Singapore Budget 2016 for Business Owners
SMEs are no doubt the lifeblood of the Singapore economy, employing about 70% of the country’s workforce, and contributing to about half of the nation’s GDP. It thus makes perfect sense that the Budget would address issues faced by SMEs in these times of change (and when isn’t it?).
Here are some of the highlights of the Singapore Budget 2016 that would be of significance to your business, whether you’re a fledgling startup or on the brink of internalisation.
1. Near term measures to keep your business afloat (and thriving)
Loan Assistance for SMEs
Cash flow issues are amongst the most common problems faced by businesses on a day-to-day basis. For SMEs without the deep pockets of their larger counterparts, a sustained cash flow problem could mean winding down the business, pronto.
The Government has just introduced the SME Working Capital Loan Scheme for loans of up to $300,000 per SME. This scheme is meant to encourage financial institutions to lend to SMEs, with the Government co-sharing 50% of the default risk of these loans.
Of course, this comes as god-sent not just for SMEs facing a cash flow issue but also those who with to grow their businesses and need some capital injection.
Increased Corporate Income Tax Rebate
The Corporate Income Tax Rebate will be raised from the existing 30% of tax payable to 50% of tax payable, up to a maximum of $20,000 rebate for each Year of Assessment (2016 and 2017).
2. Longer- term strategies that could catapult your business.
Business Grants Portal
If you thought that the only way to fund your startup was to convince, confuse, and con your friends and grandmother, then you’re definitely missing out on great funding opportunities given by various government agencies such as IE Singapore and SPRING.
The trick is was to find out which agencies would offer grants to businesses such as yours. To make things more user-friendly, the Government has decided to launch the Business Grants Portal at the end of the year.
Rather than browsing through websites of various agencies, you can soon access the portal, which will organise grants along the core business needs of capability building, training, and international expansion.
Automation Support Package
If you have been thinking of scaling up and automating certain business processes but haven’t done so due to the significant capital required, then this package comes in as incredibly helpful. The Government’s Automation Support Package will be introduced, lasting for a period of three years.
As part of the package, businesses can obtain grants for up to 50% of their rolling-out or scaling up of automation projects, with an absolute value capped at $1 million. In addition to the existing capital allowance, there will also be an Investment Allowance of 100% for automation equipment.
Loans for equipment under the SPRING’s Local Enterprise Finance Scheme will also be made more accessible as the Government will increase its risk-share from 50% to 70%.
Given that large-scale automation projects can enable businesses to expand their operations and internationalise, IE Singapore and SPRING will also be partnering to work with selected firms in gaining global market access.
If you’re ready to take your business and join the big leagues, then you’d be happy to know that the Government has plans to help your SME scale up.
The SME Mezzanine Growth Fund will get a major top-up, bringing it to $150 million as opposed to the previous $100 million. For scale-ups through Mergers and Acquisitions (M&A), there will be a grant of up to $40 million of the value of the deal, as well as up to $10 million of M&A tax allowance per Year of Assessment. Gains on disposal of equity investments will also not be taxed, based on scheme parameters, until 31 May 2022.
For SMEs who are ready to take on the world, the Governement will provide support by giving assistance through programmes like the Global Company Partnership and Market Readiness Assistance, which are part of IE Singapore. These programmes provide more than just financial assistance in the form of grants. They also help with building the capabilities of your business and facilitate access to international markets.
In addition, firms who go global will also get to enjoy an extended Double Tax Deduction (DTD) until 31 March 2020. The DTD scheme allows businesses to process an automatic claim for a 200% tax deduction on he first $100k of eligible expenses per YA without prior approval from IE Singapore. Eligible expenses include those that are incurred for activities such as participation in overseas business development and investment study trips.