Singapore’s businesses have always received a lot of support from the government. This has been accomplished through the advancement of laws, policies, and budgets that systematically benefit businesses. While rules and policies define how companies operate, a country’s budget is what helps put those policies into action. They demonstrate the financial allocations intended for the specific sectors of an economy.
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.
