Highlights of Singapore’s Fortitude Budget

Highlights of Singapore’s Fortitude Budget26 May 2020

Soh Pui Ming Head of Tax, SingaporeErnst & Young Solutions LLP

IntroductionOn 26 May 2020, Deputy Prime Minister and Minister for Finance, Mr. Heng Swee Keat, announced the fourth Budget for this year, with the aim to help Singapore companies and the workforce prepare for the reopening of the economy in phases after the circuit breaker is lifted on 2 June 2020.

With the latest 2020 GDP growth forecast downgraded from “-4% to -1%” to “-7% to -4%”, Singapore is bracing for its worst-ever recession. It is clear that the Government holds back no punches in its fight to support the economy and protect jobs. Together with the Unity, Resilience and Solidarity Budgets, S$92.9 billion, which is almost 20% of Singapore’s GDP, has been dedicated to support Singapore’s businesses, workers and households in this battle.

The S$33 billion Fortitude Budget is steadfastly focused on three areas: supporting businesses and saving jobs, transforming to seize new opportunities and helping workers upskill and reskill. This Budget has also set aside an additional S$13 billion in the Contingencies Funds to allow the Government to respond quickly to any unforeseen developments arising from COVID-19.

The Fortitude Budget continues to provide timely financial relief to businesses and individuals, whilst adopting a forward-looking approach – I am most impressed with how the Government is using this downtime to help our small and medium enterprises (SMEs) accelerate their transformation and upskill our workforce.

The EY news alerts on the earlier 2020 budgetary measures can be found here: Unity Budget; Resilience Budget and Solidarity Budget.

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Key proposals

In this Fortitude Budget, the Government has further strengthened the support for businesses on the 3Cs - cash flow, costs and credit.

Extending and enhancing the Jobs Support Scheme (JSS)

► The JSS will be extended by one month to cover wages paid in August 2020, bringing the total wage support to 10 months. This additional month of support will be paid out in October 2020.

► Employers who are not allowed to resume operations after the circuit breaker will continue to receive 75% support for wages paid to local employees, during the period for which they are not allowed to resume operations, or until August 2020, whichever is earlier.

► The classification of firms in the different JSS tiers has been updated, thereby increasing the level of wage support for sectors that are more severely impacted, from the previous 25% to either 75% or 50%. This change will be applied retrospectively, except for the built environment sector, which will receive the higher payout for June 2020 to August 2020 wages only.

► A summary of the JSS measures announced in the various Budgets is as follows:

Unity Budget(18 February)

Resilience Budget(26 March)

Solidarity Budget (and extension)(6 and 21 April)

Fortitude Budget(26 May)

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8% cash grant of up to S$3,600 per local employee for three months (October 2019 to December 2019)

Enhanced wage support for each local employee (computed based on wage cap of S$4,600) for the following industries for nine months (October – December 2019, February –July 2020):

75% wage support• Aviation and

tourism

50% wage support• Food services

25% wage support• All other sectors

All sectors will receive a temporary enhancement in wage support of 75% for the months of April and May 2020.

Additional month of wage support computed based on wages paid in August 2020, at the support level of 75%, 50% or 25%.

Businesses that cannot resume operations after circuit breaker (i.e., 2 June 2020) will continue to receive wage support at 75%.

Updated classification:(the list below is not exhaustive)

75% wage support • Aviation • Aerospace (new)• Airline fleet management (new)• Tourism and hospitality• Built environment (new)

(June to August 2020 only)

50% wage support• Food services• Retail (new)• Arts and entertainment (new)• Land transport (new)• Marine and offshore (new)

25% wage support• All other sectors

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Supporting businesses, saving jobs

Key proposals

Extending Foreign Worker Levy (FWL) waiver and rebate

► Businesses that will not be allowed to resume operations on-site after circuit breaker will receive FWL waiver and rebate for up to two months. This will include all businesses in the construction, marine and offshore, and process sectors. This is in addition to the FWL waiver and the FWL rebate of S$750 granted in April and May.

► The waiver will be 100% in June, and 50% in July.

► The rebate will be S$750 in June, and S$375 in July.

Deferring increase in CPF contribution rates

► The planned increase in CPF contribution rates for senior workers will be deferred by one year, from 1 January 2021 to 1 January 2022.

Enhancing financing support for startups

► To support promising startups in Singapore so as to help them sustain their innovation and entrepreneur activities, S$285 million will be set aside to catalyse and crowd in another S$285 million in matching private investments. This is in addition to the S$300 million set aside under the Unity Budget for deep-tech startups.

Support for the built environment sector

► To support the built environment sector, which includes construction, the Government will co-share the additional costs that will be incurred by businesses that will need to meet additional requirements in order to resume their existing projects safely. More details will be announced by the Minister for National Development and the Building and Construction Authority later.

Businesses facing longer-term challenges

► For businesses that face longer-term challenges, such as the aviation and tourism sectors, the Government will consider providing additional help depending on the situation and longer-term shape of these industries, and plans for the economy.

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Supporting businesses, saving jobs

Key proposals

Expanding rental reliefs for SMEs

► A new government cash grant will be given to offset the rental costs of qualifying SME tenants* of commercial (e.g., shops) and other non-residential properties (e.g., industrial and office properties).

► The amount of grant will be calculated based on the annual values of properties for 2020, as determined by the Inland Revenue Authority of Singapore (IRAS) at 13 April 2020. For qualifying SME tenants of commercial properties, the cash grant is about 0.8 month’s of rent. Together with the property tax rebate announced in the earlier budgets that property owners are required to pass on fully to the tenants, the total government support is about two months for SME tenants of commercial properties. For qualifying SME tenants of other non-residential properties, the cash grant is approximately 0.64 month’s of rent. Together with the property tax rebate announced earlier, the total government support is about one month for SME tenants of other non-residential properties.

► The cash grant will be automatically disbursed by the IRAS to property owners of qualifying SME tenants from end July. Landlords are required to pass on the new cash grant benefit to their qualifying SME tenants.

► For property owners whose properties are only partially let out, or whose properties are let out to both SME and non-SME tenants under a single property tax account, the property owner should submit an application to the IRAS, and provide supporting documents, including proof of SME tenants within its property. The IRAS will pro-rate the government cash grant accordingly. More details will be provided by the IRAS on its website by end June 2020.

* Qualifying SME tenants are tenants with not more than S$100 million in annual turnover based on the corporate and individual income tax returns for Year of Assessment 2019.

Mandated rental waivers by landlords

► The Ministry of Law will introduce a new Bill mandating that landlords grant rental waivers to qualifying SME tenants. SME tenants of commercial properties who have suffered a significant revenue drop will benefit from a total of four months of rental relief shared equally between the Government and landlords. SME tenants of industrial and office properties will also be given some relief. More details will be provided in June 2020.

Extending rental relief for government tenants

► Commercial tenants of government agencies will get two additional months of rental waiver, making a total of four months’ worth of rental waiver (including the two months of rental waiver announced earlier). Eligible tenants or lessees may include those providing commercial accommodation, retail, food and beverage (F&B), recreation, entertainment, health care and other services.

► Industrial, office and agricultural tenants of government agencies will get an additional month of rental waiver, making a total of two months of rental waiver (including the one month of rental waiver announced earlier). Eligible tenants or lessees may include those in premises used for industrial or agricultural purpose, or as an office, a business or science park, or a petrol station.

► The Government will provide two more months of rental waivers for stallholders in hawker centres and markets, making a total of five months of rental waiver (including the three months of rental waiver announced earlier).

Supporting businesses, saving jobs

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Fortitude Budget news alert -catch up call

Key proposals

The Government will boost its support for businesses to go digital. As a pilot, the support will be targeted at the F&B and retail sectors first. The augmented support for digital transformation comes in three prongs:

Support for e-payments

► The Infocomm Media Development Authority (IMDA), National Environment Agency, Housing Development Board, Jurong Town Corporation and Enterprise Singapore will provide a bonus of S$300 per month over five months to encourage more stallholders in hawker centres, wet markets, coffee shops and industrial canteens to adopt e-payment.

Support to digitalise basic payment and invoicing functions

► Eligible businesses in the F&B and retail sectors can receive a payout of up to S$5,000 from the Digital Resilience Bonus if they adopt PayNow Corporate and e-invoicing, as well as business process or e-commerce solutions.

Support for more advanced digital tools

► F&B and retail businesses will have an additional tier of $$5,000 as part of the Digital Resilience Bonus when they adopt advanced digital tools.

► S$250 million set aside to help businesses digitise in partnership with platform solutions providers and industry champions.

Summary of government support for digital transformation in the F&B and retail sectors:

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Baseline Category 1 (S$2,500)

Category 2 (S$2,500)*

Category 3 (S$5,000)+

Food services PayNow Corporate and e-invoicing

Business process solutions: • Accounting• HR/payroll and • Digital ordering

(dine-in or takeaway)

Digital presence: online food delivery (via food delivery platforms or own online shopfront) or e-procurement

Data-driven operations: data mining and analytics

Retail PayNow Corporate and e-invoicing

• Accounting• HR/payroll and • Inventory

management

Digital presence: e-commerce

Data-driven operations: data mining and analytics

*Businesses that adopt solutions in Categories 1 and 2 (inclusive of baseline category) can get up to S$5,000.

+Businesses that adopt solutions across Categories 1 to 3 (inclusive of baseline category) can get up to S$10,000.

Transforming to seize new opportunities

Key proposals

► An SGUnited Jobs and Skills Package that will create close to 100,000 opportunities in jobs, traineeships and skills trainingwill be launched. This will comprise the following components:

► Creation of more than 40,000 jobs in both the public and private sectors, as well as the career conversion programmes. Capacity will be expanded in career conversion programmes such as in Place-and-Train conversion programmes under the Adapt and Grow Initiative, and Company-Led Training programmes under the TechSkills Accelerator or TeSA initiative.

► Creation of 25,000 traineeship positions this year, comprising 21,000 from the SGUnited Traineeship programme, and 4,000 from a new SGUnited Mid-Career Traineeships scheme for unemployed mid-career job seekers. More details will be provided in due course.

► A new SGUnited Skills programme that will expand training capacity for about 30,000 job seekers this year. Job seekers will receive a training allowance of S$1,200 per month during the course of their training. More details will be provided by the Ministry of Education.

► Enhancement of the hiring incentive announced in the Unity Budget is summarised below:

Creating good jobs, upskilling for the future

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Fortitude Budget news alert -catch up call

Unity Budget (18 February) Fortitude Budget (26 May)

Salary support for employers that hire a local worker (aged 40 and above who had gone through an eligible reskilling programme) of 20% for six months, capped at S$6,000 in total.

Salary support for employers that hire a local worker aged 40 and above (who had gone through an eligible reskilling programme or training programme) of 40% for six months, capped at S$12,000 in total.

Salary support for employers that hire a local worker aged below 40 (who had gone through an eligible reskilling or training programme) of 20% for six months, capped at S$6,000 in total.

Eligible reskilling programmes include:• Professional Conversion Programmes (PCPs)• Place-and-Train (PnT) prgrammes for rank-and-file

workers• Career transition programmes by Continuing

Education and Training (CET) centres

Eligible reskilling or training programmes include:• PCPs• PnT programmes for rank-and-file workers• Career transition programmes by CET centres• SGUnited Traineeships• SGUnited Mid-Career Traineeships• SGUnited Skills

Key proposals

► Supporting digital literacy for students: The Ministry of Education will accelerate the timeline for all secondary school students to own a digital learning device.

► Senior Go Digital Movement: The IMDA will launch a programme to support seniors to adopt digital channels, and equip them with the digital skills to do so.

► Increased matching for donations: Charities can apply to receive dollar-for-dollar matching on eligible donations, which are raised from projects in FY2020, up to a cap of S$250,000 per charity.

► Top-up to Invictus Fund: The Government will provide a top-up of S$18 million to the Invictus Fund to enhance support for social service agencies that continue serving their beneficiaries during the COVID-19 period.

► COVID-19 Support Grant: The COVID-19 Support Grant was introduced in the Resilience Budget to support eligible Singapore citizens and permanent residents who become unemployed due to the COVID-19 pandemic. In this Fortitude Budget, an additional S$800 million funding will be provided. This covers those who have lost their jobs, are placed on no-pay leave, or will see salaries significantly reduced in the coming months due to the COVID-19 crisis. The support grant is in the form of monthly cash grant of up to S$800 for three months.

► Self-employed persons: For self-employed persons who have marginally missed the eligibility criteria or do not automatically qualify for the Self-Employed Person Income Relief Scheme (SIRS) can submit an application to National Trades Union Congress (NTUC) for consideration. Applicants can expect to hear from NTUC within a month of submitting their application.

► Solidarity Utilities Credit: Each household with at least one Singapore citizen will receive a one-off S$100 Solidarity Utilities Credit. This will cover all property types and will be credited in the July or August utilities bill.

Supporting households, building an inclusive community

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Fortitude Budget news alert -catch up call

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