21 August 2021
The S$5.1 billion second Supplementary Budget 2020, an unprecedented third round of measures rolled out to address the COVID-19 situation in Singapore, was delivered by Deputy Prime Minister and Minister for Finance, Mr. Heng Swee Keat, to the Singapore Parliament on 6 April 2020. This Solidarity Budget follows close on the heels of the first Supplementary Budget 2020 (the Resilience Budget), which was announced on 26 March 2020, and Budget 2020 (the Unity Budget), which was announced on 18 February 2020 (for more details, please refer to our Budget 2020 insights: https://www.taxiseasia.com/singapore-budget-2020-relief-from-global-uncertainty-growing-the-future-economy).
The Solidarity Budget focuses on rendering further economic support to help Singaporeans and Singapore businesses tide over the 'Circuit Breaker' measures, which have been put in place by the Government over a four-week period running from 7 April to 4 May 2020 to bring down the COVID-19 infection numbers in Singapore. The 'Circuit Breaker' measures, which include heightened safe distancing measures, non-essential workplace closures and restricted interaction, are expected to have a detrimental impact on the livelihoods of many Singaporeans. It is hoped that the Solidarity Budget will go some way towards helping to alleviate the economic hardship inflicted on the Singapore population.
The key measures are as follows
A. ENHANCE PROTECTION FOR JOBS AND LIVELIHOODS
To provide further support to protect jobs and livelihood of Singaporeans, the Solidarity Budget will introduce the following measures.
| 1. | Defraying staff cost under the Enhanced Jobs Support Scheme |
To further help businesses defray staff costs and retain their local employees during the 'Circuit Breaker' period, Solidarity Budget will provide all employers with a 75% cash grant on the gross monthly wage of each Singapore or permanent resident employee for the month of April 2020. The monthly cap remains at S$4,600 per employee. The first payout will be brought forward to April 2020 (previously May 2020). |
| 2. | Support for self-employed persons ("SEP") under the SEP Income Relief Scheme ("SIRS") |
The Resilience Budget introduced the SIRS, which was to provide eligible SEPs with a S$1,000 direct cash assistance each month, for a period of nine months. Under the Solidarity Budget, some of the qualifying criteria will be relaxed to allow more SEPs to qualify. SEPs who derive a small portion of income from employment work and own a residential property with annual value below S$21,000 (previously below S$13,000) will now be eligible. Other criteria remain unchanged. In addition, eligible SEPs will now receive direct cash assistance in three quarterly cash payouts of S$3,000 each, in May, July and October 2020
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| 3. | Support for Singaporean households |
Apart from the enhanced Care and Support cash payout of between S$300 to S$900 (depending on income) for all adult Singaporeans announced in the Resilience Budget, there will be an additional one-off cash payout of S$300 for all Singaporeans aged 21 and above in 2020. The first S$600 of cash payout will be paid in April 2020 and the balance will be paid in June 2020. Other payments from the Resilience Budget will be paid out in June 2020 (i.e. S$300 cash payout to each Singapore parent with at least one young Singaporean child, and the S$100 Passion Card Top-up in cash for Singaporeans aged 50 and above). |
B. STRENGTHENING SUPPORT FOR BUSINESSES
The following measures will be implemented to help businesses overcome the immediate cash flow and credit challenges arising from the 'Circuit Breaker' measures.
| 1. | Waiver of Foreign Worker Levy ("FWL") | To support businesses with their cash flow challenges, Solidarity Budget will grant a waiver of the monthly FWL due in April 2020 and grant a FWL rebate of S$750 in April 2020 for the levies already paid in 2020 for each work permit or S-Pass holder. |
| 2. | Property tax rebate | Previously, landlords were "strongly urged" to fully pass the property tax rebate to their tenants by way of rental reduction in order to ease the latter's cash flow. To ensure that property owners pass on the property tax rebate in full to their tenants, the Government will introduce the COVID-19 (Temporary Measures) Bill at the next sitting of Parliament to place an obligation on property owners to pass on to their tenants the property tax rebate attributable to the rented property. |
| 3. | Further enhancement of the Enterprise Financing Scheme ("EFS") for SMEs |
With respect to the EFS-SME Working Capital Loan, EFS-Trade Loan and Temporary Bridging Loan Programmed, the Government will raise its riskshare to 90% (from 80%) under the Solidarity Budget. This is applicable to loans initiated between 8 April 2020 until 31 March 2021. EFS-SME Working Capital Loan was introduced to support the daily operational cash flow needs of SMEs. The scheme provides a maximum loan quantum of S$1 million. The EFS-Trade Loan was introduced to support Singapore-based businesses' trade financing needs. The scheme provides a maximum loan quantum of S$10 million per borrower group. The Temporary Bridging Loan Programme was introduced to provide access to working capital for business needs. The programme provides a maximum loan quantum of S$5 million. |
| 4. | Deferment of contractual liabilities and changes to insolvency and bankruptcy laws | The Government will introduce the COVID-19 (Temporary Measures) Bill at the next sitting of Parliament to let businesses and individuals defer certain contractual obligations (e.g. paying rent, repaying loans, completing works, etc.) for a period of time. The Bill will also introduce temporary changes to Singapore's insolvency and bankruptcy laws to address the impact of COVID-19 on businesses and individuals, respectively |
C. OUR OBSERVATIONS
The Solidarity Budget aims to provide immediate relief to taxpayers during the 'Circuit Breaker' period, with payouts and waivers to be effected during April 2020. While it may be difficult to assess one's cash flow and working capital requirements in an unpredictable and constantly evolving crisis, businesses should consider whether the enhancement to the credit support schemes would make these schemes attractive alternatives before adopting any business rationalisation measures, taking into account possible difficulties in hiring employees – especially those with unique skillsets – during and after recovery of the crisis.
The enhanced financing schemes would be a welcome relief and help alleviate the urgent liquidity needs of businesses. In general, businesses would need to consider potential tax implications from borrowing or refinancing during this period. For example, they would still be liable for tax on interest income from loans to their local subsidiaries even if their local subsidiaries stop paying such interest payments. Further, if the company is in a loss position, interest incurred in such loans may result in a larger amount of losses which cannot be fully utilised against income from previous tax years, even with the enhanced three-year loss carry-back rules for the year of assessment 2020 introduced by Budget 2020. If the recovery is a prolonged one, a borrower may find itself unable to utilise the resultant tax losses for some time.
For further information, please contact:
Eugene Lim, Co-Founder and Principal, TaxiseAsia
