Budget 2023: Moving Forward In A New Era

If you're running a SME and/or fast-growing business, this year's Budget 2023 might've been a little "lacking" on the business front.

Although Deputy Prime Minister Lawrence Wong announced that S$104.2 billion has been set aside to reposition Singapore for a “new era” of global development (including a S$4 billion top-up for the National Productivity Fund), media coverage has focused mostly on how it can help citizens weather through rising inflation rates and other uncertainties.

Budget 2023 will include several measures to support businesses. Source: Ministry of Finance

As such, we've summarised the key highlights relevant to businesses like yours from Budget 2023 in our article below. These include:

• Introduction Of The Enterprise Innovation Scheme
• Extensions To Enhancements In Enterprise Financing Scheme
• Job-Skill Integrators
• Extensions To The Energy Efficiency Grant

Let’s take a closer look at how you can take advantage of some measures introduced in Budget 2023, to put your business in a good position to guard against risks and seize opportunities in the coming year.

Singapore Budget 2023 statement delivered by Finance Minister Lawrence Wong ;Source: CNA

Looking For Tax Deductions? Take A Look At The New Enterprise Innovation Scheme

The new Enterprise Innovation Scheme will raise tax deductions for businesses working on key activities that boost innovation. Source: Ministry of Finance

To encourage R&D efforts, Budget 2023 will introduce the Enterprise Innovation Scheme, which will raise tax deductions for businesses like yours in five key activities in the innovation value chain. 

These five key activities are:

• R&D carried out within Singapore
• Registration of intellectual property such as patents, trademarks and designs.
• Acquisition and licensing of intellectual property rights, for taxpayers with less than S$500 million in revenue
• Innovation with polytechnics and Institutes of Technical Education (ITEs)
• Training via courses approved by SkillsFuture Singapore and aligned to the Skills Framework

Currently, your business is allowed tax deductions of up to 250% of qualifying expenditure on some of the aforementioned activities. With the Enterprise Innovation Scheme, this will be raised to 400% of qualifying expenditure incurred for every activity annually, from 2024 to 2028.

However, these tax deductions will be capped at a maximum of S$400,000 for each of the key activities, with one exception. Innovation efforts involving polytechnics and ITEs will instead be capped at S$50,000.

If your business can make full use of the Enterprise Innovation Scheme, it will stand to gain tax savings of almost 70% of its investment in innovation and R&D efforts.

To find out more details about the Enterprise Innovation Scheme, take a look at the IRAS webpage about it.

Need A Loan? Enhancements To Enterprise Financing Scheme Is Extended

To help SMEs like yours cope with tighter financial conditions in the immediate future, Budget 2023 will also see current enhancements for the Enterprise Financing Scheme (EFS) extended by another year, up until 31 March 2024.

Under the EFS – Trade Loan scheme, the Government will continue to assume the enhanced risk-share of 70%. Your SME will also continue to be able to tap on the EFS – Working Capital Loan, which finances the operational cash flow needs of businesses at a maximum loan quantum of S$500,000.

And if your SME is in the construction industry, you’ll also be continue to be able to loan up to S$30 million per borrower for your domestic projects.

Facing Rising Prices For Your Food-related Business? The Energy Efficiency Grant Can Offset Costs 

Rising energy prices in light of current geopolitical conditions are also an ongoing concern, especially for SMEs like yours.

The Energy Efficiency Grant (EEG) was introduced in June 2022 to help SMEs in the food services, food manufacturing and retail sectors to invest in per-approved, energy-efficient machinery, up to a maximum of S$30,000 per company.

With this extension, your business will be able to apply for the EEG up until 31 March 2024.

Employee Up-skilling Too Complex? Job-Skills Integrators Are Here To Help

It can be difficult for employers like yourself, and employees alike, to identify high-quality courses which are relevant to your industry.

This is why the Government will appoint Job-Skills Integrators; institutions which can work with industry, training and employment facilitation partners to optimise training and job placement.

These Job-Skills Integrators will engage enterprises in the sector they oversee to understand the existing manpower and skills gaps, and work with training providers to update existing training programmes or develop new ones that will close these gaps.

They’ll also have to work closely with employment facilitation agencies, get buy-in from industry partners and unions, and identify individuals with the right aptitude and fit for training.

This scheme will be piloted in sectors such as precision engineering, retail and whole trade, where there are “higher concentrations of mature works and SMEs”.

More Funding Available To Help Grow Your Business 

Budget 2023 will also see more enhancements to other grants and funds intended to help SMEs like yours in several ways.

For example, it will set aside S$1 billion for the Singapore Global Enterprises initiatives, which was implemented last year to help local SMEs grow into globally leading enterprises.

This additional funding will pay for dedicated and customized support, which includes working with experts to strengthen the core leadership teams and build strong talent pipelines for businesses like yours.

The Government has also previously committed S$1 billion to the SME Co-investment Fund, which invests in promising SMEs. The Fund has invested in about 60 Singapore-based businesses to this date, and has “catalyzed around S$2 billion of additional investments into these companies”.

With Budget 2023, another S$150 million will be set aside for the SME Co-investment Fund, increasing the opportunities of business like yours to receive investments from the Fund.

Popular Digitalisation Grants Remain

Compared to the Budgets of previous years, it's disappointing to see that Budget 2023 doesn't offer any enhanced funding support for companies planning to digitalise their operations.

That said, you can still apply for either the Productivity Solutions Grant (PSG) or the Enterprise Development Grant (EDG) to help you fund any efforts to strengthen core capabilities and innovate on your business processes, such as an ERP software implementation.

With the PSG in particular, you can get a rebate of up to 70% off your costs for such a project. That's still a great deal to acquire the single source of truth into your SME that you need to optimise your operations.

While we’re at it, do you know that AFON is a pre-approved PSG vendor for SAP Business One and Microsoft Dynamics 365 Business Central – two of the most popular ERP software for SMEs like yours?

Many of our clients have also taken advantage of the EDG to fund the numerous implementation projects we have undertaken for their ERP software of choice, as well.

And even though Budget 2023 doesn't offer enhanced funding support for digitalisation efforts, it does offer several paths to help your business enjoy significant savings on operational costs in the near future, if you take advantage of them.

This means you can subsequently invest these savings into improving the efficiency and effectiveness of your business operations, such as by undertaking a PSG- or EDG- supported ERP software implementation project with us. If you've been seriously considering such a project, do arrange for a consultation with us today!

Last but not least, the PSG and EDG may not be the only government grants that you can take advantage of. Depending on the industry your business operates within, there may be other grants that are available to you.

To find out about any government grants that might be available to fund your business's digital efforts, click on the image below to learn more.

Highlights Of Budget 2022

A small business recovery grant to help businesses hard-hit by COVID-19 restrictions was announced last Friday, 18 Feb, Source: lli Nadhirah Mansor/ TODAY

On 18 February last Friday, Finance Minister Lawrence Wong delivered the speech on Budget 2022 for Singapore, signalling the Government’s intent to “renew and strengthen its social compact” while transitioning to the post-pandemic world.

It will include additional help for workers and businesses that are still struggling amid the broader economic recovery, as well as schemes for further building digital capabilities in both.

Singapore Budget 2022 statement delivered by Finance Minister Lawrence Wong, Source: YouTube 

For owners of small- and medium-sized enterprises (SMEs) such as yourself, Budget 2022 includes plans to help your business deal with rising costs, continued support to encourage the hiring and retention of local employees, and the extension of schemes to promote further digitalisation and innovations in your business.

These are the highlights of particular relevance to SMEs such as yours in Budget 2022:

• Support For Hiring And Retaining Local Employees
• Helping SMEs Deal With Rising Costs
• Investments To Promote Digitalisation And Innovation

Let’s take a good look at the details, and see how Budget 2022 will help your business transition into a post COVID-19 world.

Here's A Refresher On The Highlights Of Budget 2020, If You Need It. 

Support For Hiring And Retaining Local Employees

Although the economy in general is beginning to recover from the ravages of the COVID-19 pandemic, businesses in certain sectors are “still struggling”, according to Minister Wong.

Because of this, Budget 2022 will introduce the S$500 million Jobs and Business Support Package, intended to assist works and businesses in sectors that have been most affected by COVID-19 restrictions over the past year.

If your SME is operating in one of the following sectors:

• F&B
• Retail
• Tourism
• Hospitality

You can expect to receive a one-time cash payout of S$1,000 per local employee on your payroll, up to a maximum cap of S$10,000.

Even if you’re the sole proprietor of your own business, you can still expect to receive a payout of S$1,000 at the minimum.

In addition, although the Jobs Growth Incentive (JGI) was due to expire in March this year, Budget 2022 will extend it by six months, up to September 2022.

First introduced in 2020 to encourage SMEs like yours to hire local employees by providing salary support to eligible businesses and workers, it will now provide “stepped-down support rates” as a result of improved labour market conditions in 2022.

To that effect, the JGI will now offer 15% to 50% salary support for each new local employees hired by SMEs like yours.

Helping SMEs Deal With Rising Costs

Thanks to a recovery in demand, rise in energy prices and ongoing issues with supply chains around the world, the risk of rising inflation is a very real concern.

And SMEs such as yours might have noted steep increases in the cost of materials and electricity prices in recent months, which may have contributed to any cashflow concerns you might currently have with your business.

To help support the cashflow needs of your business, Budget 2022 will extend the Temporary Bridging Loan Programme (TBLP) – which provides SMEs like yours with access to working capital - from 1 April 2022 to 30 September 2022.

The extension of the TBLP also comes with the reduction of the maximum loan quantum from S$3 million to S$1 million, as well as a raise in the interest rate cap from 5% to 5.5%.

To help cover the trade financing needs of your SME, the Trade Loan Scheme (TLS) will also be extended from 1 April 2022 to 30 September 2022, with a maximum loan quantum of S$5 million per borrower, or S$20 million per borrower group.

The TLS will also maintain the enhanced 70% risk-share for SMEs that are venturing into “more nascent markets”, such as Bangladesh and Brazil.

Additionally, the Project Loan Scheme (PLS) – intended to support domestic construction firms in fulfilling domestic projects amid rising costs and cashflow issues – will also be extended from 1 April 2022 to 31 March 2023, with a maximum loan quantum of S$30 million for each borrower or borrower group.

Investments To Promote Digitalisation And Innovation

One effect of the COVID-19 pandemic is how it accelerated the move towards a digital future worldwide. And to ensure that Singapore stays competitive with the rest of the world, the “first priority” of the Government is to strengthen the nation’s digital capabilities.

To that effect, the Government will set aside about S$200 million to enhance schemes that build digital capabilities in both businesses and workers.

Part of this sum will go towards enhancing initiatives such as the Advanced Digital Solutions scheme, which helps SMEs like yours adopt cutting-edge digital solutions.

Another initiative which will benefit from this sum is the Grow Digital scheme, which helps SMEs like yours digitally access markets overseas.

Additionally, Budget 2022 will increase the capabilities of centres that provide research and development (R&D) support to local SMEs.

These centres work closely with SMEs to undertake industry projects, which regularly leads to new innovations. There are more than 80 such centres currently located across polytechnics and Institutes of Technical Education (ITEs),

The capabilities of these centres will be increased, allowing them to undertake almost 2,000 innovations projects across the following five pilot sectors over the next 5 years:

• Agri-tech
• Construction
• Food Manufacturing
• Precision Engineering
• Retail

Last but not least, Budget 2022 will earmark S$600 million to expand the range of solutions that are available under the Productivity Solutions Grant (PSG).

This is intended to encourage SMEs like yours to take up productivity-enhancing solutions, and is estimated to support more than 10,000 implementation projects over the next four years – more than double the figure since the PSG was launched.

Here Are The Answers To The Top 13 FAQs You May Have About The PSG.

Last Chance To Take Advantage Of The Enhanced PSG and EDG For Your ERP Software Implementation

With the details laid out by Budget 2022, it’s now confirmed that the enhanced maximum support level of up to 80% for both the PSG and the Enterprise Development Grant (EDG) would now be ending by 31 March 2022.

This means the window is closing for you to take advantage of the enhanced PSG to fund the digital transformation of your SME.

Whether you’re looking at a first-time implementation of a digital productivity solution for your SME, or have plans to strengthen core capabilities and innovate on business processes, an ERP software implementation project could be the key to achieving your goals.

And it’s because with a modern ERP software, your business processes will be integrated with the latest business technology available on the market today, by giving you the single source of truth into your SME that you need to optimise your operations.

While we’re at it, do you know that AFON is a pre-approved PSG vendor for SAP Business One, Oracle NetSuite, and Microsoft Dynamics 365 Business Central – three of the most popular ERP software for SMEs like yours?

Many of our clients have also taken advantage of the EDG to fund the numerous implementation projects we have undertaken for their ERP software of choice, as well.

With that in mind, there’s only about one month left to take advantage of the enhanced support level of both the PSG and the EDG, and embarking on an implementation project with us.

Budget 2022 may be the plan to transition Singapore into a post COVID-19 pandemic world, but not only does it extend support to sectors that are still in particular need, but have not skimped on support to help SMEs like yours build digital capabilities through transformation either.

With so little time left to take advantage, we highly recommend that you grasp this last chance, and arrange for a consultation with us today!