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Singapore Budget 2015: Key Highlights for SMEs
We bring you the latest news from what analysts have described as an all-rounded Budget 2015 for Singapore, including key points that affect SMEs both locally and regionally in the upcoming financial year.
According to Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam who delivered his Budget 2015 speech in Parliament on February 23, Singapore "must reach our next frontier as an economy, with firms driven by innovation, and higher incomes coming from deep skills and expertise in every job. We must ensure a society that is fair and just, where everyone has a chance to move up and do well regardless of where they start"
We now look at some of the key highlights from Budget 2015 impacting SMEs.
Transition Support Package (TSP)
The Transition Support Package (TSP) was implemented in 2013, with the objective of help businesses restructure and share productivity gains with their workers in the form of higher wages. The TSP comprises the Wage Credit Scheme (WCS), Corporate Income Tax (CIT) rebate, and the Productivity and Innovation Credit (PIC) bonus. Revisions to each scheme are as follows:
Wage Credit Scheme (WCS) - The Government will co-fund 20 per cent (previously 40 per cent) of wage increases given to Singaporean employees earning a gross monthly salary of S$4,000 and below.
Corporate Income Tax Rebate - The CIT rebate has been extended until 2017, however the rebate is now capped at S$20,000, down from S$30,000 last year.
PIC Schemes - The PIC Bonus scheme will no longer be extended beyond YA 2015 but the main PIC and PIC+ schemes will continue to YA 2018.
In total, the TSP is estimated to disburse S$7.5 billion over three years and will be extended over 2016 and 2017 to give employers more time to adjust to the tight labour market.
Temporary Employment Credit (TEC)
The TEC will be
- raised by 0.5 per cent to 1 per cent of wages in 2015,
- and will also be extended by two years to help employers adjust to additional CPF changes.
- Additionally, there will be an additional TEC of 1 per cent of wages in 2016, and 0.5 per cent of wages in 2017, helping to offset two-thirds of the employers' costs due to CPF changes in 2016, and one-third in 2017.
Foreign Labour
In order to help SMEs affected by the labour crunch, the government said it would, in every sector, defer planned levy increases for S Pass holders. The same will be implemented for Work Permit holders in the manufacturing, marine and process and the construction sectors:
- Manufacturing sector: Levies frozen at 2014 levels for 2015 and 2016
- Services, Marine and Process sectors: defer announced levy increases to 2016
- Construction sector: reduce levy for higher skiller (R1) workers in 2015 and 2016 / Raise levy for basic skilled (R2) workers over 2015 to 2017
Improved measures for business innovation
The Singapore government is strengthening support for growing the level of innovation within Singapore companies.
SMEs applying for the SPRING for Capability Development Grants (CDG) will find a simplified application process for projects below S$30,000. Enhanced grants could mean certain qualifying SMEs receive funding support of up to 70 per cent in certain cases - for an additional three years.
SPRING's Collaborative Industry Projects (CIP) will also be expanded, while the Partnerships for Capability Transformation (PACT) extended and enhanced. Additionally, the National Research Fund will be topped up by S$1 billion this year to help companies develop and commercialise new products.
To ensure that promising companies have access to funding they need to expand, the co-investment cap for SPRING's Startup Enterprise Development Scheme (SEEDS) and Business Angel Scheme (BAS) will be increased.
A venture debt risk-sharing programme will also be piloted with several financial institutions, with the aim to provide high-growth companies with alternate financing.
SPRING will provide 50 per cent risk-sharing with partner financial institutions for business loans over an initial period of two years, aiming to catalyse about 100 venture debt loans, totalling approximately S$500 million.
Spurring Internationalisation
In order to help local SMEs to internationalise, the government has announced three new measures
IE Singapore grant schemes - SMEs qualifying for these schemes will see the support rise from 50 per cent to 70 per cent for three years, benefiting close to 700 projects.
Double tax deduction for internationalisation - Tax deduction will now be enhanced to include the salaries of Singaporeans posted outstation overseas. This will mean more jobs for skilled citizens as well as reducing certain internationalisation risks to help SMEs thrive better in foreign markets.
International growth scheme: Qualifying companies will enjoy a 10 per cent concessionary tax rate on their incremental income from qualifying activities and this will encourage more Singapore companies to expand overseas, while anchoring their key business activities and HQ in Singapore.
Encouraging Mergers & Acquisitions
Government efforts estimating more than S$100 million over five years will be implemented in order to spur Mergers and Acquisitions (M&A), so that companies can acquire scale, attract talent and compete effectively in foreign markets.
The M&A scheme, introduced in 2010, will also be extended for another five years. Tax allowances for acquisition costs will also be increased from 5 to 25 per cent of the value of acquisition. Companies will be able to claim M&A benefits for acquisitions resulting in at least 20 per cent shareholding in the target company.
IE Singapore's Internationalisation Finance Scheme (IFS) will also be extended to support M&A that will aid a company's overseas expansion. These enhancements will cost the Government more than S$100 million over five years.
Singapore's Next Phase of Development
To encourage lifelong learning, the government has introduced SkillsFuture, an initiative that encourages continued learning and ongoing skill-improvement for Singaporeans in the workforce.
SkillsFuture Leadership Development Initiative: Under the SkillsFuture Leadership Development Initiative, collaborations with strategic companies will be enhanced in order to prepare Singaporeans to take on corporate leadership roles and responsibilities.
Sectoral Manpower Plans (SMP): Tighter efforts with industry and unions to encourage employers to develop employees, provide career pathways and value the mastering of skills by 2020 in all sectors.
SkillsFuture Mentors: A central pool of mentors who specialise in industry-relevant skills will provide guidance to SMEs.
The full Singapore Budget 2015 speech can be found here: http://www.singaporebudget.gov.sg/budget_2015/pd.aspx