With the release of budget 2022, the rise in the Goods and Services Tax has been the talk of the town. What many don’t realize is that there are many hidden gems within Budget 2022 that have been overshadowed by this change. For starters, the government’s emphasis on digitalization is evident from the amount of schemes, grants and incentives introduced to encourage the use of technology. Let us take a dive into the good, the unpopular and the inbetween of Budget 2022.
Every year, the budget tells us how the economy will be financed by the government. With a thriving business landscape being crucial for a strong economy, it makes sense that there is a lot on businesses in Budget 2022. Budget 2022 seems to place heavy emphasis on integrating technology into businesses. These are some of the schemes and grants for businesses that have been made more extensive in budget 2022:
To help with your digitalization needs, CTO-as-a-service offers a digital readiness check and tailored solutions based on your company’s profile. Just answer a few simple questions and their algorithm will inform you of your digital-readiness and suggest a few solutions. If you prefer a more tailored and personalized approach you can engage their appointed digital consultants.
Productivity Solutions Grant
The productivity solutions grant (PSG) covers up to 70% of the pre-approved solutions that support companies keen on adopting IT solutions. The pre-approved solutions are grouped into two categories, sector specific and generic solutions.
- An example of a sector specific solution covered by the PSG:
- Within the food services sector, one of the IT solutions offered is digital ordering and payment, online food delivery and data mining and analytics.
- An example of a generic solution covered by the PSG:
- Human Resource Management Solutions that automates all HR matters through a mobile application.
Here at Count on Me, we partner with Roubler, a pre-approved solution covered by the PSG. From onboarding to payroll, roubler is a one stop software solution that will address all your HR needs and leave you more time to focus on your core business.
Advanced Digital Solutions Scheme
The advanced digital solutions (ADS) scheme supports the adoption of advanced technologies and integrated solutions that address enterprise level challenges at scale. In Budget 2022, this initiative was expanded to include solutions that leverage artificial intelligence and cloud technologies. Starting 1 April 2022, more solutions involving artificial intelligence and cloud technologies have been included to help enterprises improve operational efficiency and business decisions. This scheme has a compilation of many advanced digital solutions for specific industries. Eligible businesses can claim up to 70% of the qualifying cost. Here at count on me, we are huge believers in using technology to streamline and improve business processes. We leverage cloud technology to provide accounting services to our clients and we could not recommend it more.
SMEs Go Digital
The schemes and grants mentioned previously are part of the larger umbrella initiative called SMEs Go Digital. This initiative aims to help SME use digital technologies and build stronger digital capabilities to seize growth opportunities in the digital economy. This initiative provides a structured and inclusive approach towards the adoption of digital technologies. The first step in this initiative is to find out if your business is digital-ready through CTO-as-a-service. This service will indicate your company’s digital readiness and suggest pre-approved solutions supported by the advanced digital solutions or the productivity solutions grant. Begin your digitalization journey by applying for these solutions. Throughout your journey, if you run into issues, you can also seek help from the digital consultant’s from the CTO-as-a-Service initiative. SME Go Digital initiative is a comprehensive and concerted push by the government for businesses to adopt the use of technology.
Now that we know the ins and outs of this initiative, who can apply? For each scheme and grant there are tailored criteria. But in general, businesses that are 1) registered and operating in Singapore, 2) have a minimum of 30% local shareholding and 3) have group sales turnover not more than SGD100 million per annum, or group employment size not more than 200 employees can benefit from this initiative. If your company satisfies the above criteria, you can claim up to 70% funding support for the qualifying cost of the selected digital solutions on their website.
In Budget 2022, not only was the Go Digital Initiative improved and made more extensive, but taxation policies were also changed to encourage the use of technology in businesses.
Approved Royalties Incentives
The approved royalties incentive is a reduction or exemption of withholding tax on royalty payment made to access advanced technology or know-how. The purpose of this is to encourage businesses in Singapore to adopt cutting edge technology. The approved royalties incentive was initially set to end on 31 December 2023 but has been extended to 31 December 2028. The process to register for the ARI has also been greatly simplified. From the Go Digital initiative to tax exemptions, we can see the government’s intention to incorporate more technology into businesses in Singapore. We would encourage you to ride on the bandwagon and begin your digitization journey. To learn more about digitization read our article all about the pros and cons of digitization. Alternatively, if you have any questions about digitization, feel free to reach out to us.
Not every change in Budget 2022 is as well received as the initiatives listed above. Budget 2022’s popularity has been tainted by the changes made to the goods and services tax.
Goods and Services Tax
With effect from 1 January 2023, the GST rate will be increased from 7% to 8%. This is part of the tiered approach which will see GST further increase from 8% to 9% from 1 January 2024. Needless to say, paying more to the government is wildly unpopular but ironically has made the budget 2022 more of a household topic in Singapore, just maybe for the wrong reasons.
Some of the changes in budget 2022 are not as black and white as the changes listed above. These are some of the changes that are important but could be classified as the many shades in between.
Changes in Employment Pass and S Pass
With all the attention on the increasing goods and services tax, there are some important changes that might have been missed. Amongst them is the changes made to the salary threshold of the employment pass and the S pass applicants. New employment pass applicants will need a minimum salary of $5000 as opposed to the $4500 required previously. For the financial sector, the requirements are slightly higher at $5500 as opposed to $5000. For S pass applicants, the salary requirement will increase from $2500 to $3000 and $3500 for the financial sector.
Personal Income Tax
With effect from YA 2024 onwards, two additional tax brackets will be added to the progressive tax rates. For the first $500 000, $84 150 is the gross tax payable. For the next $500 000, 23% will be taxed, which amounts to $115 000. The next bracket is for the first million, the gross tax payable would be the sum of $84 150 and $115 000 which is $199 150. In excess of 1 million, 24% will be taxed. This change only affects those that are earning $500 000 or more per annum and will not affect most of the population.
Minimum Effective Tax Rate
Singapore will also be implementing a Minimum Effective Tax Rate (METR) that will top up a multinational enterprise group’s effective tax rate to 15%. This will apply to MNE groups operating in Singapore that have annual revenue of at least €750 million. The METR will be aligned with the Pillar 2 Globale Anti-Base Erosion (GloBE ) rules as far as possible. Thankfully, this change will only apply to large multinational enterprises and will not affect individuals and the SMEs within Singapore.
While the rise in goods and services tax has overshadowed most of the other policies within budget 2022, there are some hidden gems that SMEs should capitalize on. The SMEs Go Digital initiative is definitely worth looking into. It’s a win-win situation for your company. Have the government cover most of the costs that come with digitalization and reap the rewards of digitalization to take your business to the next level.