February 2024 - Singapore Budget 2024 – Highlights

On February 16, 2024, the Finance Minister, Lawrence Wong delivered the Budget speech for the year 2024. The Singapore economy grew 1.1% in 2023 and the economy is forecasted to grow between 1% to 3% in the year 2024. The Finance Minister stated that the Singaporean economy has been impacted due to troubled international economy and higher cost of living. However, the Budget 2024, titled “Building Our Shared Future Together”, aims to keep Singapore moving forward, providing support and assistance to all the Singaporeans particularly, middle class. The Budget focuses on investing in cost-of-living relief, workforce development, and skills training, as well as promoting artificial intelligence and sustainability for future endeavors.

The key proposals of the Budget 2024 are as under:

Corporates/Businesses

There are no changes proposed in corporate tax rates. The standard corporate tax rate in Singapore is 17%. The tax year followed in Singapore is calendar year. The corporate tax is assessed on a preceding year basis (i.e. “basis period”). Hence, the income earned in the basis period is assessed to tax in subsequent year (i.e. year of assessment “YA”).

Introduction of ‘Enterprise Support Package’, aiming to aid businesses in managing escalating costs by offering a comprehensive set of measures. The package provides SGD 1.3 billion in support to companies altogether and includes three key components viz., (i) Corporate income tax rebate, (ii) Enhancements to the enterprise financing scheme, and (iii) Extension of the skills future enterprise credit, which are elaborated as below:
Corporate income tax (CIT) rebate: A CIT rebate of 50% of tax payable is proposed for the YA 2024, capped at SGD 40,000. Along with this, companies meeting the “local employee condition” i.e., contributing to Central Provident Fund (CPF) for at least one local employee (Singapore citizen or permanent resident) in 2023 subject to certain exclusions, will receive a minimum SGD 2,000 benefit in cash, termed as “CIT Rebate Cash Grant.”

Enterprise financing scheme (EFS): The EFS is extended for one more year i.e., till March 31, 2025 (in the previous Budget it was extended till March 2024), which provides trade loans of SGD 10 million. The EFS scope broadened with the aim of including Smaller and Medium Enterprises (SME) with an increase in limits of working capital loan from SGD 300,000 to SGD 500,000.

Skills Future Enterprise Credit (SFEC): The Budget proposes to extend SFEC scheme introduced in Budget 2020, until June 20, 2025. The SFEC encourages employers to undertake enterprise and workforce transformation initiatives, providing eligible companies with a one-time credit of up to SGD 10,000. This credit covers up to 90% of out-of-pocket expenses for qualifying enterprise capability development and workforce transformation programs, with SGD 3,000 specifically allocated for workforce transformation efforts.

The Budget 2024 introduces significant changes to corporate tax considering Base Erosion and Profit Shifting (“BEPS” 2.0) initiative, a project led by Organization for Economic Co-operation and Development (“OECD”). BEPS has 2 pillars/approaches. Pillar 1 aims to ensure businesses pay taxes in jurisdictions where they earn profits, irrespective of their physical presence in the jurisdiction by re-allocating taxing rights to marketing jurisdictions. The implementation of Pillar 1 is delayed currently. Pillar 2 introduces a global minimum effective tax rate of 15% for large multinational enterprises (MNE) groups with consolidated annual revenues of EUR 750 million or more. In light of the global developments and introduction of Pillar 2 minimum tax in many jurisdictions, Singapore intends to implement Global Anti-Base Erosion (“GloBE”) rules of Pillar 2 of BEPS 2.0 from 2025. The Budget proposes to introduce two components of Pillar 2 namely, Income Inclusion Rule (IIR) and Domestic Top-up Tax (DTT) from January 1, 2025, which will apply to MNEs with global turnover of minimum EUR 750 Mn. The IIR will be applicable to MNEs headquartered in Singapore in respect of the profits of their group entities operating outside of Singapore. The DTT will be applicable to MNEs headquartered outside Singapore in respect of the profits of the group entities operating within Singapore.

The Budget proposes introduction of Refundable Investment Credit’ (RIC), in which additional revenues obtained from global minimum tax will be re-invested by Singapore to stay competitive. It is a tax credit with a refundable cash feature. It will help in attracting investments from global companies. It will support high-value and substantive economic activities, including the setting up or expansion of manufacturing facilities; new innovation and R&D activities; as well as activities in support of the green transition. The RIC will support up to 50% of qualifying expenditure and can offset corporate tax payable or be refunded within four years from when the company meets the eligibility criteria for cash refund. More information on RIC will be available by the third quarter of 2024.

Effective from YA 2025, the tax deduction for ‘Renovation or Refurbishment’ (“R&R”) expenditure will undergo significant enhancements. Under the current provisions, businesses can claim tax deduction for R&R expenses over 3 years with a cap of SGD 300,000. The changes in the deduction are as below:

The scope of qualifying expenditure to cover designer or professional fees;
The relevant three-year period for computing the R&R expenditure cap will be fixed, with the initial period spanning from YA 2025 to YA 2027; and
Introducing an option to accelerate the R&R expenditure claim within a single YA, subject to the prevailing expenditure cap.

Further details on these enhancements will be provided by the Inland Revenue Authority of Singapore (IRAS) by the third quarter of 2024.

Employers

Effective from January 1, 2025, the Budget proposes a total increase of 1.25% in CPF contribution rate for senior workers aged between 55 to 65 years of age, including increase of 0.5% in the employer’s contribution.

Certain measures are introduced for uplifting of lower wage workers, namely:

The Budget 2022 introduced a ‘Progressive Wage Credit Scheme’ (PWCS) to co-fund employers, for progressive wage increases for lower-wage workers (i.e. earning below SGD 3,000 per month). The current Budget proposes to increase the Government co-funding levels from maximum of 30% to maximum of 50%, and also proposes increase in gross monthly wage ceiling for PWCS co-funding from SGD 2,500 to SGD 3,000 in qualifying years 2025 and 2026.

The minimum ‘Local Qualifying Salary’ (LQS) for entities hiring foreign workers is increased from SGD 1,400 to SGD 1,600 per month for full time workers and from SGD 9 to SGD 10.50 per hour for part time workers, effective from July 1, 2024. The computation quota of foreign workers will be adjusted with new LQS.

The qualifying wage cap under the ‘Workfare Income Supplement Scheme’ is increased from SGD 2,500 to SGD 3,000 effective from January 1, 2025, and increased workfare payout for lower-wage senior workers from SGD 4,200 up to maximum annual payout of SGD 4,900.

Individuals/Employees

The tax year in Singapore followed by individuals is the calendar year. An individual’s income from a previous calendar year is assessed to tax in the following calendar year (i.e. year of assessment, “YA”).

The Budget 2022 introduced two new income bracket tiers viz. 23% and 24%, which took effect from YA 2024. In the current Budget, there are no changes proposed in the personal income tax rates. The personal income tax rates applicable to residents for FY 2023 and 2024 (i.e. YA 2024 and 2025), are as follows:

Income Tax Slabs For the year of assessment 2024 and 2025
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%

In view of cost-of-living concerns, the Budget proposes personal income tax rebate for Singaporean residents for YA 2024 up to 50% of tax payable with the maximum limit of SGD 200.
Effective from YA 2025, there is an increase in the annual income threshold from SGD 4,000 to SGD 8,000 for dependant related reliefs.
The Budget proposes discontinuation of course fees (including tuition and examination fees) benefit of up to SGD 5,500 from YA 2026 relating to approved academic, professional, or vocational qualifications.
The Budget proposes one-time MediSave bonus of up to SGD 300 to all Singaporeans aged between 21 to 50 years.

Goods and Services Tax (GST)

The GST rate is increased from 8% to 9%, effective from January 1, 2024. There are no changes proposed to GST rates in this Budget.

Others

The Budget has proposed the introduction of Overseas Humanitarian Assistance Tax Deduction Scheme (“OHAS”), which will be piloted from January 1, 2025, until December 31, 2028. Currently, there is no tax deduction for overseas cash donations unless qualify under Philanthropy Tax Incentive Scheme for Family Offices (“PTIS”). Under the new OHAS, both individual and corporate donors will receive a 100% tax deduction for qualifying overseas cash donations made through a designated charity towards emergency humanitarian assistance fundraisers, provided the charity holds a valid permit/ approval for the purposes. Tax deductions are capped at 40% of the donor’s statutory income, jointly with deductions under the PTIS. Any unused tax deductions cannot be carried forward or transferred under the Group Relief System. Additional details on OHAS will be furnished by the IRAS by the second quarter of 2024.
Tax incentive schemes for funds managed by Singapore-based fund managers, known as “Qualifying Funds,” were initially set to expire after December 31, 2024. However, these schemes will now be extended until December 31, 2029.

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