Singapore Budget 2023: Quick Look At Enterprise Innovation SchemeDownload Now: FREE GST 2023 GuidebookDownload Now: FREE Employment Pass ChecklistDownload Now: Free Incorporation Checklist
On Valentine’s Day, the government released Singapore Budget 2023, emphasising the importance of driving the nation forward in a new era. In light of economic conflicts and high inflation, the government has allocate S$104.2 billion to foster economic growth, equip workers and strengthen national resilience, as well as provide immediate assistance to families and vulnerable Singaporeans struggling with inflation.
In the interim, they developed plans and provided support to draw investors and local businesses in order to sustain and expand. Among these efforts was the Enterprise Innovation Scheme.
Enterprise Innovation Scheme
The Enterprise Innovation Scheme (EIS) is one of the key initiatives of Singapore Budget 2023. The main purpose is to assist businesses in the city-state to develop innovative capabilities and products. Additionally, it provides financial support for businesses to invest in research and development, technology adoption, and innovation-related activities. It also provides tax incentives for businesses that take up these activities.
How Does It Work?
According to Singapore Budget 2023, the Enterprise Innovation Scheme (EIS) provides tax deductions for key activities that help companies innovate and improve their business processes. These activities include:
• Research & Development (R&D) – Tax deduction of up to 400% for R&D expenses incurred in Singapore, including prototyping, testing and trial production.
• Acquisition and licensing of Intellectual Property Rights – Tax deduction of up to 400% for the combined cost of acquiring and licensing intellectual property.
• Intellectual Property Registration – Tax deduction of up to 400% for the cost of registering intellectual property rights in Singapore, such as patents, trademarks and copyrights.
• Training & Skills Upgrading – Tax deduction of up to 400% for training and skills upgrading via courses approved by SkillsFuture Singapore and aligned to the Skills Framework costs incurred.
• Innovation projects carried out with polytechnics and ITE – 400% tax deduction on first $50,000 of qualifying innovation expenditure
From YA 2024 onwards, the Enhanced Investment Scheme (EIS) has increased the threshold of tax deduction, depending on the type of activity. This is more generous than the deductions currently available, which range from 100% to 250%.
In Singapore Budget 2023, businesses that have not been as profitable may now be able to convert up to $100,000 of their total qualifying expenditure across all qualifying activities mentioned above for each Year of Assessment (YA) into cash at a conversion rate of 20%. The maximum cash payout is set at $20,000 per YA and is not taxable. This option has been introduced to assist small businesses in offsetting the costs incurred through innovation activities.
However, there are certain conditions that businesses are to comply with to qualify for the grant, such as:
- Must be a registered company/ partnership or sole-proprietorship
- Have at least three full-time local employees being employed more than 6 months ( Singaporean or Permanent Residents with CPF contributions)
- Local employees must be earning at least $1,400 in gross monthly wages.
Businesses that are eligible for the cash payout option may opt to convert their qualifying expenditure into cash annually. To do so, they must submit a prescribed election form along with their income tax return. After IRAS has assessed and verified the claims, the cash payout will be disbursed.
Overall, the Enterprise Innovation Scheme helps business owners by providing them with financial support and tax incentives to develop innovative capabilities and products. This helps businesses stay competitive in an increasingly globalised economy while encouraging them to invest in research and development that will benefit their companies in the long run.
Other Financial Grants and Loan To Consider
Following Singapore Budget 2023, the government will extend the Energy Efficiency Grant and existing enhancements to the Enterprise Financing Scheme for an additional year until 31 March 2024.
This is to provide businesses with financial assistance during times of restricted capital and elevated energy costs.
Enhanced Enterprise Financing Scheme
- Trade Loan
The maximum loan quantum has been increased to $10 million followed by a 20% increase in Government risk-share for loans amounting to 70%
- Project Loan
Support for domestic projects for construction sector extended till 31 March 2024
- Working Capital Loan
An increase to $500,000 maximum loan quantum and extension period till 31 March 2024
Energy Efficiency Grant
Targeting small, medium enterprises (SME) that are in food services, food manufacturing or retail sectors, the government has granted a support for up to 70% of qualifying costs, capped at $30k, for adoption of pre-approved list of energy efficiency equipment.
In order to qualify for the grant, you must meet these conditions:
- A registered business entity operating in Singapore in the food services, food manufacturing, or retail sectors
- Companies with valid licenses dedicated to each category
- At least 30% local equity held directly or indirectly by Singaporeans or Singapore Permanent Residents
- Group annual sales turnover of not more than $100 million
- Group employment size of not more than 200 employees
- Purchased equipments must be used in Singapore
Utilizing the financial assistance provided by Budget 2023, it is now time to devise a budget with the aid of experts and remain up-to-date on compliance requirements through regular communication with your secretary. Talk to us today!