This year’s Budget is geared towards three major shifts in the coming decade: shift in global economic weight towards Asia (more pressure on Asian markets to perform), shift in how we embrace the emergence of new technologies (Industry 4.0), and shift in the median age of our population (ageing).
To prepare for these shifts in the long-term, much emphasis for Budget 2018 is placed on investing and developing our knowledge resources (people) and physical infrastructure.
The role that local businesses play lies mainly in their ability to sustain wage growth and improve productivity, while keeping business costs manageable.
After reviewing the initiatives in Budget 2018, we aren’t quite sure if collectively, this year’s Budget is a boon or bane for local businesses.
All we know is that if your business is R&D intensive, you’d probably stand to benefit quite a bit, thanks to the upcoming Open Innovation Platform and massive tax deductions for your R&D expenses.
Once again, we’ve selected and put together the key initiatives from Budget 2018 that will affect the local business community and its employees in an easy-to-digest infographic.
Click on the image for a larger view
Here are more details below explaining the points in the infographic:
Overcoming near-term pressures
1. Extension of the Wage Credit Scheme
The Wage Credit Scheme will be extended for 3 more years to help firms cope with rising near-term costs, but with gradually reduced levels of co-funding by the government until 2020. Currently, the government co-funds 20% of wage increases for Singaporean workers earning a gross monthly wage of up to S$4,000. Now, it will provide 20% for 2018, 15% for 2019, and 10% for 2020.
2. Enhancement of Corporate Income Tax (CIT) rebate
YA2018: The Corporate Income Tax (CIT) rebate will be doubled. The rebate will be at 40% and capped at S$15,000.
YA2019: The rebate will fall back to 20% and be capped at S$10,000.
3. Deferment of Foreign Worker Levy (FWL) Rates
Specifically for the Marine Shipyard and Process sectors, this deferment will take place for another year.
4. Work Trial scheme upgraded to Career Trial scheme
More funding and support for workers to try out new careers. This will be further elaborated by the Ministry of Manpower (MOM) in the coming months.
The future holds great opportunities
1. One-size-fits-all Productivity Solutions Grant (PSG)
To encourage businesses to buy and use new solutions, existing government grants supporting off-the-shelf technologies will be streamlined into a single Productivity Solutions Grant (PSG).
2. Enterprise Singapore and Enterprise Development Grant (EDG)
Also known as SPRING and IE’s baby, SPRING and IE Singapore will be merged in April 2018 and will be termed Enterprise Singapore. With this, IE’s Global Company Partnership grant with SPRING’s Capability Development Grant will be combined, to form an integrated Enterprise Development Grant (EDG), which will provide up to 70% co-funding for companies to develop certain capabilities.
3. Open Innovation Platform
A new Open Innovation Platform (a virtual crowdsourcing platform) will also be made available to businesses to openly list the challenges they are facing, so they can partner with ICT firms to develop digital solutions together.
Taxes—it’s accrual world
1. Startups Tax Exemption (SUTE) scheme
Effective YA2020, new startup companies under the Startups Tax Exemption (SUTE) scheme will receive a 75% tax exemption (a decrease from the current 100%) on the first S$100,000 of a startup’s chargeable income. They will receive a 50% exemption on the next $100,000 of their chargeable income (down from $200,000).
2. Partial Tax Exemption (PTE) scheme
There will also be some changes made to the Partial Tax Exemption (PTE) scheme, effective YA2020. While a startup still enjoys 75% tax exemption on the first S$10,000 of normal chargeable income, its second tier of tax will be lowered by $100,000. The second tier, a 50% tax exemption, is for the next $190,000 of a startup’s normal chargeable income, Instead of the current S$290,000.
3. Corporate Tax
According to MOF, corporate tax is to remain low at an effective rate of 4.3% for startups and 8.1% for older firms for a taxable income of S$100,000.
4. Double Tax Deduction for Internationalisation (DTDi) raised to $150,000
To support internalisation of our firms, the amount of expenses that can qualify for the DTDi without prior approval will be raised from $100,000 to $150,000 per year of assessment, effective YA2019.
5. Tax deduction increased to 200% on licensing payments
For the commercial use of intellectual property (IP), the tax deduction is raised to 200% (from 100%) and capped at $100,000 of licensing payments per year.
6. Tax deduction increased to 200% for IP registration fees and 250% for R&D expenses
To encourage firms to build more innovations and protect their intangible assets, the tax deduction is raised to 200% (from 100%) and capped at $100,000 of IP registration fees per year. Tax deductions for qualifying expenses incurred on R&D done in Singapore are also raised from 150% to 250%.
Collaboration with industry partners, both local and abroad
1. Various SkillsFuture schemes
Individual employees can take advantage of the various SkillsFuture schemes to develop their skills. Some these include the SkillsFuture Earn and Learn Programme, SkillsFuture Mid-Career Enhanced Subsidy, and SkillsFuture Leadership Development Initiative (LDI).
2. SBF-SMU LEAD-CHARGE Initiative
Singapore Business Federation (SBF) and the Singapore Management University (SMU) will lead this new initiative to help SME leaders transform their organisations.
3. PACT scheme
Under PACT, companies can receive up to 70% co-funding for projects undertaken in partnership with others.
Contributing back to society
1. Continued support for older workers
To support older workers, the re-employment age is raised to 67, the Special Employment Credit extended, and WorkPro enhanced.
2. Business and IPC Partnership Scheme (BIPS) and SHARE extended to 2021
Under the BIPS, businesses that support their employees to volunteer and provide services to IPCs receive a 250% tax deduction on associated costs incurred. Under SHARE, the government provides dollar-for-dollar matching when businesses and their employees donate to the Community Chest.
For more information, please refer to the Budget 2018 website. If you’d like to do a year-on-year comparison of each year’s measures, you may refer to our Budget 2017 Infographic blog post.