16 February 2021, Minister for Finance Heng Swee Keat announced as part of the Budget 2021 speech that Singapore is to set aside S$24 billion ($18.1 billion) over the next three years to help local businesses innovate and build capabilities needed to take them through the next phase of transformation.
He noted that last year’s series of budgets had tilted towards “emergency support” in light of the global pandemic, but there was a need to focus this year’s investment towards accelerating “structural adaptation”. The financial boost will go towards various initiatives such as the Emerging Technology Programme, which will see the government co-fund the cost of trials and adoption of emerging technologies including 5G, artificial intelligence and cybersecurity.
The new Emerging Technology Programme will help businesses to commercialise their innovations by co-funding the costs of trials and the adoption of frontier technologies such as 5G, artificial intelligence and trust technologies. A new chief technology officer or CTO-as-a-Service initiative, will also help firms identify and adopt digital solutions by providing access to professional IT consultancies, while a new Digital Leaders Programme will support promising firms in hiring a core digital team and in developing and implementing their digital transformation roadmaps.
Beyond these new schemes, the government will also extend to end-March 2022 the enhanced support levels of up to 80% for existing enterprise schemes. These existing initiatives include the Scale-up SG programme, Productivity Solutions Grant, Market Readiness Assistance, and Enterprise Development Grant.
There are no tax rebates or tax rate changes for companies for the year of assessment 2021, but as with YA 2021, tax losses and unabsorbed capital allowances can be carried back for three years rather than one for prior years. This amount remains capped at S$100,000.
Taxpayers can make an irrevocable election to claim capital allowances over two years rather than three. For qualifying capital expenses incurred in YA 2022, 75% of the cost can be claimed in YA 2022, with the balance in YA 2023.
An accelerated deduction will be available for expenditure incurred in the basis period for YA 2022 on renovation and refurbishment. The claim can be made in one year rather than over three, however it remains subject to the same overall cap as before of $300,000.
The Double Tax Deduction for Internationalisation (DTDI) scheme is to be enhanced. A tax deduction of 200% is currently available for qualifying expenses incurred in respect of qualifying market expansion and investment development activities. No prior approval is required from Enterprise Singapore or the Singapore Tourism Board for double tax deductions on the first $150,000 of qualifying expenses.
For qualifying expenses incurred on or after 17 February 2021, the DTDI has been enhanced to include virtual trade fairs in respect of certain expenses, the list of qualifying expenses for overseas investment study trips will be expanded to include logistics costs, and the list of qualifying activities that do not need approval under the $150,000 limit has been expanded.
Currently, bond issuers who carry on a trade or business in Singapore, are allowed to claim a tax deduction of up to 200% on qualifying upfront costs incurred in relation to the issue of retail bonds. This concession will be extended from 19 May 2021 to 31 December 2026 but only in respect of rated retail bonds.
Currently, withholding tax exemptions apply to all interest and loan-related payments falling under Section 12(6) of the Singapore Income Tax Act made between banks under an extra-statutory concession. This will now be legislated with effect from 1 April 2021 and will be subject to a review on 31 December 2031.
The WHT exemption for payments made to any non-resident person by specified entities (banks, finance companies and other entities approved under the Securities & Futures Act), as well as for payments made for structured products and for over-the-counter financial derivatives, will be extended until 31 December 2026.
To support businesses in nurturing creative ideas, the Singapore government is to invest in three platforms: a new Corporate Venture Launchpad, as well as the existing Open Innovation Platform (OIP) and Global Innovation Alliance (GIA).
The Corporate Venture Launchpad, which will be piloted this year, will provide co-funding for corporates to build new ventures through pre-qualified venture studios.
The OIP will be enhanced with new features such as a cloud-based Digital Bench for accelerated virtual prototyping and testing. The platform also co-funds prototyping and deployment.
The GIA catalyses cross-border collaboration between Singapore and major innovation hubs across the world. Its network currently has 15 city links, which will be expanded to more than 25 over the next five years. In addition, the Co-Innovation Programme will be included in GIA. The programme will support up to 70% of qualifying costs for cross-border innovation and partnership projects.
Heng noted that two major changes in the post-Covid-19 economy will be a shift from physical to digital modes of transactions across geographical borders and a shift from tangible to intangible assets (IA) in value creation. The government is therefore to develop a Singapore Intellectual Property Strategy 2030 to support businesses in commercialising the fruits of their innovation.