On 14 February 2023, Deputy Prime Minister and Finance Minister Mr. Lawrence Wong delivered his budget speech for the fiscal year April 2023 to March 2024 in Parliament. The theme of the budget this year is “Moving Forward in a New Era”.
In this budget, the Government announced Singapore’s measures to address challenges in a new era of uncertainty, due to an unstable global economy due to factors such as the decline of the US and EU economies, global conflicts, and the threat of Covid-19 variants. The focus of this budget is on being prepared to respond to these challenges.
Accordingly, Budget 2023 has identified three key thrusts to address challenges in the future economy: growing the economy and building local enterprise and workforce capabilities, strengthening the social compact by supporting housing and vulnerable groups, and enhancing resilience by building strong organizational capabilities, resilient supply chains and safeguarding climate resilience.
These thrusts align with Singapore’s fiscal policy, which takes a long-term view intended to support Singapore in the way forward with a strong defensive posture against the uncertain global economy.
Below, we summarise the key tax changes announced in Budget 2023:
Consistent with the Budget 2022 announcement of plans to implement a Minimum Effective Tax Rate of 15%, reform to our tax system remains on the horizon. This is a direct response to a global political agreement that was reached in October 2021 to implement a minimum corporate tax rate of 15% on large multinational groups (i.e. those with a minimum annual revenue of €750 mil).
Singapore plans to adopt the GloBE rules and DTT (previously referred to as Minimum Effective Tax Rate) for businesses’ financial year beginning on or after January 1, 2025. The implementation timeline may be adjusted if there are international delays, and businesses will be given sufficient notice before the rules become effective.
Meanwhile, there will be no immediate change to the corporate tax rate of 17% or the partial tax exemption scheme which applies to the first $200,000 of a company’s normal chargeable income. Consistent with Year of Assessment (“YA”) 2022, no corporate income tax rebate will be granted for YA 2023.
For comparison, we append below corporate tax rates for selected jurisdictions:
Jurisdiction | Corporate Tax Rate (%) | Jurisdiction | Corporate Tax Rate (%) |
| Hong Kong | 16.5 | Vietnam | 20 |
| Taiwan | 20 | China | 25 |
| Thailand | 20 | The Philippines | 25 |
| South Korea | 25 | India | 30 |
| Indonesia | 22 | Japan | 30.62 |
| Malaysia | 24 |
2.1.2 A new tax deduction of 400% for the first $50,000 of qualifying innovation expenditure per YA for YA2024 to YA2028 incurred on qualifying innovation projects.
2.1.3 In each case, qualifying businesses can choose to receive a non-taxable cash payout instead of tax deduction or allowances at a cash conversion ratio of 20% for up to $100,00 of total qualifying expenditure as set out above per YA capped at $20,000 per YA.
2.1.4 The YA2025 sunset date for the abovementioned measures along with the pre-existing writing down allowance on the acquisition cost of qualifying IP rights has been extended to YA 2028.
The DTDi scheme which allows a tax deduction of 200% on qualifying expenses, will now include a new qualifying activity called “e-commerce campaign” to support businesses in their efforts to build up capabilities in internationalising via e-commerce. The expenses covered include business advisory, account creation, content creation, and product listing and placement. The enhancement will apply to qualifying expenses incurred on or after 15 February 2023, with further details to be provided by Enterprise Singapore (“EnterpriseSG”) by 28 February 2023.
2.3.1 Option to Accelerate the Write-off of the cost of Acquiring Plant and Machinery (“P&M”)
Businesses which acquire P&M in the basis period for YA2024 (i.e. financial year ending in 2023) can accelerate the write-off of the cost of acquisition over two years, with no deferment of CA claims allowed. This option is irrevocable and allows 75% of the cost to be written off in the first year (YA2024) and 25% in the second year (YA2025). This option is in addition to existing capital allowance write-off options.
2.3.2 Option to accelerate the Deduction for Renovation or Refurbishment (“R&R”) Expenditure
For businesses who spend on R&R during the basis period for YA2024 (i.e. financial year ending in 2023) can choose to claim an accelerated R&R deduction in one YA (this is in addition to the existing option to claim over three consecutive YAs). The cap of $300,000 for every relevant period of three consecutive YAs still applies. This option is irrevocable once exercised.
The following schemes will be extended to encourage businesses to make capital investments:
2.4.1 The Investment Allowance (“IA”) scheme which provides additional tax allowance for businesses that spend on approved projects based on a percentage of the capital expenditure (minus any grants received). The scheme which was scheduled to lapse after 31 December 2023 – will be extended until 31 December 2028.
2.4.2 The IA-100% scheme which grants 100% IA support for approved capital expenditure for automation projects (net of grant) which was scheduled to lapse after 31 March 2023 – will be extended until 31 March 2026, with no change to its parameters.
The following incentives and schemes will be extended:
2.5.1 Extend the Pioneer Certificate Incentive (“PC”) and Development and Expansion Incentive (“DEI”)
The PC and DEI aim to encourage companies to grow, conduct new activities and establish their headquarters in Singapore. In order to encourage companies to develop high-value added manufacturing and services activities in Singapore, both incentives which were scheduled to lapse after 31 December 2023 will be extended until 31 December 2028.
2.5.2 Extend the IP Development Incentive (“IDI”)
The IDI supports companies that use and commercialise IP rights arising from R&D in Singapore by granting incentivized tax rates of 5% or 10% on a percentage of their qualifying IP income. The IDI which was scheduled to laps after 31 December 2023 will be extended until 31 December 2028.
2.5.3 Extend and Refine the Qualifying Debt Securities (“QDS”) Scheme
The QDS scheme, which supports the development of Singapore’s debt market and scheduled to lapse after 31 December 2023, will be extended until 31 December 2028. The scope of qualifying income under the scheme will be clarified to include all payments related to the early redemption of a QDS. In addition, the requirement that the QDS be substantially arranged in Singapore will be rationalised.
All other conditions of the scheme remain the same. The Monetary Authority of Singapore will provide more information on this by 31 May 2023.
2.5.4 Extend the Tax Exemption on Income Derived by Primary Dealers from Trading in Singapore Government Securities (“SGS”)
In order to support and promote trading in SGS, the tax exemption on income from trading in SGS derived by primary dealers from trading in SGS, which was scheduled to lapse after 31 December 2023 will be extended until 31 December 2028. No other changes will be made to the current scheme.
2.5.5 Extend and Refine the Tax Incentive Scheme for Approved Special Purpose Vehicle (“ASPV”) Engaged in Asset Securitisation Transactions (“ASPV scheme”) and Introduce a New Sub-scheme to Support Covered Bonds
The ASPV scheme, which supports the development of Singapore as structured finance centre in Asia and was scheduled to lapse after 31 December 2023, will be extended until 31 December 2028 with a refinement in the GST recovery rate for licensed full banks. All other tax concessions and conditions of the ASPV scheme will remain the same.
Additionally, a new sub-scheme called ASPV (Covered Bonds) will be introduced for the special purpose vehicle holding the “cover pool” in relation to the covered bonds. This scheme will be in effect from 15 February 2023 to 31 December 2028, and will be administered by MAS. More details about this sub-scheme will be provided by MAS before 31 May 2023.
2.5.6 Extend and Refine the Financial Sector Incentive (“FSI”) Scheme
The FSI scheme which was scheduled to lapse after 31 December 2023, will be extended until 31 December 2028, and the tax rates will be streamlined into two tiers of 10% and 13.5% for new and renewal awards approved from 1 January 2024. In addition, the qualifying activities will be updated for continued relevance. Further details on the changes will be provided by the MAS before 31 May 2023.
2.5.7 Extend the Insurance Business Development – Insurance Broking Business (“IBD-IBB”) Scheme
The IBD-IBB scheme which offers a reduced tax rate of 10% on commission and fee income to approved insurance and reinsurance brokers for their insurance broking and advisory services, will be extended until 31 December 2028, to enhance Singapore’s position as a leading insurance and reinsurance center. No other changes to its existing conditions will take place.
2.5.8 Extend the Tax Concession for Deduction of General Provisions for Doubtful Debts and Regulatory Loss Allowances Made in Respect of Non-credit- impaired Financial Instruments for Banks (Including Merchant Banks) and Qualifying Finance Companies
Banks, merchant banks, and qualifying finance companies can claim a tax deduction for general provisions on non-credit-impaired loans and debt securities under section 14G of the ITA, subject to a cap. The tax deduction will expire after YA2024 (for those with a 31-December FYE) or YA2025 (for those with a non-31-December FYE). To promote the stability of the Singapore financial system, the tax deduction under section 14G of the ITA will be extended until YA2029 or YA2030 (depending on whether a 31 December FYE applies).
2.5.9 Extend Three Tax Measures Relating to Submarine Cable Systems
Currently there are three tax measures related to submarine cable systems, including a withholding tax exemption, writing down allowance for acquisition of indefeasible right to use (IRU) and IA for submarine cable system construction and operation in Singapore. These measures which are scheduled to expire between 2023 and 2025 will be extended until 31 December 2028 with the same conditions.
2.5.10 Withdraw the Tax Deduction for Expenditure Incurred on Building Modifications for Benefit of Disabled Employees
The scheme introduced in Budget 1989 to help employers hire and retain disabled employees will be discontinued from 15 February 2023. This scheme which permitted employers to claim tax deductions for approved expenditure has become less relevant over the years with the introduction of other support schemes which help employers recruit and retain disabled employees.
To further encourage Singaporeans to contribute to the community, the 250% tax deduction for qualifying donations to IPCs and eligible institutions will be extended for another three years, ie for donations made during the period 1 January 2024 to 31 December 2026 (both dates inclusive). The conditions of the scheme will remain unchanged.
To continue supporting corporate volunteering, the government will extend the 250% tax deduction on qualifying expenditure incurred under the CVS until 31 December 2026. The scope of qualifying volunteering activities will also be expanded to include virtual as well as activities outside of the IPCs’ premises. The cap on qualifying expenditure per IPC per calendar year has been doubled to $100,000. These enhancements will take effect from 1 January 2024, while all other conditions of the scheme remain unchanged.
A new tax incentive scheme will be available for qualifying donors with Family Offices in Singapore who have a fund under MAS’ section 13O or 13U schemes and meet certain eligibility conditions. The conditions include incremental business spending of at least $200,000. The scheme allows qualifying donors to claim 100% tax deduction for overseas donations made through qualifying local intermediaries, up to a cap of 40% of the donor’s statutory income. MAS will provide further details by 30 June 2023.
For qualifying children who are Singapore citizens born or adopted on or after 1 January 2024, the WMCR will be changed to a fixed dollar tax relief (ranging from SGD 8,000 to $12,000) for eligible working mothers with effect from YA 2025. For eligible working mothers with a qualifying Singapore citizen child born or adopted before 1 January 2024, there is no change to the WMCR.
In 1989, the FDWLR was introduced to aid married working women who required assistance from a migrant domestic worker. The government has since established various programs to provide direct support to individuals caring for dependents, predominantly in the form of concessionary levies. Starting from the YA2025, the FDWLR will no longer be available to taxpayers.
To enhance the progressivity of the BSD regime, higher rates will be introduced for higher-value residential and non-residential properties.
These new rates will apply to all properties acquired on or after 15 February 2023, with certain transitional provisions available. As such, where the BSD rates on or before 14 February 2023 will apply for cases that meet the conditions.
Higher of Purchase Price or Market Value of the Property | Marginal BSD Rate | |
Residential Property | Non-residential property | |
First $180,000 | 1% | 1% |
Next $180,000 | 2% | 2% |
Next $640,000 | 3% | 3% |
Next $500,000 | 4% | 4% |
Next $1,500,000 | 5% | 5% |
Amount exceeding $3,000,000 | 6% | |
Working mothers will now be able to claim GCR when their parents, grandparents, parents-in-law, or grandparents-in-law (including parents or grandparents of an ex-spouse) help take care of their young children, as long as their total income from trade, business, profession, vocation or/and employment does not exceed $4,000 in the year before the YA of claim, provided that they meet all other conditions. This change will take effect from YA2024, giving caregivers the flexibility to do some incidental work.
The tiering structure for the ARF fee applicable to cars, taxis, and goods-cum-passenger vehicles will change. This new system will be implemented for all new and imported used cars and goods-cum-passenger vehicles registered with Certificates of Entitlement (“COEs”) obtained from the second COE bidding exercise in February 2023 onwards. For vehicles that do not need to bid for COEs, such as taxis and classic cars, the new rates will apply for those registered on or after 15 February 2023. More details will be announced by the LTA.
The government will cap the PARF rebates at $60,000 for cars that are deregistered within their PARF eligibility period. This cap will apply to cars that need to bid for COEs and are registered with COEs obtained from the second bidding exercise in February 2023 onwards, as well as cars that do not need to bid for COEs and are registered on or after 15 February 2023. However, the cap will not apply to vehicles that are not eligible for PARF rebates, such as goods-cum-passenger vehicles, classic cars, and vehicles that have been laid-up. The LTA will provide further details.
To discourage the consumption of tobacco products, the excise duties across all tobacco products will be raised by 15%. These tax changes will take effect on and after 14 February 2023.
No changes to personal tax rates were introduced in this budget. With effect from YA 2024, two new tax brackets were introduced for tax-resident individuals with chargeable income in excess of 0.5 mil to 1 mil respectively. For resident taxpayers below this bracket, personal tax rates remain unchanged from YA 2017.
We append below the tax rate table for resident taxpayers:
| Tax rate structure with effect from Year of Assessment (“YA”) 2024 | ||||||
|
| Chargeable Income ($) | Tax Rate (%) | Gross Tax Payable ($) | Chargeable Income ($) | Tax Rate (%) | Gross Tax Payable ($) |
| On the first On the next | 20,000 10,000 | 0 2 | 0 200 | 200,000 40,000 | – 19 | 21,150 7,600 |
| On the first On the next | 30,000 10,000 | – 3.5 | 200 350 | 240,000 40,000 | – 19.5 | 28,750 7,800 |
| On the first On the next | 40,000 40.000 | – 7 | 550 2,800 | 280,000 40,000 | – 20 | 36,550 8,000 |
| On the first On the next | 80,000 40,000 | – 11.5 | 3,350 4,600 | 320,000 180,000 | – 22 | 44,550 39,600 |
| On the first On the next | 120,000 40,000 | – 15 | 7,950 6,000 | 500,000 500,000 | – 23 | 84,150 115,000 |
| On the first On the next | 160,000 40,000 | – 18 | 13,950 7,200 | 1,000,000 1,000,000 | – 24 | 199,150
|
Similarly, the PIT rate for non-tax-residents (except on employment income and certain other income) increased to 24% for YA 2024 onwards.
We wish to take this opportunity to remind our clients of the tax filing due dates for the Year of Assessment 2023:
Personal Tax | filing due on 18 April 2023 (By e-filing) |
Partnerships, Clubs, Associations and Management Corporations | filing due on 15 April 2023 |
Corporate Tax | filing due on 30 November 2023 |
