A Member Firm of Andersen Global

The Singapore Budget 2023: What Entrepreneurs Need to Know

The Singapore Budget 2023: What Entrepreneurs Need to Know

Share

Share on facebook
Share on twitter
Share on linkedin
Share on email

Share

Share on facebook
Share on twitter
Share on linkedin
Share on email

The Singaporean government announced the country’s budget for 2023 on February 14th. The theme of the budget centres on enhancing Singaporeans’ abilities and taking advantage of new opportunities amid increasing global uncertainty.

In 2023, the government is expected to spend S$104.2 billion (US$78.1 billion), and the fiscal deficit is expected to be S$400 million (US$299 million), or 0.1 per cent of GDP. The range of 0.5 to 2.5 per cent is forecast for positive but sluggish economic growth. However, external factors like the protracted conflict between Russia and Ukraine and the deterioration of the US and Europe economies will significantly impact world trade. As a result, Singapore’s inflation is likely to continue to be high, particularly in the first half of 2023.

Support is provided for Singaporean businesses, including those looking to set up a new business in Singapore, as they adapt to life after COVID-19 and deal with high inflation and slow development. These include, among other things, tax deductions for invention and research and development (R&D).

BEPS 2.0

It was announced in Budget 2023 that Singapore will implement a minimum effective tax rate of 15 per cent for large multinational enterprises (MNEs) located in Singapore starting on January 1st, 2025.

Base Erosion and Profit Shifting (BEPS) has been a long-standing issue in global taxation, with companies exploiting loopholes in tax laws to avoid paying their fair share. The Organisation for Economic Co-operation and Development (OECD) has been working on a solution to this problem, known as BEPS 2.0, which is set to change the landscape of international taxation.

Starting in 2025, multinational enterprises (MNEs) with combined yearly revenues of EUR 750 million (US$797 million) or above will be required to pay a tax rate of 15 per cent on the profits they generate in the jurisdiction where they operate.

Innovation Enterprise Scheme

To promote innovation and R&D among businesses, the government has launched the Enterprise Innovation Scheme (EIS) in Budget 2023. The EIS offers tax incentives for eligible companies and introduces new measures to boost their innovative capabilities further.

Below are the Five Qualifying Activities Stated:

Maximising the Benefits of Singapore's Qualifying R&D Activities

At present, companies conducting R&D in Singapore can claim a 100 per cent tax deduction on all qualifying expenses related to R&D projects. Additionally, they can avail of an extra 150 per cent tax deduction for staff costs and consumables incurred for such tasks. The recent Budget 2023 has introduced a new incentive where companies can now claim a 400 per cent tax deduction on the first S$400,000 (US$298,000) of costs related to consumables and staff for qualifying R&D projects conducted in Singapore. This incentive will be effective from the year of assessment (YA) 2024 until the year of assessment (YA) 2028.

Boosting Innovation: Enhanced Tax Deductions for Intellectual Property Registration Costs

Currently, companies can avail of a 200 per cent tax deduction on the initial S$100,000 (US$74,600) of eligible costs for registering intellectual property, including patents, designs, trademarks, and other related expenses. With the introduction of Budget 2023, this incentive has been improved to a 400 per cent tax deduction for the first S$400,000 (US$298,000) of qualifying IP registration costs for each assessment year from 2024 to 2028.

Innovating with IP: A Guide to Acquisition and Licensing of IP Rights

Currently, businesses can claim a 100 per cent write-down allowance on capital expenses incurred on qualifying intellectual property (IP) rights, along with a 200 per cent tax deduction on the initial S$100,000 (US$74,600) of the costs related to licensing IP rights.

Under Budget 2023, this incentive has been improved further. Companies can now avail of a 400 per cent tax allowance/deduction on the first S$400,000 (US$298,000) of qualifying expenses incurred on acquiring and licensing eligible IP rights. This incentive is applicable for the years of assessment from 2024 to 2028.

Deductions on taxes for expenditure

Skills Future Singapore has authorised courses that are now eligible for a tax deduction of 400 per cent on the initial S$400,000 (US$298,000) of qualifying training expenses, which is an improvement from the earlier 100 per cent tax deduction.

Deductions on taxes for innovation projects conducted by qualified partners, including polytechnics

Budget 2023 has introduced a 400 per cent tax deduction program for qualifying innovation projects up to S$50,000 (US$37,300) of qualifying expenses for the years of assessment from 2024 to 2028. The initiative encourages companies to undertake innovation projects with local polytechnics, the Institute of Technical Innovation, or other eligible partners.

Enhanced Support for Business in the New Era

Enterprise Singapore, a statutory board under the Ministry of Trade and Industry that supports local SMEs in enhancing their capabilities, innovation, and internationalisation, will extend the current improvements provided by its Enterprise Financing Scheme, as announced by the government.

The Impact of the Enterprise Financing Scheme Trade Loan Extension

Starting April 1, 2023, and ending on March 31, 2024, the Enterprise Financing Scheme – Trade Loan (EFS-TL) will be available to enterprises. With the EFS-TL, borrowers can receive trade financing of up to S$10 million (US$7.3 million), and the government’s risk share on loan is set at 70 per cent, with a maximum repayment period of one year.

Extending the Enterprise Financing Scheme for Project Loans

The Enterprise Financing Scheme for Project Loans (EFS-PL) has been extended until March 31, 2024, to support eligible companies’ overseas and domestic projects. This program provides financing for various supportable loan types, including land/building/factory, working capital loans, machinery, equipment, other fixed assets, and guarantees. Borrowers can receive up to S$50 million (US$36.9 million) for overseas projects and up to S$30 million (US$22.1 million) for domestic projects. Additionally, borrower groups can receive up to S$50 million (US$36.9 million) for overseas projects and up to S$30 million (US$22.1 million) for domestic projects.

For fixed asset loans, the government will bear 50 per cent of the risk, and for young companies meeting specific criteria, the government’s risk share is 70 per cent. The maximum repayment period for fixed asset loans is up to 15 years, while working capital loans and guarantees have a maximum repayment period of up to five years.

Overview of the Enterprise Financing Scheme - Working Capital Loan

From April 1, 2023, to March 31, 2024, the Enterprise Financing Scheme – Working Capital Loan has been upgraded to provide an operating capital loan of up to S$500,000 (US$373,000).

Boosting Business Growth with Singapore Global Enterprises Initiative Top-Up

The Singapore company formation Global Enterprises initiative, aimed at supporting local companies with customised capability building programs, including internationalisation, innovation, and fostering of new partnerships, has received a top-up of S$1 billion (US$746 million) in Budget 2023.

Boosting Business Efficiency: The Top-Up for National Productivity Fund

The National Productivity Fund (NPF), created in 2010 to enhance business productivity and employee training, will receive an additional S$4 billion (US$2.9 million) in funding under the new Budget of 2023. The NPF’s mission has also been expanded to support companies in developing new capabilities, upskilling their workforce, and contributing more to the domestic economy.

Leave a Reply

Your email address will not be published. Required fields are marked *

Follow Us

Recent Posts

Your Vision, Our Mission.
Let's Discuss.