"Supporting our companies to internationalise is a key strategy to help them grow revenues," said Deputy Prime Minister and Finance Minister, Tharman Shanmugaratnam, during his Budget 2015 speech earlier today (Feb 23).
Following this, Tharman announced three measures that will help support local companies in its global expansion.
Firstly, the Government will increase support for all small and medium enterprises (SMEs) activities under IE Singapore's grant schemes from 50 percent to 70 percent for three years. Tharman said that he anticipates that this will benefit about 700 projects.
The Government will also enhance the Double Tax Deduction for Internationalisation scheme, which will now cover salaries of Singaporean workers who are posted overseas.
"This will provide greater support to companies venturing overseas, by co-sharing their risks and initial costs of expanding overseas, as well as creating skilled jobs for Singaporeans," said Tharman.
The third measure is the introduction of a new tax incentive called the International Growth Scheme (IGS), which aims to provide support to meet the needs of larger Singapore companies in their internationalisation efforts.
Under IGS, qualifying companies will enjoy a 10 percent concessionary tax rate on their incremental income from qualifying activities. Tharman said that this will encourage more Singapore companies to expand overseas, while anchoring their key business activities and headquarter in Singapore.
In total, these three scheme enhancements for internationalisation are expected to cost S$240 million, he added.
Encouraging mergers and acquisitions
The Government will also help spur Mergers and Acquisitions (M&A) so that companies can acquire scale, attract talent and compete effectively overseas, noted Tharman.
In order to achieve this, the tax allowance for acquisitions costs will be increased five times more - from five percent, to 25 percent of the value of acquisition. Companies would be able to claim M&A benefits for acquisitions resulting in at least 20 percent shareholding in the target company, down from the current threshold of 50 percent shareholding.
"This will be especially helpful for SMEs, who may not be able to acquire large stakes in their expansion strategies," he said.
Tharman also announced that the M&A scheme - which was introduced in 2010 - would be extended for another five years. The Government will also extend the scope of IE Singapore's Internationalisation Finance Scheme (IFS) to support M&A that will aid a company's overseas expansion.
These enhancements will cost the Government over S$100 million over five years, according to Tharman.
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