In 2019, Singapore's economic growth was 0.7% - the weakest growth since the 2008 financial crisis. As the economy was recovering, however, COVID-19 ran rampant with massive hits against the tourism, aviation, retail, and point-to-point transportation industries. Many of the schemes and government grants announced in Budget 2020 are aimed to help individuals and Singapore SMEs to ride out this uncertain, unprecedented period.
We took a deep look at Singapore's 2020 budget and summarized 6 key highlights that we think will be helpful for individuals or SMEs to grow their business or survive this tough period.
Tax-paying companies will be given a rebate on corporate income tax and some enhanced tax treatments in an effort raised by the government to improve their cash flow.
Under corporate tax rebates, businesses will receive a rebate of 25% of the payable tax, capped at $15,000 for 2020. Enhanced tax treatment comprises an automatic extension of interest-free installments by two months for payment of corporate income tax on estimated chargeable income. Applications have to be filed within three months of an enterprises’ financial year-end.
Businesses can also redeem the unused capital allowances and trade losses of up to the three preceding years of assessment. Companies can also apply to accelerate the defrayment of costs of obtaining plant and machinery and renovation accumulated for the year of evaluation in 2021.
The Enterprise Financing Scheme, or SME Working Capital Loan, will be raised from $300,000 to $600,000. The government’s risk-share is now increased to 80%, up from its previous range of 50% to 70%. This scheme is enhanced for a year to help businesses gain more convenient access to working capital.
The industries that got hit the hardest, namely tourism, aviation, retail, and point-to-point transportation industries, will receive additional help in these trying times.
An extended funding period for re-skilling workers is available for businesses under the five sectors mentioned above. The period has been raised from three months, to a maximum of six months.
Hotels, serviced apartments, and event venues under tourism will be granted property tax rebates of 30% on their facilities for the year 2020.
Changi Airport will receive a 15% property tax rebate, and retailers at Changi Airport will receive rental rebates.
Under transportation, taxi and private-hire drivers will obtain an S$77 million support package to bridge the gap through reduced business.
Tenants of government-managed properties like hawkers and commercial store owners will receive rental waivers, a month for hawkers, and half-a-month for retail stores.
S$8.3 billion has been allocated for the support of the growth and transformation of businesses in the form of two packages. The Enterprise Grow Package and Enterprise Transform Package aims to help businesses out in the way their name suggests.
The newly formed Enterprise Grow Package supports companies looking to venture into new markets, and enables businesses looking to expand digitally by innovation and adoption of digital solutions. The enhancement of another government grant, Market Readiness Assistance, helps to support enterprises to venture into new markets.
The Enterprise Transform Package targets to inspire business leaders of SMEs to go into the next phase of development. The government expects to support approximately 3,000 projects.
Singapore’s start-up scene is bubbling with potential, with about 3,800 of such companies, and 150 capital funds investing in start-ups locally and regionally.
Startup SG, a program that has enabled start-ups to kickstart their ideas through co-investment schemes like Startup SG Equity, has raised some S$560m in private sector funding over the past four years.
An additional $300 million will be set aside under the Startup SG Equity, to enhance support for deep-tech start-ups. This move is specially made for emerging deep tech start-ups, such as those in PharmBio and MedTech sectors, advanced manufacturing, and agri-food tech. The budget will enable start-ups in these fields to gain better access to working capital, expertise, and industry networks.
For Singaporeans aged 25 and above, there will be a $500 SkillsFuture credit top-up.
There will be an increase in capacity for SkillsFuture work-study programs to help prepare students for the workforce.
New SkillsFuture enterprise credit is available to support companies in workforce and enterprise transformation. Under this, an additional $500 SkillsFuture credit is provided for Singaporeans aged 40 to 60 years old. There will be a rise in capacity for reskilling programs, as well as a new hiring incentive for employers who hire local job-seekers aged 40 and above through the aforementioned reskilling programs.
Construction, marine shipyard, and process sectors will see a reduction in foreign worker quotas over the next three years. This move is to encourage enterprises to hire more local skilled workers and technicians.
The dependency ratio ceiling (DRC) for S-Pass holders will be reduced from the current 20% to 18% by 1 Jan 2021, and to 15% on 1 Jan 2023 for the mentioned industries.
Overall, DRC (overall foreign work quota throughout all classes of work pass) remains at 87.5% for construction and process sectors, and 77.8% for marine shipyard sector.
In summary, businesses under construction, marine shipyard, and process sectors will need to hire more skilled local workers but can continue to employ low-skilled foreign workers.
The foreign worker levies for all sectors, including tourism, food and beverage and retail industries, which have been struck by the COVID-19 outbreak, will remain unchanged.
While the government has provided ample support for companies, it is also crucial for companies to play their part in staying digitally relevant in today’s market, especially in these trying times.