How the Singapore Budget 2020 affects your F&B business

How the Singapore Budget 2020 affects F&B businesses

Everything you need to know about the Budget’s impact, for the F&B industry.

By now, you have probably read the numerous reports have been written about how the F&B, retail and services industries are suffering with low footfall and meagre sales. While pundits speculated that there might be a foreign worker levy subsidy like in 2003 when SARS hit, we were disappointed this time round. There are measures in place to support the F&B industry, but the general consensus is that more can be done. 

For hawkers

Hawker centres, usually packed especially at mealtimes, have suffered a drastic drop in business of up to 50% in as citizens opt to avoid crowded places during the Covid-19 outbreak. 

To alleviate this, the Government is waiving 1 month of rental (with a minimum waiver of $200) for hawkers at NEA-managed hawker centres. There does not seem to be any rent relief for social enterprise hawker centres, such as Ci Yuan Hawker Centre and Pasir Ris Central Hawker Centre, however.

Government-owned commercial properties

If you are a tenant of of commercial properties owned by HDB, SLA, JTC, NParks or STB, there is a half-month waiver on your rent. This applies to those with leases of not more than 3 years and who do not pay property tax. 

Wage support for employers

Under the new Jobs Support Scheme, the Government will help employers to offset 8% of the wages of their local employees for three months. This is subject to a monthly wage cap of S$3,600 per worker and they payment to employers will be made by end-July.

This grant applies to each Singaporean or PR employee on a company's Central Provident Fund (CPF) payroll for October to December last year, with the aim of helping them to retain their jobs. As it is common knowledge that many F&B businesses rely on foreign manpower, this wage support initiative does not seem very helpful when businesses are struggling to make ends meet. It is foreseeable that our industry, especially SMEs, will be forced to let foreign workers go while struggling to hire locals or running on a skeleton crew of local staff.

Corporate income tax rebate

With effect from YA 2010, a company is taxed at a flat rate of 17% on its chargeable income regardless of whether it is a local or foreign company.

With Budget 2020, a corporate tax rebate of 25% of the tax payable has been announced, capped at $15,000 per company. In his speech, Minister for Finance Heng Swee Keat has urged private commercial landlords to pass on rebates to their tenants; so far only CapitaLand has announced that it will do so.

SME working capital loan

For SMEs in need of more capital, the Government has made adjustments to bolster the SME Working Capital loan, increasing the maximum loan quantum from S$300,000 to $600,000. Previously, Enterprise Singapore will co-share up to 50% of loan default risk with the participating financial institution in the event of insolvency; now the co-shared risk is up to 80%. The interest rate is determined by the respective participating financial institutions in the SME Working Capital Loan scheme. It could range between 6.75% to 8.5% p.a. effective rate, dependent on the SME’s risk and credit assessment.

Part-Time Reemployment Grant

Under the Senior Worker Support Package, funding support will be provided to companies that voluntarily commit to providing part-time re-employment to all eligible seniors who request for it. Details of this grant have not been announced yet. 

This will take effect from 1 July 2020.

Alternative measure: The Help Our Promising Enterprises (Hope) fund 

Created to provide short-term loans to SMEs impacted by the COVID-19 outbreak, this is a working capital loan by Goldbell Group, the Super Group founder’s investment firm Apricot Capital, Ho Lee Group, Paradise Group, Sing Lun Group and Soilbuild Group, working together with the Singapore Business Federation Young Business Leaders Network.

It allows each company to take a fixed loan of S$50,000 at a lending rate between 0.5 to 0.75 per cent monthly, compared to the typical industry rate that ranges widely between 7 and 18 per cent per annum.

Borrowers can defer the loan principal and interest repayment to start from the third month onwards. Applications will open on 26 February 2020.

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Cheryl Tay is the editor and marketer at iCHEF Singapore. She also manages iCHEF Club, a growing community of F&B owners in Singapore – organising events, an online newsletter and the F&B Entrepreneur Bootcamp, the only regular workshop on opening a new restaurant in the country. In her spare time, she attempts to read every book that’s ever won a literary prize and watches cat videos. Like any proper Singaporean, her love for food runs deep – especially spicy food. Chili is life. 

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Simple (and affordable) automations for small F&B businesses

Image credit: Alex Knight

Simple (and affordable) automations for small F&B businesses

In the F&B industry, when we hear “automation”, we immediately think of robot chefs and waiters, self-service kiosks and such. The truth is, not all automation requires such heavy investments and an overhaul of your operations. Instead of directly replacing manpower with robots, there are repetitive tasks that you can automate and simple ways to make processes more efficient. This is especially useful in small businesses – where the business owner, the finance department and accounting department are one and the same. Automating workflows ultimately frees up more time, which can be better spent on your menu, marketing, or improving staff morale just to name a few.

Image credit: Innovo42

Invoice Processing

While going completely paperless is the ultimate goal, in the foreseeable future, businesses are still going to be dealing with paper invoices from suppliers.

Paper or PDF format invoices require someone to decipher them and manually enter them into a system for further processing – a time-consuming and mundane task. Imagine if you could save all that time by using automatic invoice digitization, and spend it on something more worthwhile instead!

How does the invoice digitization process work?

It’s surprisingly easy. With invoice processing software like Innovo Invoice, you upload a PDF, image or scanned copy your invoice and the relevant data will be automatically extracted. This digitised invoice, once you verify it, can then be sent to backend systems like an accounting systems or ERP system for bookkeeping or further processing.

Besides making manual work redundant, it drastically reduces the chances of errors being made by data entry – where a single typo can result in a lot of time wasted on trying to reconcile accounts. 

The healthy SOP (standard operating procedure) of digitising your invoices regularly also improves security, relationships with suppliers, operational planning and cost management because you will be able to organise and see all your invoices at a glance.

Image credit: Xero

Integration with Accounting Software 

You may think you’re setting up a coffee shop or restaurant, but in reality, there are a lot of things you have to do besides manage the front of house or cook – and accounts is one of them.

Using an accounting software like Xero makes it easier to manage your bills, expenses, invoicing and bank reconciliation with an accessible dashboard. This makes it effectively no longer necessary to have an internal accounts person, saving manpower cost. You would only need to engage an accountant once a year – for annual filing and tax filing.

To make things even easier, some POS systems can send the daily sales numbers straight to the accounting software so that you don’t have to update personally.

Seamless, Simplified Workflow 

The best way to automate you most menial tasks is to have your software connected so they can “talk” to each other. Here’s how to set up a workflow that eases your business operations without too much trouble:

1. Integrate invoice processing with Xero so that all your invoices are digitised, automatically added into your accounts and easily taken care of at the end of the month.

2. Use a POS system which can automatically send sales data to Xero, like iCHEF.

3. Connect Xero to your bank. Xero connects directly with all major banks in Singapore to provide automatic transaction updates from your bank directly into Xero every day for easy reconciliation - saving you time, and giving you a clearer picture of your business numbers.

With all your finance management in one place, it is much easier to manage than multiple spreadsheets. At the end of the day, all businesses come down to numbers. Whatever you can measure, you can improve. If you don’t have the right systems in place to measure, you can’t improve. Here’s to spending less time on meaningless work and more on improving your business!

Interested in implementing simpler workflows for your business? We have partnered with Innovo42 and Abundant Accounting to provide our readers with special deals on Invoice Processing and Xero! Click the button below to experience seamless accounting today.

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Cheryl Tay is the editor and content marketer at iCHEF Singapore. She also manages iCHEF Club, a growing community of F&B owners in Singapore – organising events, the blog, an online newsletter and the F&B Entrepreneur Bootcamp, the only regular workshop on opening a new restaurant in the country. In her spare time, she attempts to read every book that’s ever won a literary prize and watches cat videos. Like any proper Singaporean, her love for food runs deep – especially spicy food. Chili is life. 

The F&B Owner's Guide to SST in Malaysia

 

What is SST? Do I have to pay it?

SST stands for Sales and Service Tax and it has come into effect since 1st September, replacing GST in Malaysia.

Sales tax is levied on imported and locally manufactured goods at a rate of 5-10%, and the government collects tax at the manufacturer’s level only.

Service tax is imposed by businesses in the hospitality industry and is fixed at a rate of 6%, but only eateries earning RM1.5 million and above yearly are subject to SST. This includes restaurants, coffee shops and other eateries like mamak outlets. 

The Service Tax license with the name , address and the license number has to be displayed prominently in the licensed premises.

How do I register for service tax? 

Register online through the MySST system. You will be notified of registration or in the absence of a notification, you may need to apply individually online using MySST system.

Accounting for sales and service tax

Service tax is required to be accounted when payment is received, or if full payment is not received, on the day following 12 months from the date of the invoice for the taxable service provided.

Submitting service tax returns and payment

The service tax collected by your business is paid to the government once every two months.

Your service tax return has to be declared every two months according to the taxable period, and submitted no later than the last day of the following month after the taxable period ended. You can do this electronically or by post to SST Processing Centre. 

Service tax return has to be submitted regardless of whether there is any tax to be paid or not.

Late payment penalty:

▪ 10% - first 30 days period. 

▪ 15% - second 30 days period 

▪ 15% - third 30 days period 

▪ Maximum penalty 40% after 90 days

Service tax ≠  Service charge

While service tax is paid to the government, service charge is distributed among the service crew, in place of a tip system.

Service charge can range from 5 - 10%. Service tax is not imposed on the service charge but on the cost of goods or services provided.

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If you are SST registered, here are some ambiguous conditions to take note of.

 

1. if your restaurant’s premises includes parking facilities and you charge for parking, it is subject to service tax.

2. For events:

- If waiter services are part of the event package, they are also subject to service tax. 

- If you collect deposits in advance (e.g. the deposit for an event in December was received in October 2018, considering the bi-monthly taxable period is October and November), you should account for the service tax not later than the last day of the month following the end of each taxable period (i.e. December 2018).

3. Vending machines

All sales through any vending machines owned by F&B operator is subject to service tax. Service tax is to be accounted as inclusive of the sales value.

4. Coupons/ vouchers

Coupon/ voucher purchased online and redeemed at the F&B operator is subject to service tax. The coupon/ voucher value shall be accounted for by F&B operator. The value to impose service tax is the value of actual price.

5. Rental of space

Rental of space on the F&B’s premises is considered as one of the services provided by the service provider. Hence, it is subject to service tax.

6. Retail at your F&B premises

Non-food merchandise such as stationery, newspaper, toys, and etc are not subject to service tax. Neither are titbits and snacks such as sweets, ice cream, banana chips and etc. 

7. Reservations

If your restaurant takes deposits for reservations, service tax is payable upon payment received, so deposits for reservation are subject to service tax.

8. Rental of small stalls

SST tax exemption is given to rental of small stalls within a shop’s compound to food and beverages shop operators.

9. Sales of cigarettes

There is an SST exemption on the sales of cigarettes in food and beverages shops with threshold value of less than ​​​​​​​RM500,000.

You may want to adjust your menu pricing

Under the Sales Tax Bill 2018, 5,443 goods are exempted from SST, compared to 545 goods under GST.

Customs Department has uploaded a list of proposed sales tax rates for various goods, and depending on the tax rate, your restaurant’s food costs might go up.

Common ingredients such as grains like rice, wheat and quinoa, most meats (chicken, duck, beef, mutton, pork) except rabbit and camel and most live fish are exempt from sales tax.

Other seafood, however, is a different story – many items like lobster, prawn, crab, mussels and scallops whether live or smoked/ dried are subject to 10% sales tax. 

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Cheryl Tay is the editor and content marketer at iCHEF Singapore. She also manages iCHEF Club, a growing community of F&B owners in Singapore – organising events, the blog, an online newsletter and the F&B Entrepreneur Bootcamp, the only regular workshop on opening a new restaurant in the country. In her spare time, she attempts to read every book that’s ever won a literary prize and watches cat videos. Like any proper Singaporean, her love for food runs deep – especially spicy food. Chili is life.