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If You're A Singapore Startup Owner, This Is How Budget 2018 Will Affect You

Perhaps the point of Mr Heng Swee Keat’s speech that most Singaporeans will focus on is understandably the GST hike.

And with good reason.

For startups like my own, Budget 2018 will provide no new — or at most insignificant — top or bottom line impact.

This is because the Government seems to have shifted away from radical policies designed to inject growth, like the Productivity and Innovation Credit and PIC+ schemes.

Where Do Startups Go

But the Government does set a direction for us. And that is to look beyond our shores and expand overseas.

Mr Heng made numerous references to the need for firms to internationalise and have a regional focus.

In fact, this appeared to be the bulk of the Government’s guidance to enterprises — much more than the usual “need for greater productivity and innovation”, which is often repeated at every Budget.

This is in line with the Government’s actions, namely failing to roll out a radical new scheme to boost productivity and growth.

Instead, the decision to merge SPRING and IE Singapore make it clear that expanding overseas is no longer just for a select few. It’s a challenge for every enterprise to take on, should they wish to survive.

On Taxes

Don’t be too discouraged by the restriction on tax exemptions under the Startup Tax Exemption scheme.

So instead of 100%, we’ll be exempt 75% of our first $100,000 from corporate tax.

Bizfinx data (from XBRL filings) shows that most firms are in the red in their first three years anyway — which is just how long the tax exemption scheme for new start-up companies lasts. Not something I would lose too much sleep over.

Mature firms will cheer at the increase in corporate income tax rebate to 40% of tax payable.

These will be a welcome relief for more matured companies making profit of about $100,000 to $200,000; effectively saving them $15,000 in tax dollars.

On Grants

Consolidating two major grants into one promises to end the maze of different incentive schemes available to start-ups.

However, a majority of new start-ups will not benefit from the newly-announced Enterprise Development Grant, should the current policy of meeting a revenue criteria before expanding overseas prevails. We’ll have to wait and see.

As for the Productivity Solutions Grant, start-ups thrive by creating solutions, not adopting off-the-shelf ones.

This renders the grant irrelevant to them and makes me question how it will make “innovation pervasive throughout the economy”.

One Last Word

Ultimately, here’s how the Budget will affect you if you’re:

• A loss-making start-up: No new benefit
• Just making a profit after your 3rd year: Some tax relief
• Planning to go regional: A reduced tax liability but little help from grants, unless you meet revenue criteria

Ivan Chang is the Singaporean entrepreneur behind Wonderlabs, a startup co-founded with Keith Tan. Wonderlabs operates 3 offshore software development centres in Indonesia, employing 125 software engineers in Yogyakarta and Bandung. Reach out to Ivan at ivan@wonderlabs.io.

 

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