Singapore Budget 2015 for Businesses - SME must read

Measures For Businesses

(A) Lifelong Learning – Our Next Phase of Development

Through SkillsFuture, the Government will help Singaporeans learn at every age and develop mastery and flair in every field. SkillsFuture involves everyone: individuals and families, employers and industry associations, unions etc. The SkillsFuture measures specific to businesses are:

• SkillsFuture Earn and Learn Programme. Fresh Polytechnic and ITE graduates will be placed in jobs and receive a salary while undergoing institution-based and structured on-the-job training that leads to an industry-recognised qualification. Both trainees and employers will receive substantial support from the Government.
• Targeted Support for Career Progression. SkillsFuture Study Awards will be given to Singaporeans seeking to develop deep specialist skills required for our future growth clusters. It will be introduced in phases, starting this year, and will be awarded to about 2,000 recipients per year eventually. SkillsFuture Fellowships will also be introduced from 2016, to develop Singaporeans to achieve mastery in their respective fields. About 100 fellowships will be awarded each year.
  
  Under the SkillsFuture Leadership Development Initiative, collaborations with strategic companies will be stepped up, to develop a pipeline of Singaporeans to take on corporate leadership roles and responsibilities.
• A New Industry Collaboration. To uplift the broad base of companies, and to help Singaporeans develop their careers across our economy, the Government will work with employers, unions, and education and training providers to develop and implement Sectoral Manpower Plans (SMPs) in all key sectors by 2020. 
  
  To help SMEs overcome the constraints they face in developing capabilities and capacity, the Government will also work with industry partners to develop a shared pool of SkillsFuture Mentors with specialised, industry-relevant skills, which SMEs can tap on.

More details on these initiatives will be provided subsequently.

(B) Phasing out the Transition Support Package

As businesses may need more time to adjust to rising costs as they restructure, the Transition Support Package will be extended by two years but at reduced support levels.

(B1) Wage Credit Scheme ($1.8 billion over two years)

The Wage Credit Scheme will be extended to 2017, to give employers more time to adjust to the tight labour market.

• Gross monthly wage increases of at least $50 in the qualifying year (2016-2017), up to a gross monthly wage level of $4,000, will qualify for 20% co-funding.
• In addition, gross monthly wage increases of at least $50 given in 2015 and sustained in 2016/2017, and wage increases given in 2016 and sustained in 2017, will continue to be co-funded at 20%.

(B2) Corporate Income Tax (CIT) Rebate ($800 million over two years)

The 30% CIT rebate will be extended for Year of Assessment (YA) 2016 and YA2017, with a reduced cap of $20,000 per company per YA. The reduced cap will ensure that more support is focused on SMEs.

(B3) Productivity and Innovation Credit (PIC) Bonus

The PIC Bonus will be phased out after YA2015 as it was intended as a transitional measure and has been successful in spreading the culture of productivity amongst SMEs. Businesses will continue to benefit from the PIC scheme which has been extended till YA 2018, and the PIC Grant + scheme introduced in Budget 2014.

(C) Offsetting CPF Changes

(C1) Higher CPF Salary Ceiling

To help middle-income Singaporeans accumulate more CPF savings during their working years, the Government will increase the CPF salary ceiling from $5,000 to $6,000 to keep pace with income growth over the years. This will benefit at least 544,000 members and take effect from 1 January 2016.

(C2) Raise CPF Contribution Rates for Older Workers

To boost the retirement adequacy of older workers, the Government will raise the CPF contribution rate for workers aged 50 to 65 years. The increase in employer contributions will go to the Special Account, while the increase in employee contributions will go to the Ordinary Account. These changes will take effect from 1 January 2016.

(C3) Enhanced Temporary Employment Credit (TEC) ($1.43 billion over three years)

The Government will enhance the TEC by:

• Raising the TEC from 0.5% to 1% of wages in 2015.
• Extending the TEC by two years (1% of wages in 2016; and 0.5% of wages in 2017).

The extension of the TEC will offset two-thirds of the employers’ costs due to CPF changes in 2016, and one-third in 2017.

(C4) Encourage Re-Employment beyond 65 years old, and Top-up to the Special Employment Credit (SEC) Fund

To promote voluntary re-employment of older workers, the Government will provide employers with an additional Special Employment Credit (SEC) of up to 3% of wages for workers aged 65 years and above in 2015. This is on top of the 8.5% wage offset that employers would receive in 2015. This will cost about $50 million.

The Government will top up the SEC Fund by $500 million to meet the needs of the SEC until the scheme expires in 2016.

More details will be provided at the Ministry of Manpower’s Committee of Supply.

(D) Recalibrating Foreign Worker Levies

As the net inflow of foreign workers (excluding construction) has slowed significantly, the Government will defer this year’s round of announced levy increases for S Pass and Work Permit Holders, with the exception of Work Permit Holder levies in the Manufacturing and Construction sectors:

• Manufacturing Sector. The current Work Permit Holder levy rates for 2015 and 2016 will be frozen at 2014 levels.
• Construction Sector. To encourage firms to hire and retain the more productive, higher skilled R1 workers, we will make two further adjustments: (i) Basic tier levy for basic skilled R2 workers will be raised from $550 in July 2015 to $650 in July 2016 and $700 in July 2017; and (ii) Man-year entitlement waiver levy rate for more highly skilled R1 workers will be reduced from $750 to $600 from July 2015.

(E) Strengthening Our Support for Innovation

(E1) Strengthen Grant Support for Innovation

• To support SME innovation, the Capability Development Grant (CDG) will be made more accessible to companies via a simplified application process for projects below $30,000. The CDG’s enhanced funding support level of up to 70% of qualifying costs will also be extended for three more years to 31 March 2018. This will cost approximately $600 million over three years.
• To promote industry collaborations, SPRING’s Collaborative Industry Projects will be extended to all industry sectors to develop productive and innovative solutions. The Partnerships for Capability Transformation (PACT) scheme will also be enhanced to foster collaboration between large companies and SMEs in their supply chain.

(E2) Create and Capture Greater Value from R&D

The National Research Fund will be topped up by $1 billion this year, with greater efforts to help companies develop and commercialise new products.

(E3) Catalyse Enterprise Financing ($100 million over three years)

To ensure that promising companies have access to capital that they need to grow, the Government will:

• Top up the Business Angel Scheme (BAS) by $75 million and increase the co-investment cap to $2 million per company for BAS and SPRING’s Startup Enterprise Development Scheme.
• Pilot a venture debt risk-sharing programme to provide 50% risk-sharing to selected financial institutions for such loans, over an initial period of two years. The aim is to catalyse about 100 venture debt loans, totalling approximately $500 million.

(F) Going beyond our Shores

To support our companies to internationalise, the Government will:

• Raise the support level for SMEs for all activities under IE Singapore’s grant schemes from 50% to 70% for three years to 31 March 2018.1
• Enhance the Double Tax Deduction for Internationalisation scheme to cover qualifying manpower expenses incurred for Singaporeans posted to new overseas entities.
• Introduce a new International Growth Scheme to provide qualifying companies a 10% concessionary tax rate on their incremental income from qualifying internationalisation activities. The scheme will expire on 31 March 2020.

These enhancements are expected to cost $240 million.

(G) Encouraging Scale

To help companies acquire scale through mergers and acquisitions (M&A), the Government will:

• Increase the tax allowance for acquisition costs from the current 5% to 25% of the value of acquisition, with the cap on the allowance remaining at $5 million per YA. In addition, companies will be able to claim M&A benefits for acquisitions that result in at least 20% shareholding in the target company, down from the current threshold of 50% shareholding. Also, the M&A tax allowance scheme will be extended till 31 March 2020.
• Extend the scope of IE Singapore’s Internationalisation Finance Scheme to cover overseas M&A financing.

These enhancements will cost the Government over $100 million over five years. More details will be announced at the Ministry of Trade and Industry’s Committee of Supply.

(H) Other Measures

(H1) Tax Deduction for Donations ($498 million)

The tax deduction for qualifying donations made to Institutions of a Public Character (IPCs) and other qualifying recipients in 2015 will be increased from the current 250% to 300%.

We will extend the 250% tax deduction for donations, which will expire on 31 Dec 2015, by another three years for qualifying donations made from 1 January 2016 to 31 December 2018.

(H2) Extend Care & Share Movement ($250 million)

As recently announced, the Government will extend matching grant support for the Care & Share Movement till 31 March 2016, with an additional $250 million. This doubles the total matching grant for Care & Share to $500 million.

(H3) Extend and Refine Carbon Emissions-based Vehicle Scheme

The Carbon Emissions-based Vehicle Scheme will be extended to 30 June 2017 with refinements to encourage a further shift to greener cars. More details will be announced at the Ministry of Transport’s Committee of Supply.

(H4) Early Turnover Scheme

The Early Turnover Scheme will be enhanced to encourage the replacement of older commercial vehicles with greener vehicles that meet higher emission standards from August 2015. More details will be announced at the Ministry of Environment and Water Resources’ Committee of Supply.

(H5) Raise Petrol Duty and Provide Road Tax Rebate

To encourage lower car usage and reduce carbon emissions, the petrol duty rates for premium grade petrol and intermediate grade petrol will be increased by $0.20 per litre and $0.15 per litre respectively. This will take effect from 23 February 2015.

To ease the transition to the revised petrol duties, the Government will provide a one-year road tax rebate of 20% for cars, 60% for motorcycles, and 100% for commercial vehicles using petrol.

1 These are the Global Company Partnership (GCP), and the Market Readiness Assistance (MRA) grants. The current support level for both these schemes is up to 50%, except for four activities – Design, Branding, Intellectual Property, and Mergers and Acquisitions – which are supported at 70% from 1 Apr 2012 to 31 Mar 2015.