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2011 Singapore Budget Highlights – Longer Term Measures for Businesses

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Tuesday, 22 March 2011 02:46

2011 Singapore Budget  Highlights – Longer Term Measures for Businesses

In the recent Singapore Budget, the Singapore Government also announced initiatives that will provide a boost to help industries, enterprises and workers to restructure, upgrade their efficiency and create more value. Enterprises will also benefit from enhanced support to grow their revenues, through internationalisation and innovation.

1. Boosting Skills and Productivity

1.1   Doubling our Investment in the National Productivity Fund [S$1 billion]
To ensure continued support beyond the first five years for the long-term effort to restructure our industries, the Government will top up the National Productivity Fund (NPF) with another S$1 billion this year. This will bring the total fund size to its target of S$2 billion.

1.2   Enhancing Productivity and Innovation Credit [S$520 million a year in total]
From Year of Assessment 2011, the Government will make the following enhancements to the Productivity and Innovation Credit (PIC), which was introduced last year to promote investments in six categories of productivity and related activities, namely:

1. Research and Development
2. Approved Design
3. Acquisition of Intellectual Property
4. Registration of Intellectual Property
5. Purchase/Lease of Prescribed Automation Equipment
6. Training of Employees

In addition, businesses will be allowed to deduct from their taxable income 400% of the first S$400,000 of expenditure for each of the above six categories, up from the 250% tax deduction and the cap of S$300,000 of expenditure for each category currently. A company can now get S$680 in tax savings for every $1,000 invested, up from S$425 currently.

For up to S$100,000 of qualifying expenditure incurred in the current year, businesses can apply to defer the same quantum of tax payable in the same year. This deferred tax is paid next year. The tax deferral applies for expenditures incurred for YA 2012 to YA 2015.

The Government will also enhance the current cash payout option under the PIC scheme, which was introduced to benefit SMEs who pay little or no taxes, but wish to invest in productivity. Instead of claiming tax deduction, businesses can opt for a cash payout of up to S$30,000 for the first $100,000 of their investments, up from a maximum grant of S$21,000 currently.

2. Supporting Enterprise Growth

2.1    Enterprise Development Fund [S$850 million]
The Government will commit S$850 million as part of the Enterprise Development Fund (EDF) over the next five years. This is a substantial increase of about 45% from the previous five-year tranche. One of the priorities of the EDF is to help high-growth enterprises in their overseas expansion.

2.2    Foreign Tax Credit Pooling [S$22 million a year]
To support businesses that are globalising and earning a larger share of their income overseas, foreign tax credit pooling will be introduced to facilitate remittance of foreign income to businesses’ Singapore bases. Such pooling will give businesses greater flexibility in the use of their foreign tax credits, reduce their tax payable, as well as simplify tax compliance. This measure will take effect from YA2012.

2.3    Catalysing Cross-Border Financing

2.3.1 Project Financing
The Government aims to work with private sector players to catalyse project financing and will be working with Temasek Holdings to develop this initiative.

2.3.2 Political Risk Insurance
To complement the efforts on project financing, the Government is also in advanced discussions to partner with multilateral agencies to offer political risk insurance for infrastructure projects. This is especially relevant for Singapore businesses venturing into unfamiliar markets.

2.3.3 Trade Financing
The Government is exploring a model by which the current trade finance schemes can be outsourced to existing specialist providers. As these providers have well-developed risk assessment and underwriting capabilities, they would be able to provide trade finance solutions that better meet the needs of SMEs.

2.4    National Research Fund Top Up [S$1 billion]
To support the broadening of our research agenda and increasing commercial outcomes from the Research, Innovation and Enterprise 2015 plan, there will be a further top up to the National Research Fund by S $1 billion.

2.5   Enterprise Development Assistance Scheme [S$2.5 billion]
The Government will set aside S$2.5 billion under the Economic Development Assistance Scheme (EDAS) to enable EDB to continue its efforts to strengthen Singapore’s value proposition as an Asian base for corporate head-quarters and other high-value activities. This will support new efforts, such as developing a talent pool of professionals and executives with a strong understanding of Asian markets and businesses, as well as attracting mid-sized global enterprises to set up their first Asian base in Singapore.

3. Key Tax Changes in Strategic Business Sectors

3.1     Financial Sector
To help banks access more diversified funding sources for their lending business and strengthen Singapore’s position as a regional funding centre, the Government will exempt from withholding tax all interest payments made by banks and similar financial institutions to non residents for the purpose of their trade or business. This will take effect from 1 April 2011.

The Government will also extend the tax exemption schemes for Captive Insurers, Specialised Insurers and Marine Hull and Liability Insurers to grow their technical expertise and underwriting capacity in Singapore.

3.2     Maritime Sector
The Government will introduce the Maritime Sector Incentive (MSI) with effect from 1 June 2011. The scheme will streamline and enhance existing maritime tax incentives. New tax benefits, such as certainty of withholding tax exemption for interest payments on loans to build or buy ships, will also be introduced to further entrench international shipping operators and encourage the growth of the shipping-related services sector in Singapore.

To further promote Singapore’s maritime sector, the Government will expand the scope of GST zero-rating to repair and maintenance services performed on ship parts and components. This will take effect from 1 October 2011.

3.3     Biomedical Sector
To support growth in the biomedical sector, the Government will grant GST relief for imported clinical trial materials, as well as enhance the Approved Contract Manufacturer and Trader Scheme. This will take effect from 1 October 2011.

3.4     Specified Services Supplied to Overseas Persons
The Government will allow GST zero-rating for specified services supplied to overseas persons, if they are performed on goods kept in qualifying specialised warehouses and eventually sent overseas. This scheme will help to promote the use of specialised storage facilities that store high-value collectibles such as art and antiques. This will take effect from 1 October 2011.

3.5     Commodity Markets
To strengthen Singapore’s commodity markets, the Government will enhance the Global Trader Programme (GTP) to qualify all derivative trades under the scheme. This enhancement will apply to income from qualifying trades in the new qualifying derivative instruments, derived by a GTP company from YA2012.


The above information was extracted from the Singapore government 2011 Budget. For more information, please visit to website