Amid uncertainties in the global economy, Singapore's Budget 2023 sets out measures to boost local businesses and encourage innovation. On 14 Feb 2023, Deputy Prime Minister Lawrence Wong announced a S$4 billion top-up for the National Productivity Fund, and a new Enterprise Innovation Scheme, alongside other measures.
Read on to find out how these measures can help your small business.
S$4 Billion Top-Up for the National Productivity Fund
In order to attract investments, Mr Wong wil top up the National Productivity Fund with S$4 billion. The National Productivity Fund’s scope will also be expanded to include investment promotion as a supportable activity. Mr Wong believes that these efforts will lead to long-term support for education initiatives, strategies, as well as productivity.
Enterprise Innovation Scheme
To allow businesses to obtain larger tax deductions for activities including conducting research and development locally, a new Enterprise Innovation Scheme was put in place. With Singapore's emphasis on innovation, this scheme will enhance tax deductions for the following key activities:
- Registration of intellectual property such as trademarks, patents, and designs
- Innovation with tertiary institutions such as polytechnics and the Institute of Technical Education (ITE)
- R&D conducted locally
- Training through SkillsFuture Singapore-approved courses, which are aligned to the Skills Framework
- Acquisition and licensing of intellectual property rights, applicable to taxpayers with less than S$500 million in revenue
Furthermore, enterprises can get up to 250 per cent tax deduction of qualifying expenditure on some of the key activities. The tax deduction will be increased to 400 per cent of qualifying expenditure, for every key activity held annually from Year of Assessment (YA) 2024 to 2028. Other than S$50,000 on the key activity of innovation with polytechnics and ITE, the other four key activities will have a cap of S$400,000.
According to Mr Wong, enterprises that fully utilise Enterprise Innovation Scheme can enjoy tax savings of almost 70 per cent of their investment. Companies that have yet to profit, or lack profits to maximise the advantages from the tax deductions, can convert 20 per cent of their YA’s qualifying expenditure into a cash payout of a maximum of S$20,000.
Energy Efficiency Grant
To provide businesses with assistance on immediate challenges, the Energy Efficiency Grant will be extended for another year, till 31 March 2024. These measures will continue to lend support to businesses in the food manufacturing, food services, and retail sectors to invest in energy efficiency, in a bid to reduce the effects of higher electricity prices.
Enterprise Financing Scheme
Similarly, the current enhancements to the Enterprise Financing Scheme will also be extended till 31 March 2024, to facilitate local enterprises’ access to financing. Among the enhancements are a 70-per cent Government risk-share for trade loans, as well as support for domestic construction projects through project loans.
Singapore Global Enterprises Initiative
To develop local enterprises, S$1 billion will be parked under the Singapore Global Enterprises initiative. This initiative was implemented in 2022, with the aim of helping budding local enterprises evolve into globally leading businesses. This support will come in the form of customised and dedicated help, such as working with professionals to enhance the businesses’ core leadership teams and nurturing a strong talent pipeline.
SME Co-Investment Fund
Under the SME Co-Investment Fund, another S$150 million will be put aside to invest in up-and-coming small- and medium-size enterprises (SMEs). So far, the Government has put in S$1 billion in this fund and invested in approximated 60 local companies – which has in turn catalysed roughly S$2 billion of extra investments into these companies.
Higher Monthly CPF Contribution By 2026
Central Provident Fund (CPF) contributions to employees will be raised from the current monthly salary ceiling of S$6,000 to S$8,000 by 2026. To give employers and employees time to adjust, this change will happen progressively over four years. On 1 Sep 2023, the monthly salary ceiling will be raised to S$6,300. On 1 Jan 2024, it will increase further to S$6,800. By 1 Jan 2025, the ceiling will reach S$7,400, and by 1 Jan 2026, it will hit S$8,000. However, there will not be any changes to the CPF annual salary ceiling, which includes contributions from additional wages.
Adjustments to the CPF monthly salary ceiling
|CPF monthly salary ceiling||CPF annual salary ceiling|
|From 1 Sep 2023||S$6,300|
|From 1 Jan 2024||S$6,800|
|From 1 Jan 2025||S$7,400|
|From 1 Jan 2026||S$8,000|
Stay Focused on Growing Your Business
Every company’s finances differ – if you need help in getting more customised advice or figure out how Budget 2023 will affect your SME, simply reach out to our experienced accountants in Singapore. That’s not all, we also help companies with accounting tasks so you can bid those paperwork woes goodbye and focus on your core business.