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Singapore Budget 2018: Innovation, R&D to get shot in the arm

Firms will receive help to innovate across entire value chain; observers welcome moves


SUPPORTING more firms to innovate is a key thrust of the Singapore Budget 2018, as several new measures unveiled by Finance Minister Heng Swee Keat on Monday made it clear that innovation is still a top priority.

This includes help for firms to innovate across the entire value chain - be it to buy new solutions, build their own, or partner others to co-innovate, announced Mr Heng.

For a start, existing grant schemes will be streamlined into a single Productivity Solutions Grant (PSG) to make it easier for businesses to adopt off-the-shelf technologies.

The PSG will provide support for up to 70 per cent of qualifying costs, and businesses can apply for it with effect from April 1, 2018 through the Business Grants Portal.

The government will also raise the tax deduction on licensing payments for the commercial use of intellectual property (IP).

With the lapse of the popular Production and Innovation Credit (PIC) scheme, the tax deduction on licensing payments has reverted to 100 per cent for YA (year of assessment) 2019 onwards. This will be raised to 200 per cent, capped at S$100,000 of licensing payments per year.

Support will also be given for businesses to build their own innovations.

The tax deduction for IP registration fees will be raised from 100 per cent to 200 per cent to help firms protect their intangible assets, which will be capped at S$100,000 of IP registration fees per year.

The tax deduction for qualifying expenses incurred on R&D done in Singapore will also go up from 150 per cent to 250 per cent, said Mr Heng.

These incentives to boost innovation were widely welcomed by industry watchers.

Toh Boon Ngee, tax partner at KPMG in Singapore, noted that the measures showed that the government is "determined" to push ahead with innovation. "To ensure that efforts to encourage R&D and IP creation are not stalled by the phase-out of the broad-based PIC scheme, a more focused and targeted enhanced tax deduction is now introduced."

Tan Tay Lek, corporate tax partner at PwC Singapore, said that the new changes help put Singapore in a good position to compete for R&D dollars, and more importantly, R&D talent. He quipped: "I had wanted to see the deduction limit raised to 300 per cent but 250 per cent is not bad."

While the PIC scheme funded a total of six qualifying activities, the PSG is a grant scheme that appears to only cover specified equipment and technology solutions.

DBS economist Irvin Seah said: "There is a visible shift away from overly-generous and broad-based subsidy programmes such as the PIC scheme towards more specific and innovation-focused measures."

He believes that a more targeted approach in economic transformation would yield better outcomes in the longer term.

Aside from driving innovation, building capabilities of firms and workers to internationalise, digitalise and to be more productive will be critical, said Mr Heng during the Budget.

To help firms do so, a new integrated Enterprise Development Grant (EDG) was also announced - a combination of IE Singapore's Global Company Partnership Grant with Spring's Capability Development Grant as a result of the merger between the two government agencies come April.

The EDG will provide up to 70 per cent co-funding for companies to scale up and internationalise.

The government will also enhance the Double Tax Deduction for Internationalisation (DTDi) to further boost firms' efforts to go abroad, said Mr Heng.

The amount of expenses that can qualify without prior approval will go up from S$100,000 to S$150,000 per year of assessment, to take effect from YA 2019.

The finance minister also announced several initiatives to develop the digital capabilities of firms.

An additional S$145 million will be set aside for the Tech Skills Accelerator (TeSA) over the next three years, which was first launched in 2016.

TeSA is a tripartite initiative by the government, industry and the National Trades Union Congress to strengthen the digital workforce, and to enhance employability for individuals in the technology profession.

TeSA will be expanded into new sectors like manufacturing and professional services, where digital technologies are increasingly important, according to Mr Heng.

The accelerator will also scale up existing programmes to support more people to learn emerging digital skills, such as in data analytics, artificial intelligence, the Internet of Things and cybersecurity.

Aside from digital capabilities, Mr Heng also spoke on the need to build deep skills for workers. A new Asean Leadership Programme will be launched under the SkillsFuture Leadership Development Initiative this year, he said. This will help business leaders build networks and plan business expansion in South-east Asian markets.

On top of that, the Singapore Business Federation (SBF) and the Singapore Management University (SMU) will pilot the SBF-SMU Lead-Charge Initiative this year to help SME leaders transform their businesses.

Another pilot that was announced is the Capability Transfer Programme, which aims to address the issue of missing skill sets in certain important fields in Singapore. The programme, to be further elaborated at the Committee of Supply debate in March, aims to plug the gap by supporting the transfer of skills from foreign specialists to Singaporean trainers and trainees.

On the Budget as a whole, Goh Seng Wee, managing director of venture capital firm Brain-Too-Free Ventures, said that it is both "very encouraging and strategic".

He said: "It is heartening to see Budget 2018 addressing the urgent need for the entire value chain to scale beyond Singapore and to innovate. From researchers to business leaders to employees to startups, there is something for everyone to tap on."


  • Enterprise Development Grant: up to 70% funding support for building capabilities and internationalisation, to be launched in Q4 2018
  • Double Tax Deduction for Internationalisation: 200% tax deduction on the first S$150,000 of qualifying internationalisation expenses for each YA, without the need for prior approval
  • Tax deduction for qualifying expenses incurred on R&D done in Singapore will go up from 150% to 250%
  • Tax deduction for IP registration fees up from 100% to 200%, capped at S$100,000



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