Budget 2024: New Refundable Investment Credit for high-value economic activities; S$2 billion top-up to National Productivity Fund

Singapore will introduce a new Refundable Investment Credit (RIC) for substantive, high-value economic activities, as part of the country’s investment promotion toolkit, said Finance Minister Lawrence Wong on Friday (16 Feb 2024).

The tax credit with a refundable cash feature will help Singapore stay competitive and attract investments from global companies with the right know-how, he said during his Budget speech in Parliament.

The RIC encourages companies to make sizeable investments that bring substantive economic activities to Singapore, in key economic sectors and new growth areas.

Supported activities include investing in new productive capacity, such as manufacturing plants; expanding or establishing the scope of activities in digital services; and expanding or establishing headquarter activities.

Other activities include the setting up or expansion of activities by commodity trading firms; carrying out new innovation and research and development activities; and activities in support of the green transition.

To support RIC and other investment promotion efforts, the government will top up the National Productivity Fund by S$2 billion this year, said Wong.

The Economic Development Board (EDB) and Enterprise Singapore (EnterpriseSG) will award the RIC based on qualifying expenditures incurred by the company in respect of a qualifying project, during a qualifying period of up to 10 years.

Qualifying expenditures are dependent on project type, and include capital expenditure, manpower costs, training costs, professional fees and intangible asset costs, among other kinds of costs.
 

The credits are to be offset against the corporate income tax payable. Any unutilised credit will be refunded to the company in cash within four years from when the company satisfies the conditions for receiving these credits.

This is against a backdrop of tougher competition for investments, noted Wong, as governments around the world roll out vast subsidies to attract investments.

“We cannot afford to engage in a ‘bidding war’ with the major economies. But neither should we stand still and just do nothing,” he added.

More information on the RIC will be available on EDB’s and EnterpriseSG’s websites by the third quarter of this year.

Other announcements in this year’s budget also include a new S$1.3 billion support package will help Singapore businesses manage costs, said Finance Minister Lawrence Wong in his Budget speech on Friday (16 Feb 2024).

Called the Enterprise Support Package, it comprises a corporate income tax rebate; enhancements to the Enterprise Financing Scheme (EFS); and an extension of the SkillsFuture Enterprise Credit.

Companies will receive a 50 per cent corporate income tax rebate capped at S$40,000, in the year of assessment 2024.
 

Businesses that employ at least one local employee in 2023 will receive a minimum benefit of S$2,000 in cash payouts, and will automatically receive the grant by the third quarter of 2024.

The EFS will receive three enhancements:

• First, the maximum working capital loan quantum will be permanently raised to S$500,000, from S$300,000, to help small and medium-sized enterprises (SMEs) meet their increased working capital and operational cashflow needs.
  
• Second, the enhanced maximum trade loan quantum of S$10 million will be extended until Mar 31, 2025, to support businesses’ internationalisation efforts amid global supply chain disruptions.|
  
• Finally, the support for domestic construction projects under the EFS’ project loans will be extended to Mar 31, 2025, with a maximum loan quantum of S$15 million.

Meanwhile, the SkillsFuture Enterprise Credit will be extended by a year to 30 June 2025. This means that employers who have already received the credit will be able to use it on supportable schemes beyond 30 June 2024, with claims to be submitted by 30 June 2025.

Currently, eligible companies have received a one-off credit of up to S$10,000 to cover up to 90 per cent of out-of-pocket expenses for supportable enterprise capability development and workforce transformation programmes.

“The measures in this Enterprise Support Package are tilted towards firms that make the effort to restructure and transform,” said Wong.

“I encourage all firms to make full use of these schemes so that they can thrive and succeed, amid a more challenging operating environment.”
 

Source: Business Times © SPH Media Limited. Adapted with permission.