Budget Statement FY2023 Highlights: What’s in Store for Singapore?

On Tuesday, 14 February 2023, the Deputy Prime Minister and Minister for Finance, Mr. Lawrence Wong, delivered the Singapore Budget Statement for the fiscal year 2023. Themed “Moving Forward in a New Era,” this budget announcement is of great significance to small and medium-sized enterprises (SMEs) in Singapore. SMEs are the backbone of the economy and in recent years, they have had to weather economic uncertainty coupled with rising costs of living and doing business.

“The annual budget statement covers a broad spectrum of economic and social policies, so it can be a lot for the busy entrepreneur to interpret,” said Louisa Meredith, Finance and Corporate Services Director of Accela Finance. “Each year, we help our clients understand all of the implications of the budget announcement on their business operations and ensure they are equally well-positioned to capitalize on its opportunities.” 

According to Accela Finance experts, here are the key takeaways from the FY2023 Budget Statement for SMEs.

1. Goods and Services Tax (GST) will increase by 1% 

Speculative reports suggested this increase would be delayed in the forthcoming year, but no such luck. On January 1, 2024, GST will increase by 1%, from 7% to 8%. The increase is a part of the government's efforts to fund social spending, especially in the healthcare sector.

SME owners must decide whether to absorb the additional cost or adjust their prices accordingly. However, the government has announced several measures to help SMEs cope with the increase in GST, such as the GST Voucher scheme for Singaporeans, which will be enhanced to provide more assistance to lower-income citizen households. This will help to boost consumer spending, which could offset the impact of the GST increase on SMEs to some extent.

2. New Enterprise Innovation Scheme Introduced

To drive economic growth and productivity, the statement unveiled new tax relief measures for businesses engaged in qualified research, development, and innovation activities. The tax deductions for R&D and innovation-related expenses will increase from 250% to 400%, which will take effect in 2024. The move is expected to reduce operating costs and boost competitiveness among SMEs.

Supporting programs have also been announced to aid SMEs in their R&D and innovation efforts. One such initiative is the Innovation and Capability Voucher (ICV), which provides funding support for qualified SMEs to improve their business capabilities and productivity. Mr. Wong also confirmed the March 31, 2024, extension of current enhancements to the Enterprise Financing Scheme to facilitate businesses’ access to credit and to the Enterprise Energy Efficiency Grant to continue to aid companies in the food services, food manufacturing, and retail sectors to invest in energy efficiency, which will reduce the impact of higher electricity prices. 

3. Increase of Wage Limit for the Central Provident Fund (CPF) 

The CPF is a mandatory retirement savings scheme in Singapore to which employers must contribute 17% of their employees' salaries.

An increase in the CPF wage limit means employers must contribute more to their employees' CPF accounts. The wage limit will increase from $6,000 per month to $7,000 per month from January 1, 2024.

The CPF wage limit benefits employees by helping them save more for their retirement but increases labor costs for employers. The government has therefore enhanced the Wage Credit Scheme, which provides funding support to help businesses cope with the impact of this initiative. Through the scheme, business owners can use the funding to upgrade employees’ skills and improve productivity.

4. New Incentive Scheme for Family Offices Donors

Philanthropists who contribute to approved Institutions of a Public Character and other eligible institutions that impact the local community have access to a new tax scheme, provided they have a family office operating in Singapore.

Qualifying donors can claim a 100% tax deduction for overseas donations made through qualifying local intermediaries, capped at 40% of the donor’s statutory income. To qualify, donors must have an incentivized fund vehicle under the section 13O or section 13U schemes and meet the eligibility conditions, such as incremental business spending of $200,000. 

Published details about the qualification process and criteria are currently limited, but we expect more information to be available by the end of Q2. 

What does the FY2023 Budget Statement mean for your business? Get in touch with Accela Finance for an introductory chat: hello@accela.asia.