The economic condition of the world is slowly creeping towards another depression. The policies are changing, people are desperately looking for opportunities to stay afloat, and the economic heads of the country are doing every little thing possible to keep the country safe from hiccups and fluctuations. Singapore, like other nations, has been undergoing strategic changes too. All these changes gear towards maintaining the status of Singapore as ‘World’s favorite nation for start-ups’ intact and improving the lifestyle of the people of the country.
2019 saw a few big announcements from the government of Singapore that are going to alter the way SMEs have been doing business in the country. While the government promises that these changes are only going to make the life of the Singaporeans simpler, but the impact will differ from one company to another. Nevertheless, the changes plan to come into effect in 2020. The businesses need to understand what is changing and what lies on the road ahead!
Career Support Program
The government has put in place a Career Support Program (CSP), which encourages the businesses to employ eligible Singapore Citizen Professionals, Managers, Executives, and Technicians (PMETs). The program sponsored by Workforce Singapore (WSG) and the Employment and Employability Institute (NTUC’s e2i).
Under this program, the official agencies of the country offer a monetary support system to employers who hire Singaporeans who are either 40 years or older and made redundant, or who have been scouting for jobs for at least 6 months but have failed to land one. The program sponsors a specific percentage of the salary of the people employed under this scheme. To be eligible for the benefits under this scheme, the company should have a registered office in Singapore, hire the workers for a minimum period of 12 months, and pay at least $4,000 as a monthly salary. This limit reduced to $3,600 for SMEs.
The government portal has compiled a list of FAQs in great detail to help SMEs reap benefits from the program.
Special Employment Credits (SEC)
Another program sponsored by the government of Singapore that will continue in 2020 is that of Special Employment Credits (SEC). It got Incepted in 2011, to help Singaporeans above the age of 55 to find a job, this policy has endured some dire changes in the last decade. While the policy originally covered people above 55, the plan in its current state also extends the benefits to persons with disabilities. In budget 2019, the Minister for Finance announced a further one-year extension of SEC to end-2020.
Under the program, the companies are eligible to claim 8% SEC of the monthly salary of employees who are the citizen of Singapore, above 55 years of age, and get paid a minimum of $4,000 a month. For the person with disabilities of any age, a company can claim 16% SEC.
Moreover, the companies can claim another 3% as Additional SEC (ASEC) by voluntarily re-employing Singaporeans who are eligible for re-employment. The re-employment age limit set to 67 years from July 1, 2017.
SMEs can save much money by employing the Singaporeans eligible for the job under this scheme.
There is no change in the corporate tax structure. It is going to stay at 17% for the coming year. However, some radical changes in other segments of the taxation will affect the SMEs.
Writing-down Allowances on Capital Expenditure of Acquiring IPRs:
Singapore grants writing-down allowances on capital expenditure incurred in acquiring IPRs (intellectual Property Rights) under its Income Tax Act to maintain and increase the attractiveness of the country as a place where businesses can hold and commercialize IPRs. The government further strengthened its approach towards IPRs by acknowledging IPRs as a critical element of a knowledge-based economy. The ministry has now extended the granting of writing-down allowances on capital expenditure incurred in acquiring IPRs till the last day of YA2025. However, there is no other change in the policy, and ‘capital expenditure’ does not include legal fees, registration fees, stamp duty, and additional such costs.
Since a large number of Singaporean start-ups to focus on creating solutions of tomorrow, the fact that government values the IPRs should make start-ups feel more confident about staying in the country.
Automation Support Package:
Another taxation relief comes in the form of an extension of the Automation Support Package (ASP) by two years. Launched in 2016, ASP got formulated to help businesses in deploying massive automation such as robotics and the internet of things in the business processes to enhance productivity and improve the quality of the produce. ASP is a mixture of a grant, tax relief, and loan component. The program covers up to 50% of the approved cost of the project (capped at S$1 million), a 100% investment tax allowance on the authorized capital expenditure (capped at S$10 million), and finally help in financing. The Enterprise Singapore bears a loan-default risk at up to 70% for the SME sector and 50% for the NON-SME industry.
Support for Businesses
Singapore helps SMEs and other businesses through its various schemes and grants. Enterprise Development Grant is one of the most reputed and useful grants that help the Singaporean companies to adopt new technology, innovate, and venture overseas. As per the announcement in 2019, the grant gets extended for another few years, and now holds valid until 2023.
Another financing scheme, the SME Working Capital Loan that offers up to S$300,000 to SMEs in Singapore, has been extended to March 2021. This loan comes with a 5 year repayment period and government risk sharing (up to 70%) on loan default.
Another good news for SMEs came in the form of an additional investment announced during Budget 2019. As per the statement, the government will put in S$100 million in the SME sector. The additional funds will be allocated under SME Co-Investment Fund III and has been a result of the success of the first 2 rounds of the same scheme.
SMEs looking to adopt IT solutions in the coming years are in for a treat as well. The Productivity Solutions Grant, which encourages the usage of information technology in business, has been extended until March 2023. The grant promises funding support of up to 70% and also provides relief of 70% (up to S$10,000 per enterprise) on professional training undertaken by the executives of an organization.
Grants and support packages have always been the USP of Singapore. With these extensions, the country is only going to get more lucrative for the years to come.
Singapore has been focusing on making SMEs go digital and reap the benefits of using cutting edge technology. As a result, a program called SMEs Go Digital incepted to help SMEs use digital platforms and expand their capabilities. In 2020, the government plans to enter more sectors with the Industry Digital Plan, which are necessarily a step-by-step guide for the business owners to go digital. This initiative will open more possibilities for the businesses in Singapore, and eventually generate value for all the stakeholders involved in the process.
Companies participating in the Digital Service Lab initiative by Infocom Media Development Authority of Singapore can now apply for funding support. The help will be extended to companies who will act as demand users, and also to the IT solution firms that will be onboard as service suppliers. The initiative is supposed to strengthen the competitiveness of the Singaporean service sector, and make it technologically, and innovatively, at par with the rest of the world.
The Bottom Line
Start-ups in Singapore thrived in 2019, and the trend will continue in 2020. The outlook of the government and the people towards the current economic culture of the country is highly positive. The government has enhanced several schemes that will not merely improve the lifestyle of an average Singaporean citizen, including the people with disabilities, but will also reduce the liabilities on the start-ups.
The government of Singapore wants businesses in the country to go digital. Therefore, the start-ups in Singapore must look at the future in the form of binary code. The innovations and knowledge will prosper in Singapore in the coming years. Until the government stops reforming, there is nothing that is going to tarnish the image of Singapore as the world’s best country for start-ups.