On February 14, 2023, the Finance Minister, Lawrence Wong delivered the budget speech for the year 2023. The Finance Minister (“FM”) stated that the Singaporean economy has recovered back to pre-COVID levels, but it remains in a tight fiscal position. Based on the current global conditions, slower but positive economic growth of 0.5% to 2.5% is expected this year in Singapore.
The key proposals of Budget 2023 are as under:
Corporates/Businesses
- The Budget proposes to introduce an Enterprise Innovation Scheme in order to enhance tax benefits for the following five activities in the innovation value chain:
- Staff cost and consumables incurred on R&D conducted in Singapore.
- Registration of intellectual property, including patents, trademarks, and designs.
- Acquisition and licensing of intellectual property rights.
- Innovation carried out with Polytechnics, Institute of Technical Education (“ITE”) and other qualified partners.
- Training via courses approved by SkillsFuture Singapore (a statutory board that strengthens training infrastructure) and aligned to the Skills Framework.
Currently, businesses are eligible to claim a deduction of up to 250% of qualifying expenditures on some of the above activities (deduction varies according to activities). It is proposed to enhance tax deduction to 400% of the ‘qualifying expenditure’ for the above activities. Qualifying expenditure would be capped at SGD 50,000 for activity (iv) mentioned above while for others, the cap would be SGD 400,000. Qualifying expenditures exceeding the cap will continue to be subject to similar treatment as earlier.
Further, for businesses that are yet to be profitable, it is proposed to convert the deduction into a cash benefit of up to 20% of qualifying expenditure per Year of Assessment (“YA”) with a cap of SGD 20,000 subject to certain conditions. Thus, instead of claiming a deduction, eligible businesses can avail themselves of a non-taxable cash pay-out.
Tax benefit for innovation under the existing provisions was available up to YA 2025. The new scheme will apply from YA 2024 to YA 2028.
- Singapore continues to monitor developments with respect to the Base Erosion and Profit Shifting (“BEPS” 2.0) project led by Organization for Economic Co-operation and Development (“OECD”). BEPS has two approaches. The first is to ensure businesses pay taxes in jurisdictions where they earn profits, irrespective of their physical presence in the jurisdiction. The second BEPS will introduce a global minimum effective tax rate of 15% for large MNE groups with consolidated annual revenues of EUR 750 million or more. Some key parameters of the second BEPS has been finalized this year while others are still under discussion. The European Union (“EU”) recently announced its plans to implement point two in phases starting from 2024. In light of the global developments, Singapore intends to implement Global Anti-Base Erosion (“GloBE”) rules of point two of BEPS 2.0 from 2025, to align minimum global corporate tax rates for large MNE groups by introducing a ‘Domestic Top-up Tax’. From 2025, the Domestic Top-Up tax will be implemented which will top up the MNE groups’ effective tax rate in Singapore to 15%.
- There are no changes proposed in corporate tax rates.
- The Budget proposes an option for businesses to accelerate the write-off of the cost of the acquisition of plant and machinery (P&M). The businesses incurring capital expenditure on the acquisition of P&M in the FY 2023 (i.e. YA 2024) will have an option to write-off acquisition costs over two years viz.
- 75% of the cost incurred to be written off in the first year (i.e. YA 2024); and
- 25% of the cost incurred to be written-off in the second year (i.e. YA 2025).
The option will be irrevocable and cannot be deferred. Currently, businesses can claim either capital allowance (i.e. write-off over the working life of the assets) or write-off of acquisition cost over three years.
- The Budget proposes an option for businesses to accelerate the deduction for renovation or refurbishment (R&R) expenditure incurred in FY 2023 over one year (i.e. YA 2024) instead of the three years allowed currently. A cap of SGD 300,000 for every relevant period of the three consecutive YA continues to apply.
- The 250% tax deduction available to businesses on qualifying donations made to Institutions of a Public Character (“IPC”) and certain other eligible institutions is proposed to be extended till 2026.
- To encourage corporate volunteerism, a 250% tax deduction is available to businesses on qualifying expenditures incurred from July 1, 2016, till December 31, 2023, when their employees volunteer and provide services to IPC and certain eligible institutions. The Budget proposes to extend the tax deduction for another three years till 2026. Further, the Budget proposes to enhance the existing Business and IPC Partnership Scheme into a broader Corporate Volunteer Scheme, which will be rolled out over three years. Under the new scheme:
- The scope of eligible activities for tax incentives will be expanded;
- The qualifying expenditure is currently capped at SGD 250,000 per business per YA and a qualifying expenditure cap of SGD 50,000 per IPC per calendar year. The qualifying expenditure cap per IPC is proposed to be increased from SGD 50,000 to SGD 100,000.
- Under Double Tax Deduction for Internationalization (“DTDi”) Scheme, businesses are allowed a tax deduction of 200% on qualifying market expansion and investment development expenses, subject to prior approval from Enterprise Singapore (“EnterpriseSG”) or Singapore Tourism Board (“STB”). For supporting businesses to build up capabilities in internationalizing via e-commerce, the Budget proposes to enhance the scope of the DTDi scheme to include a new qualifying activity “e-commerce campaign” (i.e. organized course of action to promote goods and services abroad). It will cover specified e-commerce campaign startup expenses paid on or after February 15, 2023 to e-commerce platform/service providers, such as those that advise on market promotion plans, assist in setting up accounts on e-commerce platforms, design of e-commerce publicity material, and upload content related to products/ services on e-commerce platforms, etc.
Employers
- The employers and the employees contribute 17% and 20%, respectively, to Central Provident Fund (“CPF”) calculated on an ordinary monthly salary capped at SGD 6,000. The Budget proposes increasing the salary ceiling in a phased manner over a period of 4 years to SGD 8,000 in 2026, which is as follows:
| Effective date | CPF Monthly Ordinary Wage/ Salary ceiling in SGD |
| September 1, 2023 | 6300 |
| January 1, 2024 | 6800 |
| January 1, 2025 | 7400 |
| January 1, 2026 | 8000 |
- The Budget proposes to double the Government paid paternity leave from 2 weeks to 4 weeks for children born on or after January 1, 2024. Initially, the additional two weeks of paternity leave will be given on a voluntary basis so that employers who wish to grant such leave will be reimbursed by the Government. However, over a period it will be reviewed and made mandatory.
- The Budget proposes to increase the unpaid infant care leave for each parent during the child’s first two years of life from 6 days to 12 days per annum effective from January 1, 2024.
- The extension of ‘senior employment credit’ and ‘part-time re-employment grant’ for employers till 2025. These credits are provided to encourage employers to hire seniors and provide part-time opportunities. Senior employment credit is a pay-out received by the employer for employing senior employees and such pay-out is calculated at a percentage of salary cost and such percentage vary according to criteria such as age and salary of the employee. Part-time re-employment grant is a funding support for the employer that commits to the part-time employment policy.
- It is also proposed to enhance ‘enabling employment credit’ (available for hiring a person with disabilities) and introduce ‘uplifting employment credit’ (for encouraging employers to hire ex-offenders). However, the details of these measures will be declared subsequently.
- The Budget 2022 introduced a Progressive Wage Credit Scheme (PWCS) to co-fund employers for progressive wage increases for lower-wage workers (earning below SGD 3,000 per month). It is proposed to increase Govt co-funding share from 50% to 75% for the first tier (employee with gross monthly wages up to SGD 2500) and 30% to 45% for the second tier (employees with gross monthly wages between SGD 2500 and 3000).
- The Budget proposes to encourage tripartite standards for flexible work arrangements and will implement guidelines by next year whereby employers will be required to consider flexi-work arrangements fairly and properly. Tripartite Standard on Flexible Work Arrangements specifies practices that employers should implement at the workplace to help their employees better manage their work-life needs through flexible work options.
Individuals/Employees
- There are no new changes proposed in the personal income tax rates. However, changes made last year to personal income tax rates are effective from FY 2023 (i.e. YA 2024), which are as follows:
| Income Tax Slabs For the year of assessment 2024 | |
| Annual Taxable Income(In SGD) | Income Tax Rate |
| Up to 20,000 | Nil |
| 20,001 to 30,000 | 2.00% |
| 30,001 to 40,000 | 3.50% |
| 40,001 to 80,000 | 7.00% |
| 80,001 to 1,20,000 | 11.50% |
| 1,20,001 to 1,60,000 | 15.00% |
| 1,60,001 to 2,00,000 | 18.00% |
| 2,00,001 to 2,40,000 | 19.00% |
| 2,40,001 to 2,80,000 | 19.50% |
| 2,80,001 to 3,20,000 | 20.00% |
| 3,20,001 to 5,00,000 | 22.00% |
| 5,00,001 to 10,00,000 | 23.00% |
| Above 10,00,000 | 24.00% |
- The Budget proposes to change Working Mother’s Child Relief, (“WMCR”), from a percentage of the mother’s earned income to a fixed dollar relief effective from YA 2025. WMCR is a tax relief given to working mothers subject to certain conditions.
- Changes in WMCR relief are as under:
| Particulars | Tax relief (SGD) for a child born after January 1, 2024 | Tax relief for a child born before January 1, 2024 |
| First child | 8000 | 15% of the mother’s income |
| Second child | 10,000 | 20% of the mother’s income |
| Third and subsequent child | 12,000 | 25% of the mother’s income |
- The Budget proposes the introduction of additional support to help lower-income platform workers. The platform workers generally include food delivery riders, delivery workers, private-hire car drivers, taxi drivers, etc. who use online platforms to match them with the demand for their services, but who are not employees of the companies operating these platforms. CPF transition support will be provided for the first four years to lower-income platform workers (below 30 years of age) who will have to make increased contributions, and platform companies will have to pay CPF contributions too. A transition support scheme will offset part of platform workers’ increased CPF contributions in the first four years.
Goods and Services Tax (GST)
As announced in the last Budget, GST rates are increased in a phased manner as follows:
- Increase from GST rate of 7% to 8% from January 1, 2023, and
- A further increase in the GST rate to 9% from January 1, 2024.
Other
- The Buyer’s Stamp Duty (“BSD”) regime applies to all purchases or receipts of gifts of immovable properties in Singapore. The Budget proposes the introduction of higher marginal BSD rates for higher-value residential and non-residential properties effective from February 15, 2023, which are as follows:
| The portion of the value of the property | Residential Properties | Non-residential Properties |
| In excess of SGD 1.5 million and up to SGD 3 million | 5% (Currently 4%) | |
| In excess of SGD 3 million | 6% (Currently 4%) | |
| In excess of SGD 1 million and up to SGD 1.5 million | 4% (Currently 3%) | |
| In excess of SGD 1.5 million | 5% (Currently 3%) |
- The Budget proposes a 15% increase in tobacco excise duty across all tobacco products with effect from February 14, 2023.
- The ‘Enterprise Financing Scheme’ is extended for one more year i.e. till 31 March 2024. This includes 70% Government risk-share for certain loans/ financing schemes viz. trade loans, enhanced maximum quantum for trade and working capital loans, and project loans for domestic construction projects.
© Shan & Co 2023