Capabilities: The initiative assists businesses in enhancing their capabilities in vital domains such as digitalisation, sustainability, internationalisation, and growth financing. This will mainly be achieved through granting access to training, resources and facilitating partnerships with the right expertise.
• Developing a Robust Talent Pool: Recognizing the importance of human resources, the initiative aids businesses in building and cultivating a talented workforce for the future. It offers access to training and development programs and helps companies attract and retain top talent.
• Sustained Innovation: The SGE Initiative supports businesses in establishing sustainable innovation capabilities through the creation of in-house research and development or innovation centres. It provides access to funding and resources and connects businesses with the right partners and experts.
• Accelerating Global Expansion: The initiative expedites businesses’ global expansion efforts by offering access to market insights, connecting them with potential partners and customers, and supporting overseas marketing and business development activities.

To further bolster the effectiveness of the SGE Initiative, the Singapore government has committed a total of S$5 billion in funding. This substantial financial commitment will aid businesses at various stages of their global growth journey, from fledgling enterprises looking to enter new markets to established firms seeking to expand their global reach.

How the Singapore Global Enterprises Initiative Can Help Businesses Grow

The Singaporean government offers a range of grants and initiatives to support businesses in their growth and international expansion efforts. These programmes are typically provided by various government agencies and are designed to promote economic development, innovation, and competitiveness. Here are some specific ways in which the SGE Initiative can catalyse the growth of Singaporean businesses on the global stage:

1. Market Entry Support:

Market Research:

The SGE Initiative provides businesses with access to comprehensive market research, enabling them to gain a deep understanding of their target markets. This research covers crucial aspects such as market size, trends, consumer behaviour, and competitor analysis. Armed with this information, businesses can make informed decisions about which markets to enter and how to tailor their products or services to local preferences.

Business Matchmaking:

One of the key challenges when entering new markets is finding the right partners, distributors, or clients. The SGE Initiative facilitates business matchmaking, connecting Singaporean businesses with potential partners or customers in their target regions. This fosters mutually beneficial relationships and helps to accelerate market entry.

Regulatory Compliance Guidance:

Navigating the complex web of international regulations and compliance requirements can be daunting for businesses expanding globally. The SGE Initiative offers guidance and support in understanding and adhering to these regulations, reducing the risk of legal complications and ensuring a smooth market entry process. This comprehensive support ensures that businesses can meet all necessary compliance requirements, including corporate secretary responsibilities, for a successful global expansion.

2. Global Expansion Strategies:

Access to Expertise:

The SGE Initiative provides businesses with access to a wealth of expertise in various aspects of global expansion. This includes experts in international business strategy, market entry tactics, legal and regulatory affairs, and cultural sensitivities. Such expertise is invaluable in crafting effective global expansion strategies that work to minimise risks and maximise opportunities.

Resource Allocation:

Expanding globally often requires substantial resources, including capital, talent, and infrastructure. The SGE Initiative can assist businesses in optimising their resource allocation, helping them allocate funds, talent, and assets efficiently to support their international growth plans.

Strategic Partnerships:

Building strategic partnerships with local businesses or organisations in the target markets can be a game-changer for global expansion. The SGE Initiative can facilitate introductions and collaborations, enabling Singapore businesses to tap into the local knowledge, networks, and distribution channels of established partners.

3. Brand Building:

Global Marketing Campaigns:

To establish a strong global presence, businesses must effectively communicate their value proposition to a global audience. The SGE Initiative supports businesses in developing and executing global marketing campaigns that resonate with international customers. This includes creating compelling messaging, identifying appropriate marketing channels, and optimising advertising strategies for diverse markets.

Social Media Management:

In today’s digital age, social media is a powerful tool for brand building. The SGE Initiative can help businesses manage their social media presence effectively, tailoring content and engagement strategies to engage with audiences from different cultures and regions. This ensures that the brand’s image remains consistent and appealing on a global scale.

4. Access to Global Financing:

Network of Financial Partners:

The SGE Initiative has cultivated an extensive network of financial institutions and partners with a keen interest in supporting Singapore businesses’ global expansion endeavours. These partners can provide various financial solutions, including loans, grants, equity investments, and trade financing, enabling businesses to secure the necessary capital to fund their ambitious international growth plans.

Financial Structuring:

Navigating the complexities of global financing and taxation can be challenging. The SGE Initiative can assist businesses in structuring their financial arrangements, ensuring that they make informed decisions about the most suitable financing options for their specific expansion needs while optimizing their taxation strategies.

Examples of How Businesses in Singapore Have Benefited from the SGE Initiative

In practice, the SGE Initiative has already yielded tangible benefits for Singapore businesses:

Acumen Research Laboratories: Acumen Research Laboratories is a Singapore-based biotech company that develops and manufactures innovative test kits for infectious diseases. The company received support from the SGE Initiative to develop its digital capabilities and expand its international reach. As a result, Acumen Research Laboratories has now secured contracts with customers in over 20 countries.

Endowus: Endowus is a Singapore-based digital wealth advisor that provides personalised investment advice and services. The company received support from the SGE Initiative to develop its technological capabilities and expand its team. As a result, Endowus has now become one of the leading digital wealth advisors in Singapore, with over S$1 billion in assets under management.

Secretlab: Secretlab is a Singapore-based gaming chair company that designs and manufactures high-performance gaming chairs. The company received support from the SGE Initiative to expand its production capacity and international reach. As a result, Secretlab is now one of the leading gaming chair companies in the world, with sales in over 50 countries.

These are just a few examples of how the Singapore Global Enterprises Initiative Initiative is helping Singapore businesses to grow and succeed globally. The initiative has supported over 200 companies to date and is expected to support over 600 companies by 2025.

Conclusion

In summary, the Singapore Global Enterprises (SGE) Initiative serves as an invaluable resource for Singapore businesses aiming to expand their global footprint. Its comprehensive range of support services caters to businesses at all stages of their global growth journey. If you are a Singapore business with aspirations for global expansion, exploring the SGE Initiative through the Enterprise Singapore website can be a pivotal step in realising your international ambitions.

If you are looking to expand your reach to other countries and are unsure how to go about it, you should engage an experienced corporate service provider to get the right advice. With them by your side, you will make more informed decisions and learn more about the different government grants you can leverage.

The post How will the Singapore Global Enterprises Initiative help Businesses Grow their Global Presence? appeared first on Timcole Accounting.

Steps to Get a Business Grant in Singapore

Identify Your Business Needs

The first step in securing a business grant is to identify your business’s specific needs and goals. What challenges are you facing, and what kind of support do you require to overcome them? By clearly defining your objectives, you can narrow down the available grants that align with your business requirements.

Research Available Grants

Singapore offers a variety of business grants, each designed to cater to different industries, business stages, and objectives. To find the right grant for your business, conduct thorough research. You can explore grant options on the GoBusiness Singapore website or seek guidance from a business advisor who can help you identify suitable opportunities.

Assess Your Eligibility

Each grant program in Singapore comes with its own set of eligibility criteria. It is crucial to carefully review these criteria to determine whether your business qualifies for the grant you’re interested in. You can contact the grant administrator or refer to the grant’s guidelines for clarification on your eligibility.

Prepare Your Application

Crafting a strong grant application is a critical step in securing funding for your business. Here are some key tips to prepare an effective application:

• Read the grant guidelines carefully and follow all instructions provided.
• Be clear and concise in your writing, ensuring that your application is well-structured and easy to understand.
• Tailor your application to the specific grant you are applying for, addressing how it aligns with your business goals.
• Provide supporting documentation, such as financial statements, business plans, and any other requested materials.
• Proofread your application thoroughly to eliminate errors before submission.

Submit Your Application

Once you have prepared a well-structured application, you can submit it to the designated grant administrator. Most grant programs offer online submission options but be sure to follow the specific submission instructions provided in the grant guidelines.

Follow-Up

After submitting your application, it’s essential to follow up with the grant administrator to ensure that your application is received and processed correctly. This proactive approach can help avoid delays or issues in the evaluation process.

Additional Tips for Securing a Business Grant in Singapore

Here are some additional tips to enhance your chances of obtaining a business grant in Singapore:

• Start Early: The grant application process can be time-consuming, so begin your preparations well in advance. This will give you sufficient time to research grants, assess your eligibility, and craft a compelling application.
• Seek Professional Assistance: If you’re unsure about the application process, consider seeking help from a business advisor or attending a grant writing workshop. Professional guidance can be invaluable in navigating the intricacies of grant applications.
• Don’t Hesitate to Apply: Even if you believe your chances of securing a grant are slim, it’s worth applying. Rejections are a part of the process, and persistence can lead to success in subsequent applications.

Examples of Business Grants in Singapore

Here are some examples of business grants available in Singapore:

Enterprise Development Grant (EDG)

The Enterprise Development Grant (EDG) is a government grant that helps Singapore companies grow and transform. EDG supports projects that help you upgrade your business, innovate or venture overseas. It is a highly competitive grant but can provide significant funding for companies that are serious about growing their business.

The EDG supports a wide range of projects, including:

• New product and service development
• Market expansion
• Business process improvement
• Technology adoption
• Innovation

To be eligible for the EDG, your company must be a registered business in Singapore with a minimum of 30% local shareholding. You must also have a good track record and a sound business plan.

The EDG provides funding of up to 70% of eligible costs. The amount of funding you receive will depend on the size and scope of your project, as well as the level of risk involved.

Productivity Solutions Grant (PSG)

The Productivity Solutions Grant (PSG) is a government grant that helps businesses in the adoption of productivity solutions. Businesses can choose from a list of pre-scoped solutions and receive up to 50% funding support for eligible costs.

The PSG supports a wide range of productivity solutions, including:

• Enterprise resource planning (ERP) systems
• Customer relationship management (CRM) systems
• Business intelligence (BI) systems
• Robotics and automation solutions
• Lean manufacturing solutions

To be eligible for the PSG, your company must be a registered business in Singapore with a minimum of 30% local shareholding. You must also have a good track record and be able to demonstrate that the productivity solution you are applying for will help you to improve your productivity.

The PSG provides funding of up to 50% of eligible costs. The amount of funding you receive will depend on the cost of the productivity solution you are applying for.

Global Company Partnerships (GCP)

The Global Company Partnerships (GCP) programme is a government initiative that facilitates partnerships between Singapore companies and their global counterparts to develop new products and expand into new markets.

The GCP programme provides a range of support services to help Singapore companies partner with global companies, including:

• Matching and networking services
• Funding assistance
• Business development support
• Access to government resources

To be eligible for the GCP programme, your company must be a registered business in Singapore with a minimum of 30% local shareholding. You must also have a good track record and be able to demonstrate that the partnership with a global company will help you achieve your business goals.

Research, Innovation and Enterprise (RIE) 2025 Programme

The Research, Innovation and Enterprise (RIE) 2025 Programme is a government initiative that supports research and development (R&D) and innovation activities, including basic research, applied research, and commercialisation.

The RIE2025 Programme provides a range of support services to help companies innovate and grow. These include:

• Funding assistance
• Tax breaks
• Access to government resources

To be eligible for the RIE2025 Programme, your company must be a registered business in Singapore with a minimum of 30% local shareholding. You must also have a good track record and be able to demonstrate that your R&D and innovation activities will help you to achieve your business goals.

For detailed and the most updated information on these and other business grants in Singapore, please visit the GoBusiness Singapore website.

Conclusion

Securing a business grant in Singapore can be a pivotal step for you in the course of achieving your business objectives and enhancing your company’s competitiveness. To increase your chances of success, carefully assess your business needs, research available grants, meet eligibility criteria, and craft a compelling application. By following this step-by-step guide and considering the additional tips provided, you can navigate the grant application process effectively and contribute to the thriving business ecosystem in Singapore.

However, the process can be intricate and time-consuming, requiring careful planning and adherence to specific guidelines. In addition to the steps outlined in this guide, partnering with a corporate service provider in Singapore can significantly enhance your chances of success. Their expertise, industry knowledge, and guidance can make the grant application journey smoother and more efficient, ultimately contributing to your business’s success in Singapore’s thriving economic landscape.

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Enterprise Singapore (ES) has been absolutely wonderful at affording small and medium-sized businesses (SMEs) the opportunity to grow with an aggressive strategy by consolidating previous financing programs in one place under the name of the Enterprise Financing Scheme (EFS). The EFS has, in many ways, made it uncomplicated and trouble-free for small and medium-sized businesses to source and obtain financing at various phases of their development.

What is the Enterprise Financing Scheme (EFS)?

Enterprise Singapore (ES), a regulatory board under Singapore’s Ministry of Trade and Industry, is responsible for managing the Enterprise Financing Scheme (EFS). IE Singapore has partnered with Spring Singapore to turn this into a scheme for all types of enterprises.

The scheme’s purpose is to allow banks and lending institutions to give business loans to Singapore-based companies based on a minimum of qualifying requirements. Furthermore, Enterprise Singapore’s risk-sharing offers assurance to lenders, as banks do not have to worry about writing off poor loans since Enterprise Singapore will pay off the proportion of the loan amount designated as part of its risk-share obligations. Some of the banks that can provide loans through their association with Enterprise Singapore (ES) are DBS Bank Ltd, CIMB Bank Berhad, and IFS Capital Ltd.

As a result, the EFS will provide complete assistance for firms’ financial needs at all phases of their growth and for both their local and international operations. Apart from EFS, start-ups can also take advantage of specific grants and schemes designed for their needs. There are also a lot of tax benefits offered to new start up to help them grow faster and consistently.

Who is Eligible to Apply for EFS?

Like many government initiatives for individuals, the Enterprise Financing Scheme (EFS) is intended for firms that require the most financial assistance. For example, SME Working Capital and SME Fixed Asset loans are designed for enterprises with group revenues of $100 million or less and a company size of up to 200 people.

Enterprise Singapore administers the Enterprise Financing Scheme (EFS), which is aimed at helping local enterprises. Formal registration and physical presence in Singapore are requirements for businesses that want to take advantage of the plan. Furthermore, at least 30% of the company’s shares must be owned by Singapore citizens or PRs, either personally or indirectly.

EFS will be made available to businesses in all industries, subject to the following conditions:

• Be a business registered and operating in Singapore.
• Have at least 30% local ownership.
• Have a group annual sales turnover of less than SGD 500 million.

Types of Loans Available to SMEs Under EFS

There are a few reputable lenders who have been waiting with bated breath to extend their helping hands to small and medium-sized businesses under the Enterprise Financing Scheme. There are seven types of loans being offered, namely;

Green

Enterprise Singapore has developed an Enterprise Finance Scheme – Green (EFS – Green) with partner financial institutions. This is tailored towards providing access to green financing for firms creating technology and solutions to reduce waste, resource consumption, or greenhouse gas emissions in order to assist Singapore businesses in seizing new possibilities in the green economy. Clean Energy, Circular Economy, Green Infrastructure, and Clean Transportation are particularly important for this sector. These fall under the umbrella of the Enterprise Sustainability Programme. This scheme’s sole international bank participant is HSBC.

SME Working Capital Loan

The SME Working Capital Loan (WCL) is a government-assisted loan made accessible under the Enterprise Financing Scheme (EFS-WCL). The WCL is intended to assist SMEs by financing their everyday operating expenses.

From October 2022 to March 2023, SMEs can borrow up to $300,000, with a maximum loan amount of $500,000. In addition, Enterprise Singapore will collaborate with partnering financial institutions to share risks of between 50%-70%. Credit requirements and interest rates may differ between such institutions.

SME Fixed Asset Loan

Certain organisations may need to use specialist equipment, manufacturing machinery, or even physical assets or capital to strengthen or complement their productivity, expand their business, or even dismiss the need to rent a building. A loan may be necessary to make these substantial, capital-intensive one-time purchases. The SME Fixed Asset Loan will assist businesses in securing the money required to grow, and finance fixed asset purchases through a loan of up to 90% of the asset’s valuation or purchase price, whichever is lower, with a loan payback duration of up to eight years.

Venture Debt Loan

The Enterprise Financing Scheme – Venture Debt (EFS-VD), launched as a trial initiative in October 2015, intends to encourage the use of venture debt in Singapore. Venture loans and warrants can help to finance and accelerate the expansion of creative, high-growth businesses that may not have adequately extensive assets to serve as security for regular bank loans. Companies can utilise the loan to grow and expand existing capacity, diversify into new product lines, supplement working capital needs, embark on new initiatives, or engage in mergers and acquisitions.

The EFS-VD requires Participating Financial Institutions (PFIs) to share 50% of the risk on qualified loans, with the option of sharing 70% of the risk on loans to young enterprises. Venture debt and warrants are used to fund the expansion of innovative businesses. The warrants, or equity purchase rights, are intended to compensate for the increased risk of loan failure.

Trade loans

Trade loans assist firms by financing their short-term import, export, and guarantee needs. These can assist organisations in terms of inventory management, factoring, and international working capital requirements. They can finance requirements such as:

• Inventory/stock financing
• Factoring (with recourse)/bill of invoice/accounts receivable discounting
• Structured pre-delivery working capital (revolving working capital)
• Overseas working capital loan
• Bank Guarantee (capped at two years tenure)

Project Loan

If you have already secured an overseas project, you can seek an Overseas Project Loan to help with the working capital, equipment, or machinery you may need to acquire for the project.

The supportable loan types include those for:

• Factory/Building/Land (including Purchase/Renovation/Construction)
• Working Capital Loan
• Equipment/Machinery/ Vessels/Other Fixed Assets/Machinery Hire Purchase
• Guarantees

Merger and Acquisition

A successful merger or acquisition may bring enormous value to a company, but ensuring that each stage of the transaction process, from appraisal to negotiation and completion, is successful requires professionalism, thoroughness, care, great expertise, and understanding.

A Merger and Acquisition loan can help fund organisations that want to develop internationally through mergers and acquisitions. From April 1 2022, to March 31 2026, the Enterprise Financing Scheme – Merger & Acquisition (EFS – M&A) will be distributed to embody domestic M&A activities. This will enable organisations to expand and develop through M&A, including ventures into related businesses and emerging industries. The acquiring company can also avail the Mergers and Acquisitions (M&A) Allowance when filling their taxes which they need to share with its target company.

Conclusion

It is a known fact that small and medium-sized firms (SMEs) contribute noticeably to economic growth and development. It is also reasonable to believe that there might be multiple obstructions that can hinder their growth and development. Private enterprises must be able to adapt themselves to an ever-changing economy and be able to withstand financial pressure in order to survive and be competitive.

Therefore, for most SMEs, obtaining funding is not always an easy task and can be a highly stressful matter. Hence, it is utterly important for these government financing programmes, acting as a stabiliser, to help increase funding liquidity in the credit ecosystem since most banks would typically slow down lending to reduce risks during an economic downturn.

The Singapore Government has several support grants and schemes in place to help SMEs stay stable and grow even during uncertain times. However, if you are not aware of these or are unsure of your eligibility, you should appoint an experienced corporate service provider. Such a company would ensure you are always up to date about all the different loans and schemes your company is eligible for, and so be able to take advantage of them at the right time.

The post An Overview of the Enterprise Financing Scheme (EFS) for SMEs in Singapore appeared first on Timcole Accounting.

Apart from the fact that such schemes serve many purposes, they are also essential for companies to have enough working capital. This ensures that they can keep their operations running, pay their employees on time and remain competitive. By reassessing and redesigning their workflow, enterprises can discover new ways of increasing efficiency and improving sustainable performance by optimizing the usage of resources.

During a speech held on 14 February 2023, the Deputy Prime Minister and Minister for Finance, Lawrence Wong, unveiled the 2023 Singapore National Budget. It was during this speech that Wong stated that the only way to beat the major challenges of an uncertain year ahead is by ensuring business resiliency, workforce productivity and competitiveness. The business community of Singapore reacted to his statement largely in a positive way and embraced the “Moving Forward in a New Era” theme of the budget. Deloitte CEO Cheung Pui Yuen stated in a press conference that the budget resembled a “Valentine’s Day bundle of incentives and schemes”, which displays the very important fact that enterprises continue to remain the “heart of the Singapore economy”.

Furthermore, Lim Ming Yan, Chairman of the Singapore Business Federation, welcomed the 2023 budget and the measures put in place for enterprise growth and development. He believed it signalled a direct, transparent focus provided by the government to detract from handouts and instead invest in assisting businesses pursue innovation and building capabilities. President of the Association of Small and Medium Enterprises (ASME), Kurt Wee, stated that companies will need to remain concentrated on innovation and using technology to become more efficient and productive.

What is Enterprise Innovation Scheme (EIS)?

The Enterprise Innovation Scheme will assist businesses in developing high-value and substantive economic activities in Singapore. Businesses are encouraged to upgrade their capabilities or expand the scope of their business operations, making them highly competitive and thriving in what can be a very hostile global environment.

The EIS is available for YA 2024 to YA2028, and the scheme is geared to benefit businesses in Singapore with enhanced/new tax deductions and/or allowances on qualifying expenditures incurred on the following activities:

1) Qualifying Research and Development Undertaken in Singapore

Businesses that invest in R&D can get a 100% tax deduction on R&D expenditure (Section 14C) plus an additional 150% tax deduction on qualifying R&D expenditure (i.e., staff costs and consumables) (Section 14D) before YA 2024. From YA 2024 to YA 2028, they will be provided with an additional 300% tax deduction on the first $400,000 and an additional 150% tax deduction on expenditures in excess of $400,000.

What is very helpful and important to note is that there is now a relaxation on the “related to trade” condition. What this effectively means is that under Section 14C of the Income Tax Act (ITA), the taxpayer is not limited to only accumulating R&D expenses within their current or existing trade or business but also outside of their scope of trade or industry as long as the activity occurs within Singapore. This relaxation is effective until YA 2025.

2) Registration of Intellectual Property (IP)

Companies that register their innovation as an IP before YA 2024 will be eligible for a 200% tax deduction on the first $100,000 of qualifying IP registration costs (Section 14A) as well as a 100% tax deduction on the balance of qualifying IP registration costs in excess of $100,000 (Section 14A). The tax deduction on the first $400,000 of qualifying IP registration costs will be increased to 400% from YA 2024 to YA 2028 and 100% on the balance in excess of $400,000.

3) Acquisition and Licensing of IP Rights (IPR)

Before YA 2024, firms would 100% WDA on qualifying IPR acquisition costs (Section 19B) for acquiring IPRs, whereas they would be eligible for a 100% tax deduction on qualifying IPR licensing expenditure (Section 14 or 14C) along with an additional 100% tax deduction on first $100,000 of qualifying IPR licensing expenditure (Section 14U) for Licensing of IPRs.

From YA 2024 to YA 2028, businesses would be eligible for 400% allowances and/or tax deduction on the first $400,000 (combined cap) of qualifying IPR acquisition costs and/or qualifying IPR licensing expenditure. In addition, there will be 100% WDA on the balance of qualifying IPR acquisition costs in excess of a claim for enhanced allowances, plus a 100% tax deduction on qualifying IPR licensing expenditure in excess of a claim for an enhanced tax deduction.

4) Training

From YA 2024 to YA 2028, companies can get a 400% tax deduction on the first $400,000 qualifying training expenditures plus a 100% tax deduction on the balance of qualifying training expenditures in excess of $400,000 and all other training expenditures. But before YA 2024, they are eligible only for a 100% tax deduction on training expenditure (Sections 14 and 15).

The EIS encourages employers to continually invest in enterprise training and enhancing the capabilities of their employees. Course fees paid by the employers to an SSG-funded course provider, including certification and assessment fees, all qualify under the training expenditure and enhanced tax deduction. This is calculated based on the amount of qualifying training expenditure incurred by a business net of any government grant or subsidy received by the business in respect of the course.

5) Innovation projects carried out with polytechnics, the Institute of Technical Education or other qualified partners

Currently, expenses incurred on innovation projects carried out with polytechnics, the ITE or other qualified partners are not allowable as a deduction under Section 14 or Section 14C of the ITA on the basis that they are capital in nature and do not meet the definition of R&D under Section 2 of the ITA. But from YA 2024 to YA 2028, businesses can get a 400% tax deduction on the first $50,000 of qualifying innovation expenditure.

In order for a business to qualify for this tax deduction, it is imperative that the business is a beneficiary of the qualifying innovation project. Qualifying innovation projects refer to projects that predominantly involve one or more of the following innovation activities defined within the Oslo Manual 2018:

• Research and experimental development activities;
• engineering, design and other creative work activities;
• IP-related activities; and
• software development and database activities.

This scheme will be administered by the partner institutions, who will validate the project as a qualifying innovation project and issue the innovation project invoice. Expenditure incurred outside of the collaboration with the partner institutions will not qualify for this tax deduction.

Know More About the Option to Convert Qualifying Expenditure into a Cash Payout

Furthermore, businesses are given the opportunity to convert qualifying expenditures into a cash payout as a way to assist small and growing businesses finance the costs of their innovation activities. In lieu of tax deductions and/ or allowances, eligible businesses may elect to convert up to $100,000 of the total qualifying expenditure across all of the above-mentioned qualifying activities for each YA into cash at a conversion rate of 20%. The cash payout is capped at $20,000 per YA and is not taxable.

It is imperative to note that once the cash conversion has been chosen and completed, the same amount is no longer available for tax deductions and/or allowances and therefore, the decision to convert qualifying expenditure into cash is irreversible once complete and is only available on an annual basis. The decision to convert the qualifying expenditure into a cash payout must be made by submitting the prescribed election form along with the income tax return. The cash payout will only be assigned, allocated and paid after the Inland Revenue Authority of Singapore (IRAS) has assessed the submission and verified the request.

So, now you may ask, who or what is an eligible business? In simple terms, this means any company, partnership, sole-proprietorship or registered business trust that has at least three full-time local employees (i.e Singapore Citizens or Permanent Residents with CPF contributions) in its employment for six months or more in the basis period of the relevant YA. The local employees must each be earning at least $1,400 in gross monthly wages.

Conclusion

In summary, Singapore’s new Enterprise Innovation Scheme (EIS) has been praised for being a bold, brave and clear-cut move which will assist local businesses to continue investing in innovation, especially at a time when many will have been tempted by limiting or reducing expenditure significantly. The EIS will give businesses the boost they need to stay innovative and competitive in a very testing and difficult global environment.

Want to know more about EIS or other government grants through which you can save your taxes, engage a reliable tax consultant today. As they would always be up to date with all the grants and schemes that you are eligible for, you will never miss the opportunity to take advantage of them.

The post How Will the Enterprise Innovation Scheme (EIS) Help Businesses in Singapore? appeared first on Timcole Accounting.

The Singapore Budget 2023 includes a variety of measures aimed at positively influencing the status of business entities. It recognises the importance of businesses to the overall growth of the small state and provides funding for it. Among other things, the budget also recognises the challenges businesses have faced after COVID-19 and aims to assist them in recovering and growing. The following sections provide brief details of the budget as it affects business in Singapore.

Impact of the Singapore Budget 2023 on Businesses

On February 14, 2023, the Singapore government announced its national budget. The budget, which had been widely anticipated, revealed that the government intends to spend S$104.2 billion (US$78.1 billion) on the Singapore economy.

The budget deficit amounts to S$400 million (US$299 million), or 0.1 per cent of Singapore’s Gross Domestic Product (GDP). Nonetheless, the budget will have a lot of positive effects on businesses, which are as follows.

Enterprise Innovation Scheme

The Enterprise Innovation Scheme (EIS) is a new addition to the 2023 budget. The scheme aims to help businesses improve even more by providing tax breaks for companies that invest in innovation as well as research and development (R&D). It allows for a variety of qualifying activities, including:

Tax breaks for qualifying R&D conducted in Singapore

Currently, there is a 100 per cent tax deduction for expenditures incurred on research and development projects. In addition, staff costs and consumables for such projects are also tax deductible at a rate of 150 per cent.

However, the new budget provides an even better 400 per cent tax deduction for the first S$400,000 (US$298,000) of consumables and staff costs incurred on qualifying R&D projects conducted in Singapore.

Tax breaks for the acquisition and licensing of intellectual property rights

An existing measure provides a 100 per cent write-down allowance on capital expenditures for qualifying intellectual property rights. There is also a 200 per cent tax deduction on the first S$100,000 (US$74,600) of qualifying expenditure on licensing of intellectual property rights.

However, the budget for 2023 includes a more effective measure. The new budget allows for 400% tax allowances/deductions on the first S$400,000 (US$298,000) of qualifying expenditure on the acquisition and licensing of qualifying intellectual property rights.

Tax breaks for polytechnics and other qualified partners who work on innovative projects

The introduction of a tax deduction measure for local polytechnics spearheading innovation projects is included in the 2023 budget. The budget provides a 400 per cent tax deduction scheme for up to S$50,000 (US$37,300) for such projects undertaken by local polytechnics, the Institute of Technical Education, or other qualified partners.

Tax breaks for training expenses

Tax deductions for training expenses are another benefit of the Enterprise Innovation Scheme. In this measure, SkillsFuture Singapore-approved courses are eligible for a 400 per cent discount on the first S$400,000 (US$298,000). This is a better measure than the previous 100 per cent tax deduction.

Tax deductions under the Enterprise Innovation Scheme are available to businesses beginning with the fiscal year 2024 and ending with the fiscal year 2028.

Extension of the Enterprise Financing Scheme

With the 2023 budget, the government has expanded the Enterprise Financing Scheme, which is managed by Enterprise Singapore. Enterprise Singapore is a Ministry of Trade and Industry division tasked with assisting Singapore’s local SMEs in developing their capabilities, innovation, and internationalisation. The extensions made under this scheme are as follows:

Extension of the Enterprise Financing Scheme – Trade Loan

The Enterprise Financing Scheme – Trade Loan (EFS-TL) has been extended from its previous end date of April 1, 2023, to March 31, 2024.

This financing scheme provides each borrower up to S$10 million (US$7.3 million) in trade financing. The loan must be repaid within a year and has a government risk share of 70%.

Extension of the Enterprise Financing Scheme – Project Loan

Like the trade loan scheme, the Enterprise Financing Scheme – Project Loans (EFS-PL) will be extended until March 31, 2024. Loan amounts of up to S$50 million (US$36.9 million) per borrower are available for overseas projects, with amounts of around S$30 million (US$22.1 million) available for domestic projects. Loan amounts are also available per borrower group.

Supportable projects include land/building/factory (including purchases/renovation/construction); machinery, equipment, and other fixed assets; and guarantees. For such loans made to young businesses, the government has a 70% risk share. In this context, young companies are defined as those formed within the last five years. The government’s risk share on the loan is 50% for all other companies.

The repayment period is for a maximum of 15 years for fixed asset loans, while others are for five years.

Extension of the Enterprise Financing Scheme – Working Capital Loan

This is comparable to the two previous enterprise financing schemes. The loan scheme has been extended from April 1, 2023, to March 31, 2024. It offers S$500,000 (US$373,000) in operating capital loans to qualifying companies for a maximum of five years.

Funding for the National Productivity Fund

Businesses will benefit significantly from the recent increase in the National Productivity Fund (NPF) in the 2023 budget. The fund, which aims to improve business productivity and worker training, will receive an additional S$4 billion (US$2.9 billion).

Bigger roles will accompany the increased funding. As a result, the Singapore government has expanded the NPF’s roles to include assisting businesses in upskilling workers and assisting entities in increasing their value to the domestic economy.

Funding for International Expansion of Businesses

With Singapore being a relatively small country, the government has been supportive of local firms expanding beyond its borders. With the 2023 budget, the government reaffirmed its commitment to that. In the budget, the Singapore Global Enterprises Initiative will be funded with S$1 billion (US$746 million).

The Global Enterprises Initiative is a government initiative that provides tailored assistance to local businesses that can demonstrate a track record of innovation and international expansion. Using an excellent financial service company to assist with obtaining such funding is the most effective way to capitalise on this.

Financing for the Progressive Wage Credit Scheme (PWCS)

Another piece of funding included in the 2023 budget that will benefit businesses is funding for the Progressive Wage Credit Scheme (PWCS). This financing, which was introduced in the 2022 budget, is continued in the 2023 budget with a sum of S$2.4 billion.

The government established PWCS to provide employers with transitional support by co-funding mandatory wage increases for low-wage workers. The government will co-fund up to 75% of wage increases for employees earning up to S$2,500 monthly. In addition, wage increases of 45 per cent for employees earning between S$2,500 and S$3,000 per month will also be co-funded.

Conclusion

On the whole, the Singapore Budget 2023 provides several benefits to the country’s businesses. The new measures are intended to support businesses’ growth, competitiveness, and resilience in the face of post-COVID-19 challenges. One of the budget’s main benefits is the continuation and enhancement of existing support measures, such as the Enterprise Financing Scheme, which provides loans to businesses. The Progressive Wage Credit Scheme, for example, offers financial assistance to businesses to improve employee pay.

Furthermore, the budget includes new initiatives such as the Enterprise Innovation Scheme, which provides tax breaks to businesses that invest in innovation and research and development. The government’s various measures for businesses in this year’s budget can best be taken advantage of by leveraging them. Using the services of a good financial and taxation services firm is an excellent way to ensure that a business leverages and benefits from these measures. At the very least, such a firm will be able to assist the company in qualifying for these measures.

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Due to a lack of experts on their staff, small business owners in Singapore often have to worry about their finances. Outsourcing has allowed them to fill this gap by working part-time with trained financial experts and strategists. It has proven to be a highly beneficial and cost-effective solution.

What is an Outsourced CFO?

An outsourced Chief Financial Officer (CFO) is a financial officer working for you but from outside your organisation. This person provides financial expertise to your company, helping with the accounting and operations part of the business. A virtual or outsourced CFO can work part-time, full-time, or on a contractual basis for your business on different projects.

An outsourced CFO resolves cash flow and capital issues and takes on the challenge of implementing efficient financial solutions for growth. It is possible they would be lending their services to various public and private companies simultaneously. They usually work with businesses of all sizes and perform multiple jobs, from financial planning to projections.

Small businesses in the early stages of development can use the help of a part-time outsourced CFO instead of hiring a full-time in-house CFO. It helps them get the services of a highly experienced person but on an affordable budget.

What Is The Difference Between a Traditional CFO and Outsourced CFO?

A full-time in-house or traditional CFO differs in some respects from an outsourced CFO.

Many businesses would recruit a full-time CFO to manage their financial operations. Trained and experienced in-house CFOs can help with business growth and also keep track of monthly insights. But, they come at a considerable cost.

Hiring a full-time in-house CFO involves onboarding, staffing, salary, equipment, and training costs. You may also need to hire consultants, which adds to the financial costs and labour charges.

However, hiring an outsourced CFO gives you a cost-effective solution. This model includes all costs involving labour charges, processes, and systems. The cost model remains constant over time and doesn’t involve additional charges, for example, for updating software or training new CFOs.

Irrespective of the business scale or growth, outsourced CFOs offer the best services when it comes to financing. More companies are therefore choosing the outsourced CFO model over traditional in-house CFOs, mainly due to rising costs.

5 Benefits of Hiring an Outsourced CFO

Hiring an outsourced CFO can bring several benefits to your company. The following are the top 5 benefits:

1. Unlimited Expertise

Having an experienced CFO can help your company reach greater heights faster. They are not only a must for SMEs to grow but also an essential part of bigger organisations to set broader strategic goals and achieve both financial and non-financial milestones.

Your in-house CFO may have got both expertise and experience. But, if you can expand the level of knowledge as per your needs, why not take advantage of outsourcing your CFO? As requirements change over time with different projects, one full-time CFO cannot always offer you satisfactory services.

You can benefit much more by working with part-time CFOs as you can tailor the role and set your expectations per your needs. Along with the flexibility, you get the right expertise to meet your dynamic company goals.

2. Cost-Effective

Hiring a finance team or a traditional CFO can be very expensive for new start-ups and small SMEs, but outsourced CFO services come at only a fraction of such costs. If you have just started seeing profit as a business and are still in the growth phase, such cost-effective solutions are essential.

Reap the benefits of the extra profits and re-invest the money to see your business grow instead of spending unnecessarily on full-time traditional finance officers. A relief from the burden of added costs is a blessing to all companies.

3. Cash Flow Management

Outsourced CFOs are highly skilled and can help you manage your finances well and keep your cash flow in check. For example, they track invoices to eliminate errors like missed payments or incorrect entries.

Virtual CFOs can find opportunities to save and efficiently manage costs. These financial experts know how to identify avoidable expenses and save on your resources. They can also find ways to raise capital and increase your cash flow. With a clear-cut revenue plan, they help achieve goals and to drive revenue by encouraging their clients to invest and reinvest and to work with a proper financial strategy.

4. Experienced Services

Outsourcing CFOs does not limit you geographically. You can have access to experts from anywhere who have decades of experience. There are many finance experts out there who have worked in public, private, and non-profit organisations across industries and already have all the know-how.

They are equipped with up-to-date financial plans and can use their experience of working with many companies to help boost your company’s value. You can choose your CFO as per your needs and reap the benefits. Their global exposure and experience can help you reach your business goals effectively without spending a huge amount.

5. Reduced Risks

Business owners can become a victim of fraud if untrustworthy people are involved in the business. For example, small companies in Singapore often hire people to collect and deposit cheques, prepare invoices, and manage financial statements. Such situations increase the risk of fraud while executives are busy trying to achieve their profit goals. As a result, they ignore financial management and can fall victim to scams when they cannot keep track.

Outsourcing to get a skilled and experienced CFO separates these duties, divides the work and reduces the risk of fraud.

Final Thoughts

If you are ready to see your company grow to new heights but don’t want to invest in building a big finance team, then outsourced CFO services are just what you need.

Whether you are a new small business owner or an executive in a rising company, it’s your right to seek financial expertise from the best in the industry. Let geographical barriers no longer stop you from hiring the services of people with excellent skill sets and experience.

In this age of globalisation, having a part-time CFO is an excellent, cost-effective, and flexible solution for the needs of your business.

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In 2013, the Wage Credit Scheme was first introduced into the nation’s budget. It was a way for the government to help co-fund wage increases for employees with a gross wage ceiling of $4,000 (later raised to $5,000).

In light of this, a new scheme, the Progressive Wage Credit Scheme (PWCS), was introduced into the 2022 Singapore budget.

What Is Progressive Wage Credit Scheme (PWCS)?

With the prevailing economic situation in the post-pandemic world, low-wage workers are more than ever finding it hard to meet their needs. To help alleviate this, mandatory wage increases were instituted to ensure employers make conscious efforts to increase their employees’ wages.

However, not all employers are able to implement these mandatory wage increases without affecting their business’s financial standing. To help and support employers in making necessary wage increases for these low-wage employees, the PWCS was created. As mentioned, the Progressive Wage Credit Scheme was introduced in the 2022 budget and is designed to support low-wage employees between 2022 and 2026.

How Does The PWCS Work?

The PWCS will co-fund businesses that have employees whose salary falls within the First Tier and Second Tier levels. The First Tier sets a ceiling of $2,500 for an employee’s gross monthly wage. In other words, for this tier, only employees earning a monthly gross salary of $2,500 and below will be entitled to co-funding for their wage increases.

The Second Tier is designed to support wage increases for employees earning a gross monthly wage above $2,500 and up to $3,000. The First Tier employees would be backed by the PWCS support from 2022 to 2026, while the Second Tier employees would be supported from 2022 to 2024.

The Inland Revenue Authority of Singapore (IRAS) will reimburse businesses within the first quarter (Q1) of the following year. However, companies must have made a minimum $100 increase to their employees’ gross monthly wages in order to qualify.

Eligibility For Progressive Wage Credit Scheme (PWCS)

As a business in Singapore, you must meet specific requirements and conditions to be considered eligible for PWCS. Some of these requirements include:

• The employee must be a Singapore citizen or PR.
• The employee must have received CPF (Central Provident Fund) contributions for at least three months in the previous year. This CPF contribution must be from the same employer.
• In the qualifying year, the employee must have also received a CPF contribution for at least three months.
• The employee must have had a gross monthly wage increase of at least $100 in the qualifying year.
• The employee’s wage must fall within the First Tier or Second Tier.

Exemptions From PWCS

Understanding why PWCS was created makes it easy to understand the type of businesses and employees that would be exempted from the scheme. To help everyone avoid any doubt, this is a list of the types of organisations and individuals exempted from PWCS:

• Wages of business owners, directors, and shareholders.
• Foreign businesses, government agencies, and trade unions.
• Military units of foreign governments.
• Foreign law practices and non-profit organisations.
• Singapore state ministries, departments, organs, and statutory boards.
• Financial representative companies like banks and insurance firms.
• Government schools and government-assisted institutions.

How Are PWCS Payouts Calculated?

IRAS has offered simple formulas to compute PWCS payouts for each tier. However, before expanding on and discussing those, here’s how to calculate the payout:

The total PWCS payout for each tier is the total from the multiplication of the co-funding level for the tier, age increase for the tier, and the number of months of CPF made by the employer.

The First Tier PWCS would support employers to cover employees’ wage increases from 2022 to 2026. Here’s a breakdown of the yearly percentages:

• In 2022, PWCS will support and cover 75% of the wage increase of the employee. The wage increase must be at least $100.
• In 2023, PWCS will support and cover 50% of the employee’s wage increase.
• In 2024 and 2025, PWCS will co-fund 30% of the wage increase
• In 2026, PWCS will only co-fund 15% of the wage increase.

According to IRAS, the Second Tier PWCS will support employers in implementing and paying a certain percentage of wage increases from 2022 to 2024, as follows:

• In 2022, employees with a gross monthly wage of between $2,500 and $3,000 will receive a co-funding of 45% of their wage increase.
• In 2023, PWCS will support the employee’s wage increase with 30% of the total amount.
• In 2024, PWCS will co-fund employee wage increases by 15%.

How Can Businesses Apply For Progressive Wage Credit Scheme (PWCS)?

As a business owner or an employer, you do not have to apply for PWCS, as qualifying businesses will be automatically registered.

IRAS will reimburse businesses through their GIRO bank accounts. If your company does not have an active GIRO account, IRAS can make payment to your PayNow account. These are the only two payment options approved for payout reimbursement.

If your business does not have a GIRO or a PayNow account, you would need to open one to access any payout made to you.

Conclusion

To help improve the life of lower-wage workers in Singapore, a mandatory wage increase was instituted through the Progressive Wage and Local Qualifying Salary scheme. The PWC was created to ensure employers are able to conform to the requirements without their business being affected. It is designed to help employers make the necessary wage increases by having the government pay a certain percentage of the wage increase.

The scheme is divided into two tiers to accommodate the lowest-paid employees in Singapore and is expected to run from 2022 to 2026. Businesses with employees under these tier levels are automatically registered for participation in PWCS. Whenever there’s a minimum wage increase of $100, IRAS would reimburse the business within the first quarter of the following year.

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We have archived all of the significant updates, split into two parts. Don’t forget to read the first part of this article to know more about the Jobs and Business Support Packages. This part of the article elaborates more on the financing support, support for digitisation and workforce transformation.

Enhanced Financing Support

The government has extended the following support initiatives to help local businesses with temporary cash flow issues due to rising prices or in their foreign expansion:

Temporary Bridging Loan Programme

During the COVID-19 crisis, the Temporary Bridging Loan Program (TBLP) was established in March 2020 to aid businesses with working cash.

In light of the ongoing impact of COVID-19 and recent increases in business expenses, the TBLP will be extended for another six months until September 30, 2022, with amended limits.

The concurrent expansion of the MAS SGD Facility for Enterprise Singapore (ESG) Loans will complement this. You can refer to the MAS website for more information on the Facility.

Parameters of the Scheme

The TBLP’s amended parameters are as follows:

Enterprise Financing Scheme–Trade Loan

The Enterprise Financing Scheme–Trade Loan (EFS-TL) assists Singapore-based businesses with their trade financing needs, such as short-term import, export, and guarantee requirements.

Due to COVID-19, the EFS-TL was initially expanded in April 2020 to give businesses greater access to trade finance during slower business operations and longer payment cycles. However, given the persistent uncertainty in the global trade environment, the improvement to EFS-TL will be extended for another six months, through September 30, 2022, with amended conditions.

For new firms and enterprises dealing in countries with an S&P rating of BB+ or lower, including non-rated countries, the higher risk share of 70% will be maintained until 30 September 2022. The increased risk-sharing support seeks to encourage businesses to expand internationally and take advantage of possibilities in those nations.

Parameters of the Scheme

The enhanced EFS-TL’s updated parameters are as follows:

Enterprise Financing Scheme–Project Loan

The Enterprise Financing Scheme– Project Loan (EFS-PL) assists Singapore-based businesses with their overseas project finance needs, such as working capital, guarantee, and fixed assets financing.

In January 2021, the EFS-PL was updated to help domestic building projects cope with COVID-19’s problems.

The EFS-PL upgrade will be extended for another year until March 31, 2023, to assist construction companies in completing domestic projects despite growing costs and constrained cash flow.

Parameters of the Scheme

The upgraded EFS-PL’s parameters are as follows:

Enterprise Financing Scheme – Merger & Acquisition Loan

The Enterprise Financing Scheme– Merger and Acquisition Loan (EFS-M&A) assists Singapore-based businesses in acquiring foreign or local businesses to expand internationally.

For four years, from April 1, 2022, to March 31, 2026, the EFS-M&A will be upgraded to encompass domestic M&A activity. This is to assist firms in scaling and expanding through mergers and acquisitions, as well as going into complementary industries and developing areas.

Parameters of the Scheme

The increased EFS-M&A parameters are as follows:

This upgrade encourages local enterprises to merge and expand their skills to take advantage of commercial prospects.

The government’s decision to just extend the Temporary Bridging Loan Program and Enterprise Financing Scheme for six months to a year may be insufficient to help SMEs overcome cash flow challenges, particularly in industries still affected by the epidemic.

Key Notes:

• The MAS SGD Facility for Enterprise Singapore (ESG) Loans will provide Singapore Dollar (SGD) funding at an interest rate of 0.5% per annum for a two-year tenor to eligible financial institutions to support loans made under the TBLP and the Enterprise Financing Scheme–SME Working Capital Loan from 1 April 2022 to 30 September 2022.
• A Borrower Group consists of the following:
  • Borrower;
  • Corporate shareholders holding more than 50% at all levels up;
  • Subsidiaries where the Applicant company holds more than 50% shareholdings and subsequent subsidiaries at all levels down; and
  • Subsidiaries where the Applicant’s Ultimate Parent Company holds more than 50% shareholdings and their subsidiaries at all levels down.
• Young enterprises refer to firms formed within the past five years with at least one employee and more than 50% equity owned by individuals.

Investing in Digital Capabilities

Advanced Digital Solutions (ADS)

The Government will expand assistance to adopt cutting-edge digital solutions through the Infocomm Media Development Authority’s (IMDA) Advanced Digital Solutions (ADS) project to strengthen our enterprises’ competitive advantage and boost commercial growth.

ADS was established in 2020 to promote and expand the use of advanced integrated solutions (such as in robotics, the Internet of Things, and other technologies).

The plan will be expanded on April 1, 2022, to cover solutions that use Artificial Intelligence (AI) and Cloud technology to assist businesses in enhancing operational efficiency and making better business decisions. Participating companies will receive up to 70% financing support for these solutions.

Grow Digital

The government will also expand the Grow Digital scheme to assist firms in better using digital platforms to access foreign markets.

The Grow Digital initiative, launched in June 2020, assists SMEs in digitally accessing abroad markets through pre-approved Business-to-Business (B2B) and Business-to-Consumer (B2C) e-commerce platforms and ecosystem partners. Since then, the programme has aided over 2,500 businesses in expanding their presence to as many as ten nations.

Grow Digital will be expanded to include more pre-approved digital platforms on April 1, 2022, allowing more enterprises to internationalise without the need for an in-market presence. SMEs may also develop skills to more effectively access new markets using these platforms, such as AI-powered business matching to link SME suppliers with potential foreign clients, cross-border e-payment facilities, and training to establish competitive, globally-oriented enterprises.

Participating businesses would get up to 70% financing to help them integrate the B2B and B2C platforms.

TechSkills Accelerator (TeSA)

In conjunction with industry partners and the National Trades Union Congress, the TechSkills Accelerator (TeSA) project seeks to produce a trained Information and Communication Technology (ICT) workforce for Singapore’s digital economy (NTUC). TeSA has taught approximately 120,000 people a variety of tech skills, including cybersecurity and artificial intelligence, since 2016. A total of 12,000 people have been put in ICT occupations due to the initiative.

TeSA will grow on numerous fronts in the coming year to develop a strong Singaporean core of ICT expertise. These include:

Collaborating with industry leaders to increase Singapore’s product development teams;

Expanding TeSA to SMEs and startups to create additional job possibilities for mid-career professionals; and

Upskilling our present digital workforce to keep their skills relevant.

Through focused efforts for students at our Institutes of Higher Learning (IHLs), the government will continue to expand the national pipeline of digital talent. MCI’s Committee of Supply (COS) will provide more information.

Encouraging Enterprise and Workforce Transformation

SkillsFuture Enterprise Credit (SFEC)

The SkillsFuture Enterprise Credit (SFEC) promotes businesses to modernise their operations and workforces. Eligible employers receive a one-time credit of up to $10,000 to cover up to 90% of out-of-pocket expenses for supported enterprise transformation programmes (e.g. Enterprise Development Grant, Productivity Solutions Grant) and workforce transformation programmes (e.g. Enterprise Development Grant, Productivity Solutions Grant). In addition, a ring-fenced $3,000 of a $10,000 credit for a qualifying firm is set aside for workforce transformation efforts.

In Budget 2022, the SFEC eligibility requirements were changed to enhance SFEC coverage during the qualifying period of 1 January 2021 to 31 December 2021:

• [New] No minimum Skills Development Levy (SDL) contribution is required over the qualifying period. However, employers who had an inactive ACRA status throughout the qualification procedure or missed an SDL payment during the qualifying period will be eliminated.
• [There is no change] Over the qualifying period, at least three Singapore citizens or permanent residents must be employed each month.
• [There is no change] In any of the previous times, I did not qualify.

In April 2022, newly eligible employers will be notified. In addition, to provide firms more time to plan for and implement transformation efforts, the deadline to claim the credit for all employers (including those that previously qualified) will be extended by one year, to 30 June 2024.

Key Notes:

• Previous SkillsFuture Enterprise Credit (SFEC) qualifying periods were:
  • 1 April 2019–31 March 2020,
  • 1 July 2019–30 June 2020,
  • 1 October 2019–30 September 2020, and
  • 1 January 2020–31 December 2020.

Adjustment to Foreign Workers’ Policies

Several revisions to Singapore’s foreign labour laws, announced in the 2022 budget on February 18, 2022, seek to increase Singaporean national employment rates while reducing the number of foreign employees. So while hiring you should take note of these changes to benefit from the different schemes available. Also, the employer and employee contributions to the Central Provident Fund (CPF) will gradually increase for employees aged 55 to 70 on January 1, 2023.

An Employment Pass for Qualifying Foreign Professionals, Managers, and Executives

Incoming Employment Pass (EP) holders should be “qualitatively similar to the top one-third of our local PMET workforce (those with professional, management, executive, and technical occupations),” according to the government. In addition, it would “refine” how EP applications are evaluated to promote “the complementarity and variety of our foreign workforce, as well as provide certainty and transparency for businesses,” according to the statement.

First-time younger EP candidates must make a minimum qualifying salary of S$5,000 (up from S$4,500) as of September 1, 2022, while older applicants (in their mid-40s) must earn S$10,500 or more (up from S$9,000). From September 1, 2023, the revised wage requirements will apply to pass renewals.

EP candidates working in the financial industry will have to pay higher fees from September 1, 2022. This will translate to S$5,500 for younger applicants and S$11,500 for elderly applicants.

Implementation of a Points-Based Immigration System for EP

In addition to earning the increased qualifying income, EP candidates will be required to obtain a minimum amount of points based on individual and corporate characteristics as part of a new Complementarity Assessment Framework (COMPASS).

To pass COMPASS, candidates must score 40 points or above on four basic criteria and two bonus criteria based on compensation, credentials, and diversity. From September 1, 2023, new EP applicants will be subject to COMPASS, and renewals will be subject to COMPASS from September 1, 2024.

S Passes for Qualifying Foreign Mid-Skilled Technical Workers

S Pass holders are expected to be “qualitatively similar to the top one-third of local Associate Professionals and Technicians,” according to the government.

The minimum qualifying wage for younger applicants for an S Pass will be S$3,000 from September 1, 2022, increasing to at least S$3,150 on September 1, 2023, and S$3,300 on September 1, 2025. (the salary amounts will be confirmed closer to the date). For senior candidates, the price will be around S$4,500. From September 1, 2023, the revised wage requirements will apply to pass renewals.

S Pass candidates working in the financial industry must earn a minimum of S$3,500 starting September 1, 2022, increasing to at least S$3,650 beginning September 1, 2023, and at least S$3,800 starting September 1, 2025. (salary amounts will be confirmed closer to the date).

On September 1, 2022, the Tier 1 S Pass worker levy rate will increase to S$450, then to S$550 in September 2023, and finally to S$650 in September 2025.

Introduction of a Levy Structure to Replace Work Permits

For qualified semi-skilled foreigners working in the construction, manufacturing, marine shipyard, processing, and service sectors, a new levy system will replace the present Work Permit on January 1, 2024. Depending on the industry sector and the nationalities of the workers, different taxes will be imposed.

In addition, the dependence ratio ceiling (DRC) for the construction and process industries will be decreased beginning January 1, 2024. Under the S Pass and Work Permit programmes, the DRC is the maximum ratio of foreign employees that can be engaged with the overall workforce.

The Introduction Progressive Wage Credit Scheme

Between 2022 and 2026, the government will implement the Progressive Pay Credit Scheme, which would co-fund wage increases for lower-paid workers. The Workfare Income Supplement will be expanded to accommodate additional lower-paid Singapore citizens and permanent residents as of January 1, 2023.

Other Labour Market Indicators

The Jobs Growth Incentive scheme, which provides pay support to firms recruiting individuals aged 40 and older who have been jobless for six months or more, people with impairments, and ex-offenders, will be updated and extended until September 2022. The Skills Future Career Transition Programme will take over many training programmes on April 1, 2022.

An Increase in CPF Contributions

On January 1, 2023, the CPF contribution rates for members aged 55 to 70 will increase once more (an increase was implemented in 2022). Employer contributions will be 14.5% for members aged 55 to 60 and 15% for workers (up from 14% paid by both employers and employees). The rates for those aged 60 to 65 will be 11% and 9.5%, respectively (up from 10% and 8.5%).

The rates for those aged 65 to 70 will be 8.5% and 7%, respectively (up from 8% and 6%). Members aged 55 to 60 would pay 37% of their total CPF contributions, while members aged 60 to 65 would pay 26%, and members aged 65 to 70 would pay 16.5%. The government will support employers with an offset compared to the CPF Transition Offset offered in 2022.

Final Thoughts

While Singapore’s economy is improving, small and medium-sized businesses (SMEs) are still dealing with the pandemic’s long-term impacts. On the 18th of February 2022, Finance Minister Lawrence Wong announced measures to assist struggling employees and companies as part of Budget 2022.

The budget for this year has expanded corporate financing initiatives, including industry-led skills training for workers and tightened rules on foreign worker inflows.

In 2022, the government will expand the implementation of existing policies while also launching new efforts to help companies in Singapore.

The government will increase its financial assistance, invest in digital capabilities, and encourage enterprise and workforce change, as stated in the 2022 budget.

Minister Wong concluded his speech by stating that Singapore businesses will have a bright future in 2022. The need to digitise is now more important than ever, with improving digital capabilities becoming a “top priority” for the future.

The post Budget 2022 – Support Packages for SMEs (Part 2) appeared first on Timcole Accounting.