The budget for 2018 has prioritised capacity enhancement, business development, and innovation through collaboration as the main areas of focus. The government has also made an early announcement on GST rate hike to help businesses cope with the probable cost challenges.
Bankbazaar Singapore – February 21, 2018
Singapore: At the recently concluded budget session, Finance Minister Heng Swee Keat announced a flurry of measures to help businesses cope with short-term cost escalations and encourage long-term capacity building.
In a move aimed at reducing the tax burden of businesses, the government has decided to offer a tax rebate of up to 40% of the tax payable, capped at S$15,000, for the year of assessment (YA) 2018.
For YA 2019, businesses can enjoy up to 20% rebate on corporate tax, subject to a maximum of S$10,000. Starting 2020, businesses will receive a discount, restricted to the first S$200,000 of the taxable income.
Start-ups will enjoy a tax exemption of up to 75% of their first S$100,000 taxable income from 2020. The current exemption stands at 100%.
To encourage businesses adopt newer technology and capability-enhancing solutions, the government has announced tax exemptions for activities involving research and development.
To help businesses protect their intangible assets and trade secrets, the government has also decided to increase the tax rebate on intellectual property fee to 200%, which is double the current deduction.
Going forward, the government will merge a number of grant schemes that fund strategic business partnerships to form Partnerships for Capability Transformation scheme under which eligible companies will be able to claim up to 70% funding for capability enhancement, scale-up, and increasing presence in international markets.
A newly formed scheme called the Enterprise Development Grant (EDG) will now be used to co-fund up to 70% of a qualifying spend to encourage business development and core capacity building.
To promote collaboration and innovation, the government will soon pilot an Open Innovation Platform to help businesses identify their areas of challenge and also partners with matching capabilities and interests.
Government has also promised more incentives to help businesses form productive partnerships locally and globally.
Business experts have said that the government’s decision to announce GST hike, slated to happen anytime between 2021 and 2025, will reduce uncertainties and help companies create capacities to eliminate potential challenges that the expected hike might create.
Experts felt that this move gives businesses more time to adjust to cost escalations that might ensue from the rate increase.
The government has decided to provide more incentives to employees and employers. The Wage-Credit Scheme, that cofunds salary increases of employees who have a gross monthly income of S$4,000, will be extended for three more years.
While employees are expected to benefit from digital and technical skill enhancement trainings, cash-intensive businesses may enjoy a better cash flow.
According to experts, the government, however, needs to do more to help small businesses cope with energy efficiency issues and other operational challenges.