How Singapore is Helping Businesses Accelerate Digital Transformation and Expand Overseas

• Singapore has extended several measures to assist businesses in accelerating their digital transformation.
• The government recognizes that the success of new business models will come down to how companies leverage digital technologies for growth.
• The list of qualifying activities for businesses to receive tax deductions for overseas expansion has been expanded.

Singapore’s government issued several measures to accelerate the digital transformation and overseas expansion of local businesses.

As more companies shift towards a hybrid online-offline business model, their success will be underpinned by how effectively they leverage digital technologies to innovate and grow.

Among the initiatives issued by the government is the Chief Technology Officer (CTO)-as-a-Service scheme to help small and medium enterprises (SMEs) understand their digitalization needs and the new Digital Leaders Program (DLP), which aims to assist promising local companies to become digital leaders and capture new growth opportunities.

The government has allocated some S$24 billion (US$18.1 billion) over the next three years to assist businesses in their transition in a post-pandemic world. As part of the 2021 national budget, S$11 billion (US$8.3 billion) alone was provided to extend working capital loan schemes, reskilling programs for workers, and wage subsidies, among others.

Accelerating digital transformation

Singapore will accelerate the digital transformation of local businesses through three strategies:

• Scale broad-based digitalization — providing SMEs with access to relevant resources and advisory;
• Develop digital leaders — building a local core of enterprises that can compete regionally and globally; and
• Catalyze new products and business models — helping businesses to scale up and innovate.

Scale broad-based digitalization

Under this strategy, the government issued the (CTO)-as-a-Service scheme that enables SMEs to tap professional IT consultancies to receive end-to-end digital solutions based on their company’s profile. These consultants have expertise in areas, such as artificial intelligence, data analytics, and cybersecurity.

Further, the digital consultants will be managed by IT firms appointed by the Infocomm Media Development Authority (IMDA) and will be selected based on their relevant industry experience and reputation. The service will be available to all registered SMEs in the form of a web application.

Develop digital leaders

To develop digital leaders, the DLP seeks to identify high-potential, promising companies and equip them with the digital capabilities to transform their business.

The DLP will support companies to:

• Build expertise in the firm, including the hiring of digital talent; and
• Develop and implement digital transformation roadmaps.

The program will initially support 80 companies beginning with those more advanced in their use of digital technologies, providing up to 70 percent on qualifying costs. Eligible firms will participate in an initial two-year pilot.

Catalyze new products and business models

To increase the speed of digital innovation and drive more collaboration, the government has enhanced the Open Innovative Platform (OIP) initiative. The OIP was launched in 2018 to support businesses in getting resources to meet their innovative needs effectively.

The OIP has been enhanced to include two new features:

• The Discovery Engine that facilitates search and matching of technology solutions through automated recommendations; and
• The Digital Bench provides quick proof-of-concept (POC) testing through a virtual POC platform.

The government hopes that the OIP will lead to more co-innovations, and the fast-track development of prototypes, reducing the time for products and services to be commercialized.

Double tax deductions for overseas expansion

Singaporean companies looking to expand overseas can benefit from the Double Tax Deduction Scheme for Internationalization (DTDi), which provides a 200 percent tax deduction on expenses for international expansion.

Most DTDi deductions are subject to approval from ESG and the Singapore Tourism Board. However, certain activities do not require approval on the first S$150,000 (US$111,000) of eligible expenses.

The DTDi supports businesses in four categories and several sub-categories:

• Market preparation
  • Product/service certification;
  • Feasibility studies; and
  • Design of packaging for the overseas market.
• Market exploration
  • Overseas market development trips;
  • Local trade fairs (must be approved by the ESG and the Singapore Tourism Board);
  • Virtual trade fairs (must be approved by the ESG); and
  • Overseas trade fairs.
• Market promotion
  • Overseas advertising;
  • Production of corporate brochures for overseas distribution;
  • Overseas business development; and
  • Advertising in approved trade publications.
• Market presence
  • Overseas trade offices;
  • Investment feasibility studies;
  • Employee overseas posting;
  • Master licensing and franchising; and
  • Overseas investment trips.

Budget 2021 has expanded the list of qualifying activities that do not require prior approval to include overseas advertising, approved product/service certification, and packaging design for overseas markets.

The qualifying expenses for overseas investment trips have also been expanded to include logistics costs to transport materials.

Please refer here to the full list of qualifying activities available under the DTDi.

Extension of the 100 percent Investment Allowance scheme

An extension of the 100 percent Investment Allowance (IA) scheme has been granted by the government until 2023.

The approved 100 percent IA support is capped at S$10 million (US$7.4 million) and is part of the Automation Support Package (ASP), which comprises the following grants, loans, and tax support:

• Grant support through the Enterprise Development Grant (EDG), capped at S$1 million for up to 50 percent of qualified automation projects;
• Loan financing of up to S$15 million (US$11.1 million) for automation equipment; and
• The 100 percent IA scheme.

The ASP support itself is due to end on March 31, 2021, but the 100 percent IA scheme will still be available.

This program offers tax relief that can be used to offset taxable income for approved automation projects by the EDG and Enterprise Singapore (ESG).

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