Press Release On The SME Rebate Scheme

Overview

1. In Budget 2007, Government announced the SME Rebate Scheme to provide locally-registered Small and Medium Enterprises (SMEs) with a rebate on labour expenses. The scheme is a temporary assistance scheme to help SMEs adjust to higher costs due to the increase in CPF employer contribution rate of 1.5% that will take effect on 1 July 2007.

Duration of Scheme

2. The SME Rebate Scheme will last two years. Rebates will be paid to each qualifying firm on an annual reimbursement basis, based on the firm's total employer CPF contributions made during each 12-month qualifying period. The start of the first qualifying period will coincide with the increase in CPF contribution rate (1 July 2007). The two qualifying periods are :

• 1 July 2007 to 30 June 2008 ("First Year")

• 1 July 2008 to 30 June 2009 ("Second Year")

Amount of Rebates

3. The amount of rebates that a firm will receive is pegged to the total employer and employee contributions payable by a firm to CPF Board. The rebate is 2% of the first $40,000 of total CPF contribution and 1% of the next $40,000 of total CPF contribution in the First Year, and 1% and 0.5% respectively for the Second Year. In the first year, the rebate will effectively offset up to 45% of the additional CPF cost that SMEs face due to the increase in employer CPF contribution rate.

Eligibility Criteria

4. To ensure that the rebates are targeted at SMEs, the government will grant the rebates to businesses (including corporate entities, partnerships and sole proprietorships) that meet the following crit

Payment

9. Payment to each employer will be made within 2 months following the end of each application period, i.e. in August and September. Firms which make an application before May 2008 will receive their first year rebates

MINISTRY OF FINANCE