Budget 2024: Enterprise Support Package to help SMEs contain costs, though impact will vary

• Companies to receive a corporate income tax rebate of 50 per cent – capped at S$40,000 – for 2024; S$2,000 cash payouts given to those with at least one local employee in 2023
• Three enhancements to Enterprise Financing Scheme, including raising maximum working capital loan quantum to S$500,000
• SkillsFuture Enterprise credit extended to Jun 30, 2025

WHILE the Enterprise Support Package will help small and medium-sized enterprises (SMEs) contain costs, profitable businesses stand to benefit more from a corporate income tax rebate that overlooks their loss-making counterparts, said industry professionals.

The S$1.3 billion package, which was announced by Finance Minister Lawrence Wong in his Budget speech on Friday (Feb 16), comprises a corporate income tax rebate of 50 per cent, capped at S$40,000; enhancements to the Enterprise Financing Scheme (EFS); and an extension of the SkillsFuture Enterprise Credit to Jun 30, 2025.

Professor Lawrence Loh, director at the Centre for Governance and Sustainability at NUS Business School, said: “The broad intent of this package is cost containment. It will be the bedrock that complements more focused, sector-oriented measures in areas such as sustainability, finance and manufacturing.”

Rohan Solapurkar, business tax leader at Deloitte Singapore, noted that the corporate income tax rebate cap of S$40,000 for 2024 was higher than the quantum in any of the past years.

But the impact across companies “may vary”, he said, adding that businesses with normal chargeable income – before partial tax exemption – in the range of S$570,000 should expect to benefit the most from the rebate.

Likewise, David Toh, leader for PwC Singapore’s entrepreneurial and private business practice, pointed out that the uplift would differ across SMEs “with different business models and degrees of international exposure”.

“Unfortunately, businesses whose profitability are directly impacted by inflationary costs may not feel the impact of this tax-rebate boost,” he said.

Associate Professor Lau Kong Cheen, head of the marketing programme at the Singapore University of Social Sciences, noted that there are many SMEs still in the red and “struggling to get back into business” in today’s post-pandemic landscape.

“These weaker companies will be at a slight disadvantage,” he said, comparing them with revenue-generating companies.

To ensure unprofitable companies are not left out, the government will pay a minimum of S$2,000 in cash to those that employed at least one local employee in 2023.

This cash payout, however, is a “fairly token” sum that does not factor in the size of the company, said Lee Swee Siong, vice-president of strategies and development at the Association of Small and Medium Enterprises.

“For a company that has a big number of employees and a huge turnover, S$2,000 isn’t going to help a lot,” he said, adding that the government could consider tiering cash rebates according to company size to be “more equitable”.

Deloitte’s Solapurkar added that the quantum of the cash grant could have been bigger in view of the spike in wages, utilities and rental costs in 2023.

SMEs with higher capital requirements in certain industries, or those looking to expand overseas, are also more likely to benefit from enhancements to the EFS, said observers.

Under the enhancements, the maximum working capital loan quantum has been raised to S$500,000 from S$300,000 to help SMEs meet their increased working capital and operational cash flow needs.

The maximum trade loan quantum of S$10 million was also extended to Mar 31, 2025, to support businesses’ internationalisation efforts amid global supply-chain disruptions.

Lastly, support for domestic construction projects under the EFS’ project loans was extended to Mar 31, 2025 as well.

“The EFS trade and EFS project loans, by design, serve a particular niche industry,” said PwC’s Toh. For instance, businesses in sectors such as trading and construction would require higher working capital.

Companies or micro-SMEs in domestic-oriented sectors – such as food and beverage, or land transport – with “limited expansionary opportunities” may feel sidelined by the trade loan, he added.

Such companies could be serving the local market well, but may be restricted in going abroad due to the nature of their business “rather than a lack of ambition”, he explained.