Government grants for companies in Singapore
A large part of Singapore’s business-friendly regime is due to the abundance of grants and incentives available to Singapore businesses. Here are six grants that companies can tap on to grow their businesses.
Singapore is well-known for its business-friendly stance and its pro-business approach is underlined by numerous grants and incentives offered by the Singapore government to companies operating in the city state.
Historically, grants and incentives were rolled out or expanded with the annual national budget announcement – and this year was no different. Budget 2018 saw the addition of several new grants and the expansion of existing ones to improve the capabilities, manpower and internationalisation efforts of businesses in Singapore.
“Compared to previous years, recent grant offerings have been more straightforward and streamlined. The new and expanded grants are more targeted towards specific needs of Singapore businesses instead of trying to be one-size-fits-all solutions,” said Kurt Wee, president of the Association of Small and Medium Enterprises in Singapore (ASME).
Here are six major Singapore government grants and incentives that companies can tap into:
1. Productivity Solutions Grant (PSG)
The Productivity Solutions Grant (PSG) came into effect on 1 April 2018. It was established to encourage the adoption of digital productivity solutions among Singapore businesses. Currently, the PSG funds up to 70% of the costs for qualifying activities under these sectors:
- Precision Engineering
Businesses can also apply for the PSG to support the use of solutions in the areas of customer management, data analytics, financial management and inventory tracking. PSG will be expanded to cover several more sectors, such as tourism, agriculture and professional services, in the near future.
A full list of supported equipment and solutions that currently qualify for the PSG can be found here.
The PSG combines three existing productivity schemes: Innovation and Capability Voucher, the Landscape Productivity Grant and the SME Go Digital Programme, into one channel. This enables Singapore businesses to access a wider range of digital productivity solutions at once, which can then be used to scale and upgrade their business capabilities.
To qualify for the PSG, a company needs to be registered and operating in Singapore, and the solutions that are purchased, leased or subscribed must be used within Singapore. For selected solutions, the company needs to have 30% local shareholding.
How do Singapore businesses benefit from the PSG?
Typically, due to size and resource constraints, it takes a longer time for Singapore SMEs to scale up, and more importantly, expand their operations beyond the country’s borders – an essential component of any Singapore business’ long-term sustainability.
The PSG supports smaller Singapore businesses and SMEs by making funding and support more readily available to them, with support offered at detailed, specific levels that SMEs can pick and choose to upgrade their capabilities.
“Under the PSG, the delivery of grants is more focused – and Singapore businesses can drill down to find specific capabilities that they need. The inclusion of the SME Go Digital programme into the PSG further enhances the online availability of digital support for SMEs,” Wee said.
2. Enterprise Development Grant (EDG)
Scheduled to take effect in the fourth quarter of 2018, the Enterprise Development Grant (EDG) aims to support Singapore businesses in three key areas:
- Market and business development
- Innovation and productivity
- Core functions and capability
The EDG combines the support and scope offered previously by two existing grants: Capability Development Grant (CDG) and the Global Company Partnership Scheme. To qualify for the EDG, a SME must be registered and operating in Singapore, have at least 30% local shareholding, and have a group annual sales turnover of less than S$100 million or less than 200 employees.
For qualifying activities under the EDG, Singapore-based SMEs can enjoy up to 70% of funding support, while non-SME Singapore businesses can enjoy up to 50% of funding support. For non-SMEs in particular, the new rates signify a significant raise of 20% from comparable support offered under the CDG.
According to an official statement by the Singapore Ministry of Trade and Industry (MTI), the streamlined EDG will have “the same eligibility criteria, application platform and support levels, which reduces the confusion faced by Singapore businesses applying for the grant.”
How do Singapore businesses benefit from the EDG?
While the PSG focuses on supporting smaller businesses based in Singapore, the EDG focuses on helping larger businesses that are looking to expand within and beyond Singapore’s shores.
The EDG-related incentives help new businesses establish innovative production and service offerings from the get-go of their setup in Singapore, while established businesses expanding in Singapore get to make the Singapore arm of their business a high-growth, profitable venture instead of being tied down by legacy systems.
The EDG enables and incentivises Singapore businesses to enjoy higher savings while focusing on business and capability growth efforts – something that is especially important during the first few years of the business’ establishment.
Enhanced or extended grants
The original PACT scheme’s aim was to enhance mutually beneficial collaborations between large multinationals and local enterprises with SMEs.
The new PACT scheme, which came into effect on 1 April 2018, takes the levels of collaboration several steps further: it now supports collaborations between Singapore businesses of all sizes. This directly encourages small and medium-size companies to partner with one another to foster business innovation and growth.
PACT collaborations are led by one company (known as a Lead Enterprise) whose job is to drive projects that benefit all collaborating parties. These projects go beyond business activities (such as providing services) and include areas such as:
- Capability development, or upgrading the technology capabilities of suppliers, co-development and test-bedding of supplier products, and knowledge transfer (such as training programmes) between companies to develop innovation expertise
- Alliances, consortium's, and shared resources (or shared service centres)
The new PACT scheme combines four existing partnership programmes: EDB's and Spring's respective Partnerships for Capability Transformation schemes, Spring's Collaborative Industry Projects; and IE Singapore's Global Company Partnership Grant. It funds up to 70% of qualifying costs for SMEs and 50% for non-SMEs.
Companies acting as Lead Enterprises in PACT projects need to be registered in Singapore – either as a local company or a multi-national corporation with a Singapore office. As for participating companies, they can be either local or foreign, with local projects given a majority in individual PACT projects.
How does PACT help Singapore businesses?
The previous iteration of PACT focused more on local business growth: smaller companies can benefit from the network and experience of larger companies, while larger enterprises can benefit from the nimbleness and agility of smaller businesses.
SMEs need not stop at local growth though – internationalisation is important for Singapore SMEs to remain competitive and sustainable. The expansion of PACT to include service provider support and international alliances will greatly help Singapore businesses to expand beyond Singapore’s borders.
“Internationalisation is important for small businesses in Singapore to be able to grow. However, they are quite often tied for bandwidth and resources, which limits their ability to scale,” Wee explained.
With schemes like PACT, smaller companies that previously did not have the resources or connections can now work together with companies of various sizes to scale up.
4. Double Tax Deduction for Internationalisation (DTDi)
The Double Tax Deduction for Internationalisation (DTDi) initiative was established to encourage Singapore businesses to embark on international expansion and internationalisation.
Under the enhanced DTDi initiative which comes into effect on the Year of Assessment 2019, Singapore businesses carrying out select overseas business activities will be entitled to a 200% tax deduction up to S$150,000 – up from the previous cap of S$100,000 - on expenses for these activities.
These activities include, but are not limited, to the following:
- Overseas business development trips
- Overseas trade fairs
- Market surveys and feasibility studies
- Investment feasibility and due diligence studies
- Overseas advertising or promotional campaigns
- Expenses of Singaporean staff posted to overseas entities
Businesses applying for the DTDi need to be registered in Singapore and primarily deal with goods and services. Foreign businesses who have their global headquarters in Singapore and intend to internationalize will also be considered on a case-by-case basis.
How does the DTDi help Singapore businesses?
Internationalisation is often costly for small businesses – ventures needed to create market presence in other countries, such as marketing, trade shows, networking and sourcing for local partners, present additional time and effort to small companies who are often lean in operations.
When compared to the previous DTDi that set the automatic DTDi clearance at S$100,000, the new clearance limit of S$150,000 for eligible expenses enables Singapore businesses to reduce their tax burdens and have more money on hand, and more time, to engage in higher value internationalisation and expansion activities.
5. Market Readiness Assistance (MRA) Grant
Initially introduced in 2013, the Market Readiness Assistance (MRA) grant was established to help Singapore SMEs access overseas opportunities.
Initially set at 50% of funding support for qualifying activities, the support for the MRA was increased to 70% from 2015 to 2018. Under the extended MRA, the 70% support will be maintained from 1 April 2018 until 31 March 2020.
The MRA grant supports the costs for Singaporean businesses that are exploring overseas markets in three main areas:
- Overseas market set-up – legal and documentation expense
- Identification of overseas market partners – licensees, franchisees, agents, distributors and joint venture partner
- Overseas market promotion – marketing and PR activities, space rentals or booths at overseas trade shows
To qualify for the MRA grant, companies need to have their global headquarters anchored in Singapore, as well as have a group annual turnover not exceeding S$100 million or less than 200 employees.
Learn more about the detailed list of eligible activities (and deliverables) that qualify under the MRA.
How does the MRA grant help Singapore businesses?
The expanded MRA grant makes it easier for Singapore businesses to establish physical branches and conduct market research in the countries they are expanding to, as well as take advantage of digital business promotional channels, which typically incur high costs for effective utilisation (such as in-store campaigns, digital ad space, etc).
“The extended MRA grant enables more Singapore businesses to expand internationally. It’s also been structured by the grant officials to be more tailor-made to specific needs of the businesses when overseas,” Wee added.
6. Venture Debt Programme (VDP)
Capital sourcing has traditionally been a challenge for SMEs, especially for Singaporean businesses outside the fast-paced tech field where venture capitalists and startups interact on a more regular basis.
In 2015, the Singapore government piloted the SME Venture Debt Programme (VDP), which enabled SMEs with high-growth potential to access loans up to S$5 million for working capital, asset financing, project financing and mergers & acquisitions purposes. Under the 2018 Budget, this scheme will be extended for another two years.
The VDP was structured with small Singapore businesses in mind: to be eligible for the loan, businesses needed at least 30% local ownership and less than 200 employees. Additional eligibility requirements may be imposed by local banks participating in the programme, which can be found at their respective websites and enquiry channels.
The VDP has seen positive take-up - within a year of the programme’s launching, loans to four Singapore businesses have been approved, with more slated for approval in the near future.
How does the VDP help Singapore businesses?
In the start-up world, time is money – the faster a business can hit the ground running, the easier it is for the business to gain momentum, growth, and be sustainable for the long run. The VDP helps Singapore businesses access sources of capital quickly to set up and expand their business
In an interview with local news channel, Channel News Asia, Mr Chia Yoong Hui, chief executive officer of local SME Ascenz, shared that the VDP spared them the challenge of having to look for collaterals and assets early on in the business.
“Our company is more research-based, and most of our assets are our intellectual properties. It’s harder to get bank loans based on that, and VDP provided us with a feasible alternative to fund our research and development efforts,” he said.Disclaimer: All materials have been prepared for general information purposes only to permit you to learn more about Hawksford, our services and related matters. The information presented is not legal advice, is not to be acted on as such, may not be current and is subject to change without notice.