In most countries of the world, small and medium-sized enterprises (SMEs) play a critical role in determining the overall success of the economy of the country in question. This is because in general, most companies the world over are classified as SMEs.
Not many people have the capability, financial wherewithal, or time required to own and operate a large company with numerous branches all over the world and which employs a great many employees. Therefore, those who desire to have a business of their own usually choose to start an SME, and this fact makes SMEs very common virtually everywhere in the world.
In Singapore, it is no different. SMEs in all manner of business fields have been able to find success within Singapore’s thriving economy. In fact, a key reason why Singapore’s economy has been thriving is because of the contributions made by the country’s SMEs.
These SMEs provide tax revenue as well as other financial contributions to the country which serve as a key source of revenue which the government may use to better serve everyone who lives in Singapore. They also provide employment opportunities to both Singaporeans and foreigners alike and thus reduce the country’s unemployment rate.
Information About SMEs in Singapore
SMEs are officially defined by the government of Singapore as business enterprises which either have a total value of operating receipts below S$100 million or employ 200 or fewer employees. These criteria apply to all SMEs in any sector.
SMEs comprise approximately 99% of all business enterprises which operate in Singapore today. There are over 273,000 SMEs operating across the many business fields of Singapore. Of these SMEs, 81% of them are either completely or primarily owned by locals.
In this context, local ownership is defined as an instance in which at least 50% of the equity of the SME in question is local. SMEs also supply a large portion of Singapore’s workforce. Around 72% of all employees in Singapore are employed by an SME. This figure equates to over 2.5 million employees.
As mentioned, SMEs also provide a sizable contribution to the economy of Singapore. In 2019, the total economic contribution made by SMEs in the country was valued at S$463 billion. This amount is 45% of the total nominal value added to the economy during that year. Although this amount may not be the majority of the economic contribution made to Singapore, one must keep in mind the fact that SMEs are generally less capable of generating large amounts of revenue when compared to larger companies which have more employees and a wider reach. Thus, the figure of 45% is nevertheless impressive.
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Key Industries for Singapore SMEs
As expected, certain industries of Singapore are more conducive to the ongoing business success of the country’s SMEs than are some others. Among the key industries which have proven to be favourable to the SMEs of the country are the food and beverage (F&B) industry, the information communications technology (ICT) industry, the retail industry, and the manufacturing industry.
These industries are among the most important to Singapore not only for the economic value which they generate for the country, but also for how they have served to improve Singapore’s reputation in the global context. Singapore has become recognized as a global leader in each of the industries mentioned. Therefore, it should not come as a surprise that SME owners often choose these industries as those in which they would like to begin their next business venture.
The F&B industry of Singapore has been expanding at a remarkable rate over recent times. For this reason, starting any sort of business including an SME within this industry has become more lucrative than ever before. There are several methods by which an F&B SME in Singapore may gain much revenue.
Many of these methods involve being in tune with the current food trends which are present in Singapore today. Trends such as the installation of self-service food terminals and kiosks, the encouragement of payment through cashless means, and the specialization of a restaurant in a single dish have proven to attract many a customer. By capitalizing on these trends and finding a way to put their own creative spin on them, SME owners in Singapore’s F&B industry will be able to greatly benefit from the many open opportunities which lie before them.
SMEs within Singapore’s ICT industry play an extremely important role within the Singaporean economy. This is because such SMEs, along with the rest of the ICT industry, serve as the technological catalysts of the country. They provide technological and digital growth for the companies in other sectors. For this reason, the government of Singapore has provided means by which the development of SMEs in the country’s ICT industry will be facilitated. There are grants and initiatives such as GoSecure and GoCloud which are intended to support the growth and innovation of SMEs involved in ICT.
SMEs which make use of these grants may improve their quality of cybersecurity, be more able to provide cloud-native applications to clients, and improve their level of product security posture. The SMEs Conference and Infocomm Commerce Conference (SMEICC) is also held in Singapore every year. The information which an SME owner might gain through attending this conference may also provide insight on how to maximize the revenue of an SME which is part of Singapore’s ICT industry.
The retail industry is another industry of Singapore which is known to be very SME-friendly. Singapore has today established itself as one of the world’s premier shopping destinations. Therefore, government authorities such as Enterprise Singapore have provided financial incentives which are designed to improve the condition of the retail SMEs of Singapore.
One of these is the E-Commerce Booster Package which pays for 90% of a retail SME’s costs related to the setup of operations on an e-commerce platform. E-commerce has emerged as the way forward for most retail SMEs, whether those based in Singapore or elsewhere, in recent years. The Singaporean government understands this fact and has thus laid the foundation for these SMEs to make use of the increasing power of e-commerce.
In order for retail SMEs of Singapore to further extend their reach and contact markets in other countries, Enterprise Singapore has also introduced the Multichannel E-Commerce Platform Programme. Enterprise Singapore has even gone a step further than usual by increasing the level of support for this purpose through the program. It previously provided support at a level of 70% of the expenses to be incurred but has since increased it to 90%. Thus, there is clear evidence that retail SMEs of Singapore are well-positioned to benefit significantly in the time to come because of the advantages with which the government has provided them.
Manufacturing SMEs of Singapore answer to the Singapore Manufacturing Federation (SMF). The SMF was established in 1932 to oversee all companies within the manufacturing sector of the country. The SMF is a non-profit organization which nevertheless maintains close ties to the government. The primary method by which the SMF has aided Singapore’s manufacturing SMEs is through the establishment and operation of the SME Centre @ SMF. It was established in 2005 with a view of assisting local manufacturing SMEs with starting business operations, overcoming business issues, and increasing their general level of capability.
The SMF has also hired many consultants to assist these SMEs and their owners with solving these problems. These consultants also provide valuable advice regard how manufacturing SMEs of Singapore may make use of tax incentives for which they are eligible. They also assist some of these SMEs with the completion of projects, development of business operations, and conducting of research, should any of the preceding be deemed necessary.
Perhaps you are interested in starting an SME of your own in one of the industries which have been mentioned or in any other industry. If you are, contact us at Paul Hype Page & Co. Our incorporation experts will keep you informed about everything which is necessary to operate a successful SME in Singapore. We will thus ensure that your new Singapore company will be placed in a suitable position for future financial success.
Tax Incentives for Singapore SMEs
There are several tax incentives which may be claimed by SMEs of all sorts in Singapore. Probably the two most noteworthy of these are the Start-up Tax Exemption Scheme and the Partial Tax Exemption Scheme. The Start-up Tax Exemption Scheme was introduced in 2004. It was introduced to encourage more people to start companies of their own in Singapore. It also serves as a boost to the financial condition of existing SMEs in Singapore. This tax incentive may be claimed by any Singapore-based SME which has not yet completed its first three years of assessment (YAs).
Through this incentive, an eligible company is entitled to receive a tax exemption worth 75% of its first S$100,000 of normal chargeable income. The subsequent S$100,000 of normal chargeable income earned by the SME will receive another exemption; this exemption is worth 50% of the amount in question. However, companies which are primarily involved with the development of properties for sale or investment are ineligible for this scheme’s benefits. The same is true of investment holding companies.
The Partial Tax Exemption Scheme was introduced in 2008. Eligible companies are permitted to claim an exemption worth 75% on the first S$10,000 worth of chargeable income which has been earned. The next S$190,000 which is earned by the company in question may receive a 50% tax exemption.
Should you have any difficulties with comprehending any tax-related matter in Singapore, we at Paul Hype Page & Co are always willing to be of service. We will guide you through the complexities of the tax system of Singapore so that you will become more familiar with your rights and responsibilities as a taxpayer of Singapore. We will also show you how to make use of tax exemptions for the benefit of your business.