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Singapore Budget 2023: How it will impact your business

Deputy Prime Minister and Finance Minister of Singapore Lawrence Wong delivered the Singapore Budget 2023 speech on 14 February. This year’s budget, or Wong’s “Valentine’s Day present” for Singaporeans, intends to cushion rising costs and strengthen Singapore’s economic competitiveness.

In his second budget speech as Finance Minister, Wong opened with a review of Singapore’s three-year fight against Covid-19. After a rough 2022 fraught with record-high inflation, social distancing measures and border closures, Singapore is finally out of the woods, with demand for travel, F&B and retail resuming. It has gone back to DORSCON green, and commuters are no longer required to wear masks on public transport.

While Singapore moves forward from the worst of the pandemic, it has new challenges to contend with. The global economy’s picture will be “mixed and uneven”, with weaknesses in many parts of the world, said Wong.

Europe is hardest-hit from the Ukraine War, while the US’s slower growth and raising of interest rates may mean a recession this year. The outlook is brighter for Asia, driven by China’s stabilising Covid-19 situation. Inflation looks set to remain high in 2023. Regardless of the challenges, the International Monetary Fund does not foresee a global recession in 2023, noted Wong.

Beyond that, the Singapore Budget 2023 will include a series of new grants, schemes and tax deductions for employers and employees alike. These new measures will give Singapore businesses a boost in this uncertain period.

Here is how this year’s budget will impact your business.



Extension of existing grants and financing for businesses

  1. Budget 2023 will include an extension of the Enterprise Financing Scheme for another year till 31 March 2024. The scheme is designed to fund expansion and innovation of Singapore businesses.. It includes 70 percent government risk-share for trade loans, the enhanced maximum quantum for trade and capital loans and support for domestic construction projects via capital loans.
  2. The Energy Efficient Grant will be extended for another year till 31 March 2024. The grant provides support for F&B and retail sectors to invest in energy efficiency, and thereby reduce the impact of higher electricity prices.

More enterprise financing

Due to Singapore’s small size, the government is long-time supporter of local firms venturing overseas. For Budget 2023, the government will provide S$1 billion in financing to the Singapore Global Enterprises Initiative.

The initiative helps emerging companies with innovation, internationalisation and fostering partnerships with other companies. With offices in Hong Kong, Singapore, the United Kingdom and Australia, Sleek supports internationalisation by helping businesses set up overseas.


Increased taxes for MNEs

Multi-national enterprises will be subject to a global minimum effective tax rate of 15 percent by 2025. The new tax rate includes a domestic top-up tax. The changes will apply to overseas subsidiaries of Singapore parent companies and MNEs operating in Singapore. These changes are in line with the BEPS 2.0, a global framework for international tax matters.


The new Enterprise Innovation Scheme

Budget 2023 includes the new Enterprise Innovation Scheme, which enhances tax deductions for Singapore businesses in their innovation activities. The scheme helps small-and-medium enterprises build up their financial position to weather the challenges ahead.

  1. Currently, companies are allowed tax deductions of up to 250 percent of qualifying expenditure for innovation activities. Under Budget 2023, these tax deductions will be raised to 400 percent for five innovation activities.These activities:
    • Research and development conducted in Singapore
    • Registration of intellectual property (IP), including patents, trademarks and designs
    • Acquisition and licensing of IP rights
    • Innovation carried out with polytechnics and Institutes of Technical Education (ITEs)
    • Training via courses approved by SkillsFuture Singapore and aligned to the Skills Framework
  2. The scheme will cap qualifying expenditure at S$400,000 for each innovation activity, except for those carried out with polytechnics and ITEs. These activities will have a cap of S$50,000.
  3. The scheme will allow companies, in lieu of tax deductions/allowances, to opt for a nontaxable cash payout at a cash conversion ratio of 20 percent or up to S$100,000 of qualifying expenditure.The payout will help smaller firms defray the costs of their innovation activities, even if they pay little or no taxes, said Wong.

Changes for employers

  1. Increase in CPF salary ceiling

    Budget 2023 will lend some much needed financial support for Singaporean households amid rising costs. As such, the CPF Monthly Salary Ceiling will be raised from S$6,000 to S$8,000 in 2026.

    The increases will take place in phases over four years, to allow employers and employees to adjust to the changes. These changes will help Singaporeans build a solid retirement nest egg.

  2. Topping up the Progressive Wage Credit Scheme (PWCS) fund

    The PWCS was introduced at 2022’s Budget to provide transitional support for employers, by co-funding mandatory wage increases for low-wage workers. It will top up the PWCS fund by S$2.4 billion to support the wage increase.

    For this year’s Budget, the Singapore government will co-fund up to 75 percent of wage increases for employees earning up to S$2,500 a month. It will co-fund 45 percent of wage increases for employees earning up from S$2,500 to S$3,000 a month.


Changes for employees

  1. CPF Transition Support scheme for Platform Workers

    By 2024, platform workers who are below 30 years-old will be required to make CPF contributions. They will also be required to align their contributions with contributions made by their employers.

    The alignment will inevitably increase the platform workers’ CPF contributions, affecting the workers’ take-home pay.

    As such, this year’s Budget will include the CPF Transition Support scheme – for the first four years, the scheme will provide support to lower-income platform workers who are struggling with the increase in CPF contribution rates.

  2. Doubling of Government-Paid Paternity Leave and Unpaid Infant Care Leave

    Fathers are integral in building strong and well-rounded families. For a start, eligible working fathers of Singaporean children born on or after 1 January 2024 will be given an extra two weeks on a voluntary basis. The voluntary terms will give employers time to adjust amid manpower and operational challenges from granting a longer leave.

    Unpaid Infant Care Leave for each parent in the child’s first two years will be increased from six days per year to 12 days per year. The longer leave will come into force in 2024.

Wrap up

Wong concluded his Budget speech by reiterating the importance of securing Singapore’s future through strengthening its economy, equipping its workers and uplifting its citizens. This year’s Budget initiatives are also part of the Forward Singapore exercise, a broad strategy that considers the insights of Singaporeans, to build the country’s future development.

Use Sleek’s digitised compliance, accounting and tax services so you can focus on keeping to your budget while building your business easily. Visit Sleek today to get started.

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