Announced by Lawrence Wong, Singapore’s deputy prime minister and finance minister, in February, Budget 2024 takes as its theme ‘building our shared future together’, which requires a unified and resilient approach to navigating global uncertainties and capitalising on growth opportunities.
General changes
To help companies manage rising costs, (i) a corporate income tax (CIT) rebate of 50% of tax payable will be granted for year of assessment (YA) 2024; and (ii) companies with at least one local employee in 2023 will receive a minimum benefit of S$2,000 in cash (referred to as the CIT rebate cash grant). The maximum total benefits of (i) and (ii) are capped at S$40,000. A significant number of SMEs are expected to enjoy immediate financial relief and conserve cashflows.
Currently, any business carrying on a trade, business or profession can claim a deduction for qualifying expenditure incurred on renovation or refurbishment (R&R) works. To ease the compliance burden for businesses and to make the R&R scheme more relevant, enhancements from YA 2025 will include (i) expanding the scope of qualifying expenditure to include designer fees or professional fees, (ii) fixing the relevant three-year period for the purpose of computing the R&R expenditure cap (with the first three-year period being from YA 2025 to YA 2027), and (iii) allowing an option to claim R&R deductions in one YA, subject to the prevailing expenditure cap of S$300,000.
An overseas humanitarian assistance tax deduction scheme will be piloted
An overseas humanitarian assistance tax deduction scheme (OHAS) will be piloted for four years from 1 January 2025 to 31 December 2028 to encourage giving towards overseas emergency humanitarian assistance causes. Individual and corporate donors will be given a 100% tax deduction for qualifying overseas cash donations made through a designated charity and towards a fundraiser for emergency humanitarian assistance with a valid fundraising for foreign charitable purposes permit from the Commissioner of Charities.
A minimum effective tax rate of 15% on businesses’ profits will be imposed
From financial years starting on or after 1 January 2025, a minimum effective tax rate of 15% on businesses’ profits will be imposed following the implementation of the income inclusion rule (IIR) and a domestic top-up tax (DTT) under pillar two of the Base Erosion and Profit Shifting (BEPS) 2.0 initiative. This applies to relevant multinational enterprise (MNE) groups with annual group revenue of €750m or more in at least two of the four preceding financial years (in-scope MNE groups). This is a strategic move to ensure that Singapore can collect the appropriate level of tax on profits generated within its jurisdiction.
To address concerns of in-scope MNE groups as well as to help Singapore attract investment from global companies with the right know-how and to create high-value adding jobs for Singaporeans, a new refundable investment credit scheme (RIC) will be introduced to support up to 50% of qualifying expenditures incurred by companies for qualifying projects during the qualifying period, which could be up to 10 years. It supports high-value and substantive economic activities such as investing in new manufacturing plants, producing low-carbon energy and carrying out innovation and R&D activities. The RIC tax credits are to be set off against CIT payable, and any unused tax credits will be refunded as cash.
Sector-specific changes
Tax incentive schemes for funds managed by Singapore-based fund managers will be extended till 31 December 2029. Some key changes in qualification criteria will take effect from 1 January 2025, which is in line with similar changes already introduced for family-owned fund vehicles to grow Singapore’s asset and wealth management industry.
From YA 2024 the qualifying income of qualifying shipping entities may be taxed on an alternative basis by reference to the net tonnage of their ships to better align the Singapore tax regime for shipping entities with common international practices. This alternative basis of tax is available for the maritime sector incentive (MSI) sub-schemes, including MSI-shipping enterprise (Singapore registry of ship – MSI-SRS), MSI-approved international shipping enterprise (MSI-AIS) and MSI-maritime leasing (ship) (MSI-ML(ship)). The existing tax treatment under the relevant MSI sub-schemes will continue to apply to MSI entities that are not under the alternative net tonnage basis of tax.
Existing concessionary tax rates have been recalibrated with new tiers
The concessionary tax rates offered under Singapore’s existing suite of tax incentives have been recalibrated with new tiers to align with pillar two rules. These include additional concessionary tax rate tiers of 10% for the finance and treasury centre (FTC) incentive, 10% for the aircraft leasing scheme (ALS), 15% for the development and expansion incentive (DEI), 15% for the intellectual property development incentive (IDI) and 15% for the global trader programme (GTP). This is to ensure that Singapore’s tax incentives remain relevant and competitive.
The current concession of taxing only 10% of gross on royalty income accorded to authors, composers and choreographers, or any company in which he or she beneficially owns all the issued shares, will be withdrawn in phases with effect from YA 2027 to ensure parity in the treatment of royalty income. For YA 2027 and YA 2028, eligible taxpayers may continue to claim the tax concession. Their taxable royalty income is based on the lower of (i) the net amount of royalties (ie gross amount of royalties, less allowable deductions and capital allowances), and (ii) 40%/70% of gross amount of royalties for YA 2027/YA 2028 respectively. From YA 2029, the net amount of royalties is subject to tax.
Strategic reform
Singapore’s Budget 2024 aims to help businesses overcome challenges and tap opportunities for growth in a world with considerable uncertainty. By focusing on strategic tax reforms, the budget reaffirms the government’s commitment to fostering a sustainable and forward-looking nation.
