Small and medium-sized enterprises (SMEs) are the lifeblood of the Southeast Asian economy, making up 97% of its businesses and utilising 67% of its workforce. Funding Societies has fuelled this growth by bridging the gap between Southeast Asian businesses and investors since our launch in 2015. As the region’s largest SME digital financing platform, we are always making sure our SMEs get the right access to business financing. We kept our eyes on Budget 2023 and here are 8 ways Singaporean SMEs can maximise tax benefits from the measures announced.
SMEs are a key player in Singapore’s economy, giving jobs to 70% of the nation’s working population. Because the country ranks fifth in the world’s most competitive economies, the announcement of the Budget on 14 February was much awaited by both local and foreign businesses.
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Singapore’s 2023 Budget Statement for SMEs
The country’s Ministry of Finance expects a budget deficit of S$0.4 billion this year. To address this, local businesses remain a priority in the budget allocation, with the government promising incentives and financial aid for those boosting productivity, innovation, and worker skills.
With a National Productivity Fund of S$4 billion, Singapore aims to strengthen its businesses while enticing multinational companies to invest. Furthermore, the government will release a separate fund of S$150 million to the SME Co-Investment Fund, allowing SMEs to access capital and improve their global competitiveness.
8 things SMEs can do to avail of government incentives
To maximise government benefits through cash payouts and tax deductions, local SMEs need to participate in the country’s upskilling and digitalisation plans. In turn, these plans help businesses to scale up and attract international investors, resulting in more jobs for Singaporeans.
1. Fast-track business innovation.
Through its Enterprise Innovation Scheme, the government offers a 400% tax deduction for the first S$400,000 spent on sanctioned research and development (R&D) programs in Singapore from each Year of Assessment (YA) of 2024 to 2028. According to Finance Minister Lawrence Wong, businesses who take full advantage of this scheme can enjoy up to 70% in investment returns due to tax deductions. The government is convinced that innovation is critical to economic growth, which is why it has consistently invested S$25 billion in R&D from 2021 to 2025.
2. Protect Intellectual Property (IP).
Businesses enjoy an enhanced tax deduction of 400% for the first S$400,000 of IP registration costs specified by the government from YA 2024 to 2028. Succeeding costs in this area will have a 100% tax deduction. IP registration protects the businesses’ core activities and R&D findings while building value. It also encourages business diversification among local entrepreneurs and elevates standards, preparing them for globalisation. Meanwhile, the government will give 400% tax allowances or deductions for the first $400,000 spent on acquiring and licensing IP rights for YA 2024 to 2028.This benefits SMEs as it is exclusive for businesses that earn less than $500 million within the specific YA.
3. Upskill workers.
From a 100% tax deduction, businesses can claim a 400% tax deduction for the first $400,000 in training costs for each YA from 2024 to 2028. However, SMEs can only avail of the tax benefit if the upskilling involves courses that qualify for SkillsFuture Singapore funding and are compatible with the government’s skill framework. Click here for a complete list of the courses.
4. Work with the government’s partner institutions.
SMEs can further tax savings by partnering with government-approved innovation partners, such as Singapore Polytechnic, the Institute of Technical Education, Nanyang Polytechnic and others. By doing this, local businesses can claim a 400% tax deduction for a maximum of S$50,000 spent on innovation from YA 2024 to 2028. Sanctioned innovation activities include R&D, engineering and design, IP-related, and software and database development.
5. Hire full-time local employees with CPF Contributions.
One of the Budget Statement’s primary points is that the Central Provident Fund (CPF) monthly salary ceiling will increase gradually from S$6,000 to S$8,000 by 2026 to help Singaporeans prepare for retirement. While this impacts local businesses, which contribute 17% of their employee’s wages to CPF, they can still mitigate expenses if they have at least three full-time employees who earn a gross monthly pay of at least S$1,400 and are active CPF contributors. If a business participated in the activities stated above (nos. 1 to 5) and incurred costs of up to S$100,000, it can choose a tax-free cash payout of 20% of the expenditure for each YA.
6. Employ senior workers and offer part-time re-employment.
Claim salary offsets through the Part-Time Re-employment Grant by hiring and offering senior workers flexible work setups. This will be available until 2025.
7. Go green and global.
The government’s Enterprise Financing Scheme is still very active, supporting SMEs’ daily operational costs and investments in automation and factories built by the government and commercial entities. The scheme also helps finance greening measures and secured projects abroad.
8. Develop world-class talent.
Singapore’s Global Enterprises initiative receives an additional S$1 billion to give tailored assistance to companies with promising potential. Support will be delivered through capacity-building programs, facilitating partnerships with other companies, and internationalisation.
Access to finances—a game-changer in 2023 and beyond
To ensure economic growth, deserving yet under-served SMEs in Southeast Asia still need reliable and easy access to capital. With undeterred capital flow between investors and businesses, all stakeholders on national and global scales stand to benefit. Singapore’s Budget Statement affirms the essential role that SMEs play in helping communities and countries to thrive during these challenging times.
We believe that stronger SMEs create stronger societies. For SMEs who need capital urgently while waiting to avail of any government incentives, Funding Societies offers a range of business financing up to $3 million in loans with a disbursal as fast as 24 hours. Browse our customised financing options that give you capital when and how you need it!
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