The 2014 Budget was delivered by the Finance Minister on 21 February 2014.
As expected, the theme of the 2014 Budget was to continue the long-term
strategy of restructuring Singapore's economy and to build a fair and equitable
society. In line with this theme, the focus of the tax changes introduced in this
year's Budget can be summarised in three points: increase business
productivity, enhance tax simplicity and certainty, and provide support for the
pioneer generation and disabled.
From the viewpoint of multinational companies (“MNCs”), the main tax
changes are few but some of these changes may have important
ramifications. In particular, a number of MNCs, especially those in high-tech
and financial industries, will be affected.
This year's Budget sees the waiver of the withholding tax requirement for
payments made to Singapore branches. It also contains a number of
important changes to the writing-down allowance ("WDA") rules for intellectual
property ("IP"), the Productivity and Innovation Credit ("PIC") scheme and the
tax incentive schemes for qualifying funds. The absence of new schemes, and
the focus on fine-tuning existing ones reinforce the Government's
determination to transform our economy with increased productivity for
sustainable long-term growth. This trend is expected to continue, barring any
major global event that will shift the Government's focus from the task at
hand: transitioning our economy to a productivity and high value driven one.
We highlight some of the key changes below.
1. Extension and Clarification of Section 19B WDA
Currently, taxpayers who have acquired both legal and economic ownership
of IP rights can write-down the capital expenditure incurred to acquire these IP
rights over a period of five years. The IP rights which qualify for the WDA are
defined broadly in the Singapore Income Tax Act (the “Act”) and include,
amongst others, patents, trademarks, and trade secrets or information that
has commercial value.
With the 2014 Budget announcements, the availability of WDA under the Act
will be extended for five years to Year of Assessment ("YA") 2020. This has
been widely anticipated.
Taxpayers should also take note that the meaning of “information that has
commercial value” will be clarified to exclude information relating to customerbased
intangibles and work processes. The Inland Revenue Authority of
Singapore (“IRAS”) will publish a negative list with further details by end April
2014. It is expected that this negative list will be given the force of law and
incorporated into the Act by end 2014.
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Comments: Given the Government’s focus on positioning Singapore as an IP hub, the extension of WDA for the acquisition of IP is welcomed as taxpayers will continue to be encouraged to own IP in Singapore.
The phrase "information that has commercial value" is not defined in the Act. Broadly interpreted, any information of commercial value would arguably fall within the meaning of "IP rights" in Section 19B. The clarification of the meaning of "information that has commercial value" is an important development. On one hand, this means greater certainty now that there is a negative list which taxpayers can refer to in order to determine the qualifying IP for WDA purposes. We note that the exclusion of customer-based intangibles and work processes is likely because IRAS is of the view that such intangibles are akin to goodwill, and are therefore not IP rights.
On the other hand, for taxpayers who had previously made Section 19B claims, a number of immediate questions come to mind. As the change is described as a "clarification", it is likely that the change will be retrospective. In this case, taxpayers who have claimed WDAs on IP in the past may be faced with unexpected tax issues.
Even if the change is not retrospective, taxpayers who intend to claim WDA in respect of IP should expect increased scrutiny by IRAS as to whether the IP in question qualifies for WDAs. Taxpayers who have already claimed WDAs should review their existing claims and valuation reports to evaluate their exposure to potential re-assessments.
This change will impact MNCs in various industries, including high-tech, pharmaceutical and healthcare industries, which have transferred or intend to transfer IP to Singapore.
2. Extending Research and Development Measures and Section 14A Tax Deduction Scheme
A. Supporting Research and Development in Singapore
Under Section 14DA(1) of the Act, businesses can enjoy an additional 50% tax deduction on qualifying research and development ("R&D") expenditure incurred on qualifying activities in Singapore. In addition, Section 14E of the Act provides up to 200% tax deduction on expenditure incurred in respect of R&D projects approved by the Economic Development Board ("EDB"). These measures were announced in the 2008 Budget to boost and support R&D in Singapore.
The tax benefits under Section 14DA(1) and Section 14E have been extended for 10 years to YA 2025 and for five years to 31 March 2020 respectively. The rationale for extending these measures is to continue encouraging private R&D and to give certainty to companies which invest in R&D, taking into account the long life cycle of R&D activities. Moreover, these measures aim to attract businesses to conduct large R&D projects in Singapore.
Comments: This is a widely anticipated extension, in view of the objective of the 2014 Budget to enhance businesses' productivity. Notably, these R&D measures apply only to R&D undertaken in or partly in Singapore, which suggests the Government's emphasis on incentivising businesses to undertake R&D projects in Singapore.
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B. Encouraging the Protection of IP
Section 14A tax deduction scheme for registration costs of qualifying IP was introduced in 2010 to encourage business to protect their IP. This scheme allows businesses to claim a full tax deduction on costs incurred to register the following IP:
In addition, fees paid to any person acting as agent for the following purposes are fully deductible:
applying for a patent, registering of a trademark or design or the grant of protection of a plant variety;
preparing specifications or other documents relating to the above IP; and
giving advice on the validity or infringement of any of the above IP.
This scheme has been extended for another five years until YA 2020.
Comments: In line with building Singapore as an IP hub, the extension of Section 14A is welcomed as businesses would be encouraged to register their IPs, and are able to treat the costs incurred to protect their IPs as deductible costs.
3. Waiving the Withholding Tax Requirement for Singapore Branches
When payments that fall under the scope of Sections 12(6) and 12(7) of the Act (e.g. interest, royalties and technical service fees) are made to non-residents, the payer has to withhold tax. This applies to payments made to Singapore branches of non-residents. Prior to the 2014 Budget, IRAS would grant a waiver of withholding tax on payments made to Singapore branches on application, subject to meeting stipulated conditions.
Effective from 21 February 2014, there is no need for payers to withhold tax on Sections 12(6) and 12(7) payments made to Singapore branches of non-resident companies. Singapore branches will still be taxed on such payments at the current corporate income tax rate of 17%, and are required to declare such payments in their annual income tax returns.
Comments: This change is positive as it reduces compliance costs for payers who were required to withhold tax on Sections 12(6) and 12(7) payments made to Singapore branches, where no waiver had been granted by IRAS before 21 February 2014.
We should point out that this change only applies to branches of non-residents. Withholding tax still generally applies when payments subject to withholding tax are paid to non-residents directly or through partnerships. When deciding on appropriate business structures, this waiver will be an added consideration for non-resident persons receiving Singapore sourced or deemed sourced payments.
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4. Extending and Refining Tax Incentive Schemes and the Concession for Recovery of Input GST for Qualifying Funds
There are tax incentive schemes applicable to funds managed by Singapore-based fund managers ("Qualifying Funds") under which specified income derived by the fund from designated investments is exempt from tax. These incentive schemes are:
Resident trust fund exemption (Section 13C);
Non-resident fund exemption (Section 13CA);
Resident corporate fund exemption (Section 13R); and
Enhanced tier fund incentive (Section 13X).
Further, prescribed funds that are managed by prescribed fund managers in Singapore are entitled to claim a substantial portion of their input goods and services tax ("GST") on prescribed expenses at an annual fixed recovery rate. Prescribed funds refer to Sections 13C, 13G, 13R 13X funds or designated unit trusts.
As the above schemes were going to expire on 31 March 2014, members of the fund industry will be pleased to note that Section 13CA non-resident fund exemption, Section 13R resident corporate fund exemption and Section 13X enhanced tier fund incentive schemes have been extended for five years till 31 March 2019. The concession for the recovery of GST for prescribed funds has also been extended to 31 March 2019.
While Section 13C resident trust fund exemption scheme will lapse after 31 March 2014, the trust funds to which Section 13C applies will be subsumed under the Section 13CA non-resident fund exemption. This change will be effective from 1 April 2014.
Comments: This extension was largely expected since the above schemes were due to expire on 31 March 2014, and there is a continuing need to ensure that Singapore remains an attractive base for fund management activities. In addition, members of the fund industry can be assured that Qualifying Funds which are currently exempt from tax, and funds which are in the process of applying for these incentives can enjoy the tax incentives under these schemes until 31 March 2019, subject to meeting the conditions under their respective tax incentive scheme.
Apart from the extension, the tax incentive schemes have been further enhanced in two main areas:
i) Expansion of the List of Designated Investments
The list of "designated investments" which qualify for tax exemption under Section 13CA non-resident fund exemption, Section 13R resident corporate fund exemption and Section 13X enhanced tier fund incentive schemes is now expanded to include:
loans to qualifying offshore trusts;
interests in certain limited liability companies; and
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This expansion will apply to income derived on or after 21 February 2014 from the above investments. The Monetary Authority of Singapore ("MAS") will release further details by end May 2014.
Comments: This expansion shows the Government's and MAS' willingness to adapt existing tax incentive schemes so that they remain relevant for funds, in particular those which tend to adopt complex investment strategies. However, it remains to be seen how the terms, especially "qualifying offshore trusts", "interests" and "certain limited liability companies", will be defined in the implementing legislation.
ii) Computing Investor Ownership Levels Based on Market Value
The Section 13CA non-resident fund exemption and Section 13R resident corporate fund exemption schemes impose conditions on investor ownership levels on the last day of the Qualifying Fund's basis period for the relevant YA. Currently, the investor ownership levels are computed based on the historical value of the Qualifying Fund's issued securities.
With effect from 1 April 2014, the investor ownership levels for these schemes will be computed based on the prevailing market value of the issued securities instead of the historical value. MAS will release further details by end May 2014.
Comments: This is a welcome enhancement for investors who hold issued securities at multiple different value as they face practical difficulties in computing their investor ownership levels based on the historical value of the issued shares. The use of market value will make it administratively simpler for such investors to calculate their investor ownership levels.
5. PIC Scheme and Corporate Income Tax Rebate
A. Extension and Enhancement of PIC Scheme
The PIC scheme, which was first introduced in 2010, is an integral part of the Government’s plan to encourage investments which are focused on increasing productivity. The scheme currently provides for a 400% tax deduction or allowance on up to S$1.2 million worth of expenditure that is incurred across YAs 2013, 2014 and 2015 on each of the six qualifying activities below:
Acquisition and leasing of information technology ("IT") and equipment aimed at automating processes;
Training of employees to upgrade their skills and capabilities;
Acquisition and in-licensing of IP rights;
Registration of qualifying IP rights;
R&D activities; and
Design projects approved by DesignSingapore Council.
In addition, businesses are entitled to the following, subject to meeting certain conditions:
PIC cash payout: Businesses may opt to convert their PIC qualifying expenditure into a non-taxable cash payout at a cash payout rate of 60% (capped at S$100,000 of PIC qualifying expenditure). The S$100,000
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expenditure cap for cash payout cannot be combined from YA 2013 to YA 2015.
PIC bonus: Businesses that spend a minimum of S$5,000 of PIC qualifying expenditure in a YA will receive a dollar-for-dollar matching cash bonus, up to S$15,000 across YA 2013 to YA 2015.
The PIC scheme will be extended for three years to YA 2018. There will be no changes to the quantum of tax deduction or allowance or the PIC cash payout from YA 2016 to YA 2018 (apart from that allowed under PIC+). The PIC bonus has not been extended and will lapse after YA 2015.
Comments: This extension is a positive move and signals the Government's push for higher productivity in the business sector. Moreover, it recognises that efforts to raise productivity do not occur overnight, but require planning and implementation time so as to automate work processes and increase efficiency levels of workers. The Government may wish to consider extending the PIC bonus to YA 2018 to support smaller small and medium enterprises ("SMEs").
The PIC scheme has been changed in 4 key areas:
i) Tightening the Three-Local-Employees Condition for PIC Cash Payout
Under the current PIC scheme, businesses (i.e. sole proprietorships, partnerships and companies, including registered business trusts) that want to apply for PIC cash payout must have:
a) incurred PIC qualifying expenditure;
b) active business operations in Singapore; and
c) employed at least three local employees in the relevant month.
A local employee is a Singapore citizen or Singapore permanent resident with Central Provident Fund ("CPF") contributions, but excludes sole-proprietors, partners under contract for service and shareholders who are directors of a company. A business is considered to have met this condition if it contributes CPF on the payroll of at least three local employees in the relevant month.
For YA 2013 to YA 2015, businesses can apply for PIC cash payout after the end of each quarter or combined consecutive quarters in the business’ financial year. The relevant month is the last month of the quarter or combined consecutive quarters to which the cash payout option relates. The application should be submitted by the filing due date of the income tax return (i.e. 30 November).
Change: From YA 2016 to YA 2018, businesses applying for PIC cash payout will have to employ at least three local employees for at least three months. These three months are all three months in the quarter or last three months of the combined consecutive quarters of the business' financial year to which the cash payout option relates.
Comments: This change reinforces the condition that businesses that opt for cash payout must have active business operations in Singapore. There is no existing legal definition of what amounts to "active business operations”. We note that the Act uses the phrase “carries on a trade, profession or business” in Singapore instead of "active business operations", which brings to question the level of "active" business operations required for the purposes of making a
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cash payout application. In this regard, the Government could have further clarified the meaning of "active business operations" so as to give greater certainty to businesses that opt for cash payout.
ii) Extending PIC Benefits to Training of Individuals Under Centralised Hiring Arrangements
Currently, businesses that incur training expenses on individuals deployed to their organisations under centralised hiring arrangements are not allowed to claim PIC benefits on the training expenses incurred. This is because they are not the legal employers of these individuals.
With the enhancement, businesses will be allowed to claim PIC benefits on such training expenses, subject to satisfying qualifying conditions. This enhancement will be effective from YA 2014 to YA 2018.
The qualifying conditions are:
a) the claimant must produce supporting documents on the recharging of employment costs by a related entity, in respect of employees working solely in the claimant entity;
b) the corporate structure and centralised hiring practices are adopted for bona fide commercial reasons; and
c) the related entity does not claim deductions on the training expenses recharged to the claimant entity.
If the above qualifying conditions are met, the deployed individual will be treated as an employee of the claimant entity and the training expenses incurred on the deployed individual will qualify for the PIC scheme.
The IRAS has clarified that centralised hiring arrangements include:
deployments where the human resource function of a group of companies is centralised in a single entity, with the staff costs including training expenses allocated to the respective entities; and
employee secondments to a related entity, with the staff costs fully recharged to the related entity.
Comments: This enhancement is welcomed as it allows businesses to streamline hiring processes in a corporate group and reduce labour costs. It also shows that the Government is prepared to implement changes which take into account practical business considerations.
iii) Allowing the Tax Deferral Option to Lapse
Businesses can opt to defer their tax for each YA from YA 2011 to 2014 with their PIC qualifying expenditure incurred in the corresponding financial years 2011 to 2014. This is subject to a cap of S$100,000.
With effect from YA 2015, this tax deferral option will lapse.
Comments: This tax deferral option was introduced to help businesses, especially SMEs, with their cash flow and investments in productivity. Since business do not usually use the option and the PIC cash payout option serves a similar purpose, this change will not have much impact on businesses.
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iv) Introducing PIC+ for SMEs
A new PIC+ scheme will be introduced under which qualifying SMEs can claim 400% tax deduction or allowance on up to S$600,000 (instead of S$400,000) of their PIC qualifying expenditure for each qualifying activity for each YA.
A qualifying SME is an entity with an annual turnover of not more than S$100 million, or an employment size of not more than 200 workers. This criterion will be applied at the group level if the entity is part of a group.
The combined expenditure cap is S$1,800,000 across YAs 2016, 2017 and 2018. PIC+ will apply to qualifying expenditure incurred in YA 2015 to YA 2018. IRAS will release further details by end March 2014.
Comments: The new PIC+ scheme is a welcome move for qualifying SMEs that are currently investing more than S$1.2 million of qualifying expenditure on each qualifying activity from YAs 2013 to 2015. This should encourage SMEs to increase their efforts in raising productivity levels. Businesses should also consider if they can utilise the PIC+ scheme to obtain more tax benefits.
To provide greater tax certainty, we think that the Government should clarify whether the qualifying SME criterion applies to a Singapore group or an entire corporate group where an SME is part of a group.
B. Corporate Income Tax Rebate
To relieve rising business costs due to a tighter labour market and high rentals, it was announced in the 2013 Budget that companies will be given a 3-year corporate income tax rebate of 30% (capped at S$30,000) per YA, from YA 2013 to YA 2015.
This rebate was not extended in the 2014 Budget. Therefore, companies can only claim this rebate for this YA and the next.
6. Treatment of Basel III Instruments
With the 2014 Budget announcements, instruments issued as Basel III Additional Tier 1 instruments will be treated as debt for tax purposes, and distributions on such instruments will be deductible for issuers and taxable in the hands of the investors, subject to existing rules. The tax treatment will apply to distributions accrued in the basis period for YA 2015 and after.
Comments: Prior to the 2014 Budget, there was uncertainty as to how Singapore banks could treat these instruments for tax purposes. To obtain certainty, Singapore banks might have had to consider applying for advance tax ruling from IRAS. This clarification will come as a relief for Singapore incorporated banks, who are required by the MAS to meet minimum capital adequacy ratios that are 2% higher than the Basel III minimum requirements with effect from 1 January 2015 and to meet the Basel III minimum requirements by 1 January 2013.
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7. Registered Business Trusts and Designated Unit Trust Schemes
A. Changing the Foreign Sourced Income Exemption for Listed Infrastructure Registered Business Trusts
Currently, foreign-sourced income derived by listed infrastructure registered business trusts (“RBTs”) in Singapore is exempt from tax if the income falls within certain scenarios specified under Section 13(12) of the Act. For foreign-sourced income received in all other situations, tax exemption must be approved by the Minister for Finance on a case by case basis.
The specified scenarios under Section 13(12) will be expanded to cover dividend income originating from foreign-sourced interest income so long as it relates to the qualifying offshore infrastructure project asset, and interest income derived from a qualifying offshore infrastructure project asset will automatically qualify for the exemption provided certain conditions are met. IRAS will verify that the conditions are met instead of the current case-by-case approval.
Comments: This provides greater tax certainty for listed RBTs, and will be useful for clients contemplating whether to list their infrastructure assets in Singapore. Doing away with the need for approval from the Minister of Finance also reduces the administrative burden which can result in significant delays.
B. Refining the Designated Unit Trust Scheme
The Designated Unit Trust (“DUT”) scheme was introduced to foster the development of the domestic retail unit trust industry. Under this scheme, specified income derived from designated investments are exempt from Singapore income tax at the trust level, but is taxed upon distribution in the hands of certain investors. The DUT scheme is available to both retail unit trust and prescribed non-retail unit trusts (which are targeted at more sophisticated investors).
With effect from 21 February 2014, the scheme will be limited to unit trusts offered to retail investors, though existing non-retail unit trusts that were approved under the scheme prior to 21 February 2014 may continue to retain their DUT status. Also, from 1 September 2014, subject to the fulfilment of conditions, retail unit trusts no longer have to apply for the DUT scheme to enjoy the benefits of the scheme. This scheme will be reviewed on 31 March 2019.
Comments: This should be seen as a positive development given that retail unit trusts no longer need to apply to qualify under the scheme, so long as they meet the qualifying conditions. However, for clients that prefer certainty, it may not be desirable to take a position that the retail unit trust has met the conditions and therefore can enjoy the scheme, and later finding out that it is not the case. That said, it should be possible to get guidance and clarification from IRAS should the need arises.
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8. Land Intensification Allowance and Approved Building Project Scheme
A. Extension and Refinement of the Land Intensification Allowance
The Land Intensification Allowance ("LIA") supports enhanced land productivity among industrial users. It is available to businesses in industry sectors which have large land takes and low Gross Plot Ratio (“GPR”). LIA can be claimed on qualifying capital expenditure incurred for the construction of a qualifying building or structure. To qualify for the incentive, recipients are required to meet GPR benchmarks, i.e. the ratio of a building’s total floor area to the size of the land upon which it sits, and other conditions. LIA is administered by EDB and approvals for the incentive will be granted by EDB from 1 July 2010 to 30 June 2015.
The scheme has been extended to 30 June 2020. The LIA will be extended to the logistic sector in recognition of the close nexus between this sector and the qualifying activities supported by the LIA. Itwill also be extended to businesses carrying out qualifying activities on airport and port land. A new condition requiring that existing buildings that have already met or exceeded the GPR benchmark to meet a minimum incremental GPR criterion of 10% will be introduced. This is to encourage business, especially those already in the top quartile of the GPR benchmark to continue intensifying their land use.
Comments: The LIA was introduced during Budget 2010, and is a relatively new scheme that replaces the former Industrial Building Allowance scheme. The extension signifies the Government’s emphasis on the efficient use of land in certain identified industries. It may be useful for clients who are making significant investments in their building infrastructure to consider this, and implementation details will be released by EDB by end May 2014.
B. Approved Building Project Scheme
Under the Approved Building Project ("ABP") scheme, there is a property tax exemption for land under development, if the development project has been granted the ABP status. The criteria are:
a) the date of commencement of foundation works of the project is on or after 1 May 2001;
b) the project has the support of EDB;
c) the project involves substantial investment cost (excludes land costs); and
d) the project will create substantial spin-offs and benefits for Singapore.
A review date of 31 March 2017 has been introduced for this scheme and will be legislated, but there are no substantive changes to the criteria and benefits.
Comments: Property tax exemption for land under development was first implemented in 1987 to help businesses tide over an economic downturn. It was withdrawn in 1995 (except for ABPs), reinstated in 1998, subsequently withdrawn in 2000, and finally reinstated in 2001. Having a legislated review date would ensure that there is a timeframe that potential applicants for the ABP scheme can work with, given that this scheme has been withdrawn and reinstated several times previously.
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9. Other Minor Changes
A. Betting Taxes
The Singapore Betting and Sweepstakes Duties Act imposes duty on betting activities as follows:
Totalisor or parimutuel betting (excluding horse racing, TOTO) and any other system or method of cash or credit betting: 25% X the amount of bets received.
From 1 July 2014, the tax will be raised to 30% of the gross bets received.
B. Investment Allowances for Rotables
Approved companies were able to claim up to 50% of the capital expenditure incurred on rotables, on top of the normal capital allowance claims, subject to conditions.
The scheme will not be extended when it expires on 31 March 2015.
10. Trade-related Measures
A. Carbon Emissions-based Vehicle Scheme and Green Vehicle Rebate
The Carbon Emissions-based Vehicle Scheme ("CEVS") was scheduled for a review in end 2014 and the Green Vehicle Rebate ("GVR") for commercial vehicles, buses and motorcycles were scheduled to end in December 2014.
Extend CEVS by six months, from 1 January 2015 to 30 June 2015.
Extend GVR for commercial vehicles, buses and motorcycles by six months, from 1 January 2015 to 30 June 2015.
Comments: It was announced in the Budget that more time is needed to observe the impact of CEVS amidst other vehicle tax changes in 2013, e.g. introduction of tiered Additional Registration Fee and adjustments to the Certificate of Entitlement system, before refinements to CEVS are made. The extension of this scheme underscores the Government's push to be more environmentally friendly.
B. Excise Duties
Excise duties on cigarettes and other manufactured tobacco products will increase by 10%, from $352 per kg or 35.2 cents per gram or part thereof of each stick of cigarette, to $388 per kg or 38.8 cents per gram or part thereof of each stick of cigarette.
Excise duties across all liquor categories will increase by 25%, except for the excise duty rate of shandy which will be reduced.
These increases take effect from 21 February 2014.
Comments: These increases in excise duty for alcohol are the first in 10 years and is said to be in order to keep pace with inflation. It remains to be seen whether this change will have a significant impact on the food and beverage industry in Singapore.
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11. Grants and Subsidies for SMEs
We have summarised in Annex 1 grants and subsidies available for SMEs that were announced in the 2014 Budget.
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Annex 1 - Grants & Subsidies
Capability Development Grant for SMEs
Spring Singapore will support capability upgrading initiatives relating to consultancy, manpower, training, certification, upgrading productivity and developing business capabilities for process improvement, product development and market access by defraying up to 70% of qualifying project costs.
Innovation and Capability Voucher for SMEs
Spring Singapore will provide a S$5,000 voucher for the implementation of capability upgrading initiatives in the areas of innovation, productivity, human resource development and financial management.
The specific details of the 2014 Budget enhancements to the scheme will be revealed 1 March 2014.
Inclusive Growth Programme for SMEs
The Employment & Employability Institute will provide up to 50% co-funding on qualifying projects that will drive up the productivity of company operations and worker efficiency.
iSPRINT for SMEs
The Infocomm Development Authority of Singapore ("IDA") will, amongst others, subsidise up to 70% of the qualifying costs for infocomm projects that will increase the efficiency, revenue or business value-add for SMEs.
Info-communication Technology ("ICT") for Productivity & Growth Programme for SMEs
The specific details of the programme have yet to be released by the IDA, but benefits include subsidies for:
o Costs incurred in the adoption of qualifying ICT-based sectoral productivity solutions;
o Costs incurred in piloting emerging technology solutions; and
o Fibre subscription plans.
Co-Investment Programme for SMEs
The Government will set aside an additional S$150 million of seed capital to two new funds to catalyse patient growth capital for Singapore-based enterprises through co-investment with the private sector. The funds will provide equity capital and mezzanine capital to qualifying investee companies and bring the total Government capital under the programme to S$400 million.
Micro-loan Programme for SMEs
The Government will provide loans of up to S$100,000 for daily operations, automating and upgrading of factory and equipment.
The specific details of the 2014 Budget enhancements will be made available by Spring Singapore in the second quarter of 2014. In general, the benefits will include:
o Making loans more accessible to enterprises which are less than three years old; and
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o Increasing the risk the Government co-shares with participating financial institutions from 50% to 80% for two years, in order to encourage participating financial institutions to lend to young SMEs.
Market Readiness Assistance Grant
IE Singapore will defray up to 50% of eligible costs (capped at S$20,000 per company per year) for professional services for market assessment, market entry and business restructuring through internationalisation.
Global Company Partnership Programme
IE Singapore will provide customised support in the areas of capability building, market access facilitation, access to financing, and manpower development to Singapore -based companies seeking to internationalise.
Budget 2014 enhancements will include:
Expanding existing support for staff attachments in overseas markets to include attachments to acquire new business or technical capabilities that can assist in internationalisation for two years.
Raising the funding level percentage for pilot and test-bedding projects in the area of market access from 50% to 70% for two years to support companies to build track records for internationalisation.
Increasing the maximum loan quantum supportable under the Internationalisation Finance Scheme from S$15 million to S$30 million for two years.
Potential changes to the Loan Insurance Scheme to help Singapore-based companies secure short term trade financing.