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Singapore Budget 2014: 7 Key Points for SMEs
The myBusiness team brings you the latest news from Budget 2014, including the developments that may affect SMEs in the coming financial year.
The Government announced today (21 February 2014) new measures to further increase productivity in the SME sector, focusing on supporting businesses with plans for innovation, infocomm technology (ICT), as well as internationalization. Here are key developments that will have the most impact on SMEs.
1. PIC scheme extended, introduction of "PIC+" scheme
Of interest is the extension of the Productivity and Innovation Credit (PIC) Scheme, which was due to expire in 2015. Deputy Prime Minister Tharman Shanmugaratnam announced that it will be extended for another three years, until year of assessment 2018 at a cost of $3.6 billion to the Government.
Additionally, the "PIC+" scheme will be introduced to assist firms which make more substantial investments to transform their businesses. The new scheme will raise the expenditure cap of the current PIC scheme to $600,000 from year of assessment 2015. As such, SMEs will be able to claim tax deductions for up to $1.8 million.
2. Tax incentives for innovation extended
SMEs in the R&D sector will continue to receive a 50% additional tax deduction for qualifying expenditures for another 10 years, to year of assessment 2025. Further tax deductions by the Economic Development Board (EDB) will also be extended for another five years to year of assessment 2020.
3. New initiatives to help SMEs lower costs
The Government has committed to creating new industrial spaces for companies within the same industry. SMEs will then potentially see lower costs as a result of a consolidation of operations, pooling of resources, as well as aggregation of demand for delivery and other services.
The Government also announced an extension for the Land Intensification Allowance (LIA), due to expire next year, for five years to 30 June 2020.
4. ICT solutions for SMEs a priority
One of the main thrusts of the new measures is a plan to encourage the adoption of ICT solutions among SMEs. Over the next three years, the Government will launch an ICT for Productivity and Growth (IPG) programme, which will see the implementation of three key initiatives.
First, the Government aims to expand the reach of existing proven ICT solutions, from 500 SMEs to another 10,000 SMEs over the next three years. 70% of the cost of these ICT solutions will be subsidized.
Second, to encourage first-movers who pilot emerging technology solutions, the Government will support 80% of the qualifying costs for firms implementing innovative solutions that are new to Singapore. This will be capped at S$1 million per participating firm.
Third, promoting high-speed internet connectivity will be a priority. SMEs can look forward to subsidies for fibre broadband subscriptions of at least 100mbps, as well as support for the implementation of Wireless@SG services at their premises.
Subsidies for the cost of new in-building structures will also be available to building owners looking to provide fibre broadband for their business tenants. This will be capped at $200,000 per building.
These initiatives will cost the government $500 million over the next three years.
5. Financing for companies at various stages of growth
The Government will be introducing the second phase of the Co-Investment Programme (CIP), which was first launched in 2010 to catalyse patient growth capital for Singapore-based enterprises, through co-investing in the private sector.
The first phase's good take-up rate will see the Government providing an additional $150 million to match private sector investments. This will be allocated to two funds.
The first, SME Co-Investment Fund II, will make direct equity investments into companies alongside other private equity investors. This is similar to the existing SME Co-Investment Fund.
The second, SME Mezzanine Growth Fund, is a new fund aiming to meet the demand from SMEs for mezzanine financing.
6. Enhancement of the Micro-Loan Programme
Launched in 2001, the Micro-Loan Programme (MLP) was designed to encourage banks to lend to young SMEs, especially where the SMEs lack a track record needed to secure a business loan from banks.
The original MLP therefore allows for the Government to take on some of the risk for loans below $100,000.
The enhancement of the MLP will see SPRING Singapore raise the government risk-share in the MLP for SMEs from 50% to 70%. This is expected to catalyse an additional $32 million in loans for the 2014 and 2015 financial years.
7. Overseas growth initiatives
The internationalisation of Singaporean companies has grown in the past year with the help of IE Singapore's schemes. As such, the Government will raise the maximum loan quantum supported by the Internationalisation Finance Scheme (IFS) from $15 million currently to $30 million.
This will improve debt financing for companies looking to make overseas investments, or fund expenses for overseas projects.
A second initiative will see the enhancement of the Global Company Partnership (GCP) programme. The Government has committed to raising the support level for pilot and test-bedding projects from the current 50% to 70%. This is to assist Singaporean companies establish proven track records and create products that can break into overseas markets.
In addition, SMEs can look forward to increased support for staff attachments in overseas markets.
Overall, the year's Budget statement has responded to concerns from the SME sector raised in a previous article from our special Budget 2014 series: namely, the extension of the PIC scheme, as well as reducing business costs.
The full FY2014 Budget Statement can be found on the Singapore Budget website.
REACH will be conducting a public forum on 26 February 2014 and a ‘live’ Facebook chat on the REACH Facebook page on 2 March.
Read on for more on Singapore Budget 2014:
- Singapore Budget 2013: Key Initiatives Impacting SMEs
- Singapore Budget 2014: Frequently Asked Questions
- Singapore Budget 2014: Update on the Latest Developments
- Singapore Budget 2014: 7 Key Points for SMEs
- Singapore Budget 2014: Potential challenges for Singapore SMEs
- Singapore Budget 2014: FAQ for ICV and PIC Schemes