Singapore Fact-File Part 5:
Small Business Incentive Programs
5.1 Singapore Small Business Support Schemes
Government and municipal incentive programs for small
business
Although there are a number of official
bodies designed to support the small business sector, SPRING
Singapore (the Standards, Productivity and Innovation Board;
a statutory board under the Ministry of Trade and Industry)
is one of the cornerstones, as it is both the enterprise development
agency and the national standards and accreditation body.
The EnterpriseOne portal, managed by SPRING
Singapore, provides comprehensive information and resources
for entrepreneurs looking to launch a start-up in Singapore,
and for businesses looking to grow.
The authorities especially value businesses creating employment,
or training and retaining existing workers, and/or innovating,
although the incentives available are geared more towards
the incorporated entity.
EnterpriseOne provides
a full account of the various forms of government assistance
here.
Business start-up schemes
There are various support schemes for business start-ups in
Singapore; most notably the tax exemption for qualifying incorporated
entities, the R&D Incentives for Start-Up Enterprises
(RISE) scheme, and the Production and Innovation Credit (PIC).
Since 2005, an incentive scheme has been in place whereby
if a business is incorporated in Singapore, is tax resident
for the years of assessment in question, and has no more than
20 shareholders (where all of the shareholders are individuals
beneficially and directly holding the shares in their own
names, or at least one shareholder is an individual shareholder,
with a direct holding of at least 10% of the issued ordinary
shares of the company), it receives a 100% tax exemption on
the first SGD100,000 of its chargeable income for the first
three consecutive years of assessment (and since 2008, a further
50% exemption on the next SGD200,000 for those years.
Where an incorporated start-up does not qualify for the full
exemption, it can usually receive a partial exemption.
Under the RISE scheme, start-ups engaging in intensive research
and development (who are more likely than other enterprises
to be incurring losses) can convert a portion of those losses
into cash grants, if they are: resident, incorporated, and
carrying out the research in Singapore, and have share capital
owned by between 1 and 20 shareholders (who must comprise
either all individuals, or at least one individual holding
at least 10% of the ordinary issued shares). Additionally,
the first three years of assessment must be between 2009 and
2013.
The Productivity and Innovation Credit (PIC) provides enhanced
deductions for investment in activities such as registration
or acquisition of intellectual property, R&D, training,
automation through technology or software, and design activity.
The credit is available between 2011 and 2015, and allows
250% deductions relating to qualifying activity, capped at
SGD300,000 for each year, and with a combined cap of SGD600,000
for the first two years of the scheme (2011 and 2012). Small
businesses with limited cashflow can convert SGD300,000 of
PIC into a cash grant of up to SGD21,000.
Support programs for bank lending
The Singapore authorities have sought to facilitate access
to credit, loans and grants via a number of pathways, including
supporting equity financing for small businesses via schemes
such as the SPRING Startup
Enterprise Development Scheme (SEEDS), and the Business
Angels Funds (BAF) Scheme.
Various other schemes with government involvement designed
to support SMEs are also available, although generally a 30-100%
local shareholding/involvement is required, presumably necessitating
incorporation in order to take advantage of the financing
options in question.
Government-backed financing programmes (often undertaken in
conjunction with banks) available in Singapore include:
- The Local Enterprise Financing Scheme (LEFS), which provides
fixed interest financing for the purposes of purchasing
and updating assets such as plant and machinery;
- Microloans: Loans of up to SGD100,000, provided to businesses
with less than 10 employees (and 30-100% local shareholding)
- Loan Insurance Scheme (LIS): Where the government defrays
the cost of credit insurance, in order to encourage banks
to be more open to granting trade financing.
The government has also sought to match SMEs with appropriate
private sector financing options where possible, via various
events, and agencies, including enterprise development agency
SPRING.
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