As conveyed in the Labour Day Rally speech by Prime Minister Lee Hsien Loong on 1 May 2014, generous incentives and tax savings are in store for companies that take steps to move up the value-chain and create better jobs for residents. Rikvin, a leading Singapore company registration specialist, acknowledges that newly-incorporated companies stand to benefit as well.
Analysis by Rikvin shows that this effort is part of a larger strategy to mobilize Singapore-based companies to become more operationally effective, knowledge-intensive and innovation-driven as the country undergoes a massive economic restructuring. At the same time, the measures aim to mitigate the imminent rise of structural unemployment in the city-state.
Further analysis shows that PM Lee’s view reinforces the message laid out by Foreign Affairs and Law Minister K Shanmugam at Deloitte’s Global Tax Conference last month. At the event, Minister Shanmugam urged businesses to aim for quality growth to tackle growing manpower constraints. In addition, PWC’s “Adapt to Survive” study, released last month as well, revealed that retraining workers for new skills or across industries could unlock a hefty US$280 million for Singapore.
“Businesses that aim to operate here must understand that Singapore is focused on mitigating future challenges as well as remaining relevant amid greater competition. To help companies align themselves to this larger goal, and shape the country’s future workforce and economy, the Singapore government will continue to offer a number of incentives,” said Ms. Christine Lim, General Manager of Rikvin.
Companies that opt for incorporation in Singapore will be eligible for the following benefits.
PIC SCHEME AND PIC BONUS
The PIC scheme (Productivity and Innovation Credit Scheme) allows companies to enjoy substantial tax deductions (400%) or cash payouts (pegged at 60% of costs) for investing in efficiency-enhancing activities. These activities include staff training, acquiring new IT and automation equipment or intellectual property rights, as well as conducting research and development projects.
In addition to these incentives, the PIC Bonus offers companies an additional dollar-for-dollar cash bonus to help them recompense for costs in any PIC activity. The bonus is capped at S$5,000 per year of assessment (YA). In some cases, the PIC Scheme helps Singapore companies reduce their corporate tax bill significantly or defray it completely.
CORPORATE INCOME TAX REBATE
To help companies cope with increasing business costs during the restructuring period, a special corporate income tax rebate will be granted. The rebate spans 3 years (YA 2013 -YA 2015) and will help companies trim their tax bill by 30% or up to $30,000 per YA. The rebate will automatically be computed by IRAS, the local tax authority, after companies have filed their Annual Income Tax returns.
INNOVATION AND CAPABILITY VOUCHER (ICV)
The ICV helps small to medium sized enterprises (SMEs) enhance their capabilities in four areas – human resources, productivity, financial management and innovation. Instead of offering the option of a cash payout per the PIC Scheme, the ICV offers 2 vouchers, worth S$5,000 each, to every business, and for every area of enhancement. The vouchers in turn can be used to engage the services of approved ICV vendors.
To encourage companies to use infocomm technology to improve their business operations, the Singapore offers grants under the iSPRINT scheme. Under this program, an SME can claim up to 70% of the cost of a packaged solution (capped at S$2,000 per item) or a more customized solution (capped at S$20,000). After the iSPRINT application has been approved, SMEs can claim for a cash payout option under the PIC Cash Scheme.
“There really is no other jurisdiction in the world that offers such incentives and help businesses have their cake and eat it too. In spite of the inevitable challenges, such as rising costs, Singapore gives businesses the tools to move up the value-chain. In light of these incentives, we anticipate that more companies will continue to come to Singapore and establish their presence here,” affirmed Ms. Lim.