Tax Changes as Covered in Singapore Budget 2023

Finance and Deputy Prime Minister Lawrence Wong’s budget speech 2023 has touched on vital key points to look forward to in 2023 as the government laid out plans to fuel internal revenue sources through taxes whilst providing support to those struggling to adjust to post-pandemic norms and inflation.

Summarised here are the major changes in the existing tax schemes, and reliefs both for local and foreign businesses, individuals, and properties.

A. Tax Changes For Businesses

1. Investment Support

The following tax scheme changes covered activities that include investments and projects directed for development and income generation.

2. Base Erosion and Profit Shifting (BEPS) Pillar 2

• Pillar 2 of the Global Anti-Base Erosion (“GloBE”) model rules ensure multinational enterprises (“MNEs”) – those with consolidated annual group revenue of at least €750m (per books of ultimate parent entity) – pay an effective tax rate (ETR) of at least 15% on profits earned in the jurisdictions they operate.
• Singapore will implement the GloBE rules and Domestic Top-Up Tax (DTT) of 15% from 1 January 2025
• This delay may result in Singapore enterprises of applicable MNEs being subject to DTT tax in other jurisdictions in 2024.
• The Government will monitor the international tax developments (to adjust the timeline as needed), review and update its broad suite of industry development incentives continuously.

3. Qualifying Debt Securities (QDS) Scheme

• Scheduled to lapse after 31 December 2023.
• Extended to 31 December 2028.
• Scope of the qualifying income will include all payments in relation to early redemption of a QDS.
• Qualifying conditions:
  • All debt securities issued on or after 15 February 2023 must be substantially arranged in Singapore by a financial institution holding a specified license (instead of a FSI company)
  • For Insurance-linked securities (ILS) issued on or after 1 January 2024, if the condition above is not met, at least 30% of ILS issuance costs incurred by the issuer must be paid to Singapore businesses.

MAS will provide more details by 31 May 2023.

4. Approved Special Purpose Vehicle (ASPV)

• Current scheme is scheduled to lapse after 31 December 2023.
• Now Extended to 31 December 2028.
• ASPV scheme grants tax exemption on income derived by an ASPV engaged in asset securitisation transactions.
• WHT exemption on payments to qualifying non-residents on over-the-counter financial derivatives in connection with an asset securitisation transaction.
• Instead of a fixed 76% GST rate of recovery on its qualifying business expenses, the GST recovery rate will follow that accorded to licensed full banks for the specific year in question.
• All other conditions remain unchanged.
• ASPV (Covered Bonds) sub-scheme will be introduced from 15 February 2023 for ASPV holding the “cover pool” in relation to the cover bonds in MAS Notice 648
• MAS will provide more details by 31 May 2023

5. Double Tax Deduction for Internationalisation (DTDi) Scheme

• Existing scheme in place until 31 December 2025.
• Enhanced to include a new qualifying activity “e-commerce campaign” which covers e-commerce start-up expenses incurred on or after 15 February 2023:
  • Business advisory on market promotion and execution plans
  • Account creation -set up accounts on e-commerce platforms and the right to sell.
  • Content Creation – design e-commerce campaign publicity materials
  • Product listing and placement -upload content, select suitable frequency and timing to display content on products/services.
• Prior approval is required from EnterpriseSG (granted for a maximum period of one year, per-country basis)
• EnterpriseSG will provide further details by 28 February 2023.

6. Enterprise Innovation Scheme (EIS)

• To encourage R&D innovation here and capability development activities, enhanced tax deduction [or allowance for c)] of 400% is given for the first S$400,000 incurred each YA from YA 2024 to YA 2028 on:
  • Staff costs, consumables incurred on qualifying R&D projects conducted in Singapore.
  • Qualifying IP registration costs
  • Qualifying expenditure incurred on the acquisition and licensing of IP rights (Only businesses with less than $500 million in annual revenue for that YA will qualify)
  • Qualifying training expenditure incurred on qualifying courses (i.e. courses eligible for Skills Future Singapore funding and aligned with the Skills Framework)
• Introduced a 400% tax deduction for up to $50,000 qualifying innovation expenditure projects carried out with polytechnics, the Institute of Technical Education, and other qualified partners per YA.
  • In lieu of the enhanced deduction, businesses may opt for a non-taxable cash payout (capped at S$20,000 per YA) at 20% of qualifying expenditures across all qualifying activities above (ie maximum S$100,000).
  • Available to businesses with at least 3 full-time local employees earning at least S$1,400 monthly gross salary and in employment for 6 months or more in basis period of the relevant YA.
• IRAS will provide further details of changes by 30 June 2023.

7. Accelerated capital allowance (CA) in YA 2024

• Businesses that acquire plant and machinery in YA2024 can elect accelerated CA claim as follows:
  • 75% of the cost incurred to be written off in 1st year (YA2024); and
  • 25% of the cost incurred to be written-off in 2nd year (YA2025)
• No deferment of CA claims is allowed

8. 1-year S14N Renovation or Refurbishment (R&R) deduction (previously S14Q) in YA 2024

• Claim 1-year deduction on qualifying R&R costs incurred in YA 2024
• Cap of S$300,000 for every relevant period of three consecutive YAs still applies

B. Tax Changes For Individuals

1. Working Mother Child Relief (WMCR)

WMCR is given to working mothers who have maintained a Singapore citizen child born or adopted on the year preceding the YA of claim.

• All other conditions remain unchanged.
• This change will take effect from YA 2025.

For the new absolute reliefs and using the same % of earned income pre-change, we are looking at a WM’s annual earned income of approximately S$50,000.

2. Grandparent Caregiver Relief (GCR)

GCR is given to working mothers who engage the help of their parents, grandparents, parents-in-law or grandparents-in-law to take care of their children.

3. Foreign Domestic Worker Levy Relief (FDWLR)

4. Changes in  Central Provident Fund (CPF)

• CPF monthly salary ceiling will be raised by S$2,000 from S$6,000 to S$8,000 by 2026.
• Employer and employee CPF contribution rates for employees aged above 55 to 70 will increase by up to 1 percentage point each from 1 January 2024. A one-year CPF Transition Offset (equivalent to half the 2024 increase in employer CPF contribution rates) will be given to employers to mitigate the rise in business costs.
• From June 2023, the minimum CPF monthly payout will be raised from $250 to S$350 for those on the Retirement Sum Scheme.

C. Tax Change For Businesses, Individuals & Bodies of Persons

1. Corporate Volunteer Scheme (CVS) (formerly Business and IPC Partnership Scheme (BIPS)

• BIPS ends 31 December 2023.
• Extended until 31 December 2026.
• With effect from 1 January 2024:
  • BIPS will be renamed CVS – scope of qualifying volunteering activities expanded to include activities conducted virtually (e.g., online mentoring, tuition support for youths/children) and activities outside of the IPC’s premises (e.g., refurbishment of rental flats).
  • Cap on qualifying expenditure per IPC per calendar year doubled to S$100,000

2. Corporate Volunteer Scheme (CVS) (formerly Business and IPC Partnership Scheme (BIPS)

• Incentive introduced to qualifying donors with Family Offices operating in Singapore.
• Doners must have a fund under MAS’ Section 13O or 13U (formerly S13R and S13X) schemes and meet eligibility conditions such as incremental business spending of S$200,000.
• Qualifying donors can claim 100% tax deduction for overseas donations made through qualifying local intermediaries. The tax deduction is capped at 40% of the donor’s statutory income.
• MAS will provide more details by 30 June 2023.

D. Changes on Stamp Duty

1. Raise Buyer’s Stamp Duty (BSD) on Residential/Non-Residential Property from 15 Feb 2023 

From 20 Feb 2018 to 14 Feb 2023

For a property bought for S$6 million before (e.g. in 2020) and after this change, Residential or Non-Residential, the incremental stamp duty is as follows

Ensure you are and will always be updated of the tax changes to ascertain you enjoy the reliefs and benefits due to you. Our team of experienced tax professionals can walk you through the process or manage your accounts for your individual, corporate or property tax needs.

Get in touch with Audrey Ong or Sharifah Mahmood to get started.

All materials have been prepared for general information purposes only. The information presented in this document is not legal advice, is not to be acted on as such, may not be current and is subject to change without notice. Professional advisory should be sought before taking or refraining from any action as a result of the contents of this document.