top of page

Budget 2023: A Simplified Guide to the Latest Tax Changes for Businesses"

Budget 2023 is just announced. Here are the changes announced that will affect businesses.

Tax Change

Summary

Related Information

Implement the Global Anti-Base Erosion (GloBE) Rules (i.e., Income Inclusion Rule and Undertaxed Profits Rule) and Domestic Top-up Tax (DTT)

  • Singapore plans to implement the Global Anti-Base Erosion (GloBE) rules and Double Taxation Treaty (DTT) from the financial year of businesses starting on or after 1 January 2025.

  • The implementation timeline may be adjusted if there are any delays in international developments, and the government will monitor such developments closely.

  • The government will engage with businesses and provide them with adequate notice before any rules become effective.

Introduce the Enterprise Innovation Scheme (EIS)

  • Singapore will enhance or introduce a suite of tax measures to encourage businesses to engage in R&D, innovation, and capability development activities under the EIS.

  • Tax deduction for qualifying R&D projects conducted in Singapore will be enhanced to 400% for the first $400,000 of staff costs and consumables incurred on a yearly basis from YA2024 to YA2028.

  • Tax deduction for qualifying IP registration costs will be enhanced to 400% for the first $400,000 incurred per YA from YA2024 to YA2028.

  • Tax allowance/deduction for the acquisition and licensing of IP rights will be enhanced to 400% for the first $400,000 of qualifying expenditure incurred per YA from YA2024 to YA2028. This enhancement will only be available to businesses generating less than $500 million in revenue in the relevant YA.

  • Tax deduction for qualifying training expenditure incurred on qualifying courses will be enhanced to 400% for the first $400,000 per YA from YA2024 to YA2028.

  • A 400% tax deduction will be introduced for up to $50,000 of qualifying innovation expenditure incurred on qualifying innovation projects carried out with polytechnics, the Institute of Technical Education, and other qualified partners per YA from YA2024 to YA2028.

  • Businesses can opt for a non-taxable cash payout of up to $20,000 per YA at a cash conversion ratio of 20% on up to $100,000 of total qualifying expenditure across all qualifying activities.

  • The sunset dates for various sections of the Income Tax Act 1947 will be extended till YA2028 in line with the above enhancements.

  • IRAS will provide further details of the changes by 30 June 2023.

Enhance the Double Tax Deduction for Internationalisation (DTDi) Scheme

  • E-commerce is an important mode of overseas expansion for businesses.

  • The DTDi scheme will be enhanced to include a new qualifying activity called "e-commerce campaign".

  • The DTDi scheme will cover e-commerce campaign start-up expenses paid to e-commerce platform/service providers.

  • The e-commerce campaign start-up expenses include business advisory, account creation, content creation, and product listing and placement.

  • Prior approval is required from EnterpriseSG to enjoy DTDi on the new qualifying activity.

  • EnterpriseSG will only approve DTDi support for e-commerce campaigns for a maximum period of one year, applied on a per-country basis.

  • The above enhancement will take effect for qualifying e-commerce campaign start-up expenses incurred on or after 15 February 2023.

  • EnterpriseSG will provide further details of the changes by 28 February 2023.

Provide an Option to Accelerate the Write-off of the Cost of Acquiring Plant and Machinery (P&M)

  • Businesses in Singapore can receive temporary support by accelerating the write-off of the cost of acquiring P&M (plant and machinery) over two years.

  • This option is available for businesses that incur capital expenditure on the acquisition of P&M in the basis period for YA2024 (financial year ending in 2023) and is irrevocable if exercised.

  • The accelerated CA rates allowed are 75% of the cost incurred to be written off in the first year (i.e. YA2024) and 25% of the cost incurred to be written-off in the second year (i.e. YA2025).

  • This option is in addition to the options currently available under sections 19 and 19A of the ITA.

  • No deferment of CA claims is allowed under the above option, which means that if a business opts for the accelerated write-off option, it needs to claim the capital expenditure incurred for acquiring P&M based on the rates of 75% (in YA2024) and 25% (in YA2025) over the two consecutive YAs.

Provide an Option to Accelerate the Deduction for Renovation or Refurbishment (R&R) Expenditure

  • Businesses that incur qualifying expenditure on R&R during the basis period for YA2024 (i.e. financial year ending in 2023) can claim R&R deduction in one YA.

  • This is called accelerated R&R deduction.

  • The cap of $300,000 for every relevant period of three consecutive YAs will still apply.

  • This option, if exercised, is irrevocable.

  • This option will be in addition to the existing option currently available under section 14N of the ITA.

Extend the Investment Allowance (IA) Scheme

  • The IA scheme is meant to encourage businesses to invest in plant and productive equipment in Singapore.

  • The scheme will be extended until 31 December 2028.

Extend the IA-100% Scheme for Automation Projects

  • The IA100% scheme encourages businesses to transform through automation.

  • The scheme will be extended until March 31, 2026.

  • The parameters of the scheme will remain the same.

Extend the Pioneer Certificate Incentive (PC) and Development and Expansion Incentive (DEI)

  • The PC (Productivity and Innovation Credit) and DEI (Double Tax Deduction for Internationalisation) schemes in Singapore will be extended.

  • The extension period for both schemes will be until 31 December 2028.

  • The aim is to support companies to anchor and grow strategic high value-added manufacturing and services activities in Singapore.

Extend the IP Development Incentive (IDI)

The IDI (Intellectual Property Development Incentive) scheme will be extended until 31 December 2028.

Extend and Refine the Qualifying Debt Securities (QDS) Scheme

  • The QDS scheme will be extended till 31 December 2028 to support the development of Singapore's debt market.

  • The scope of qualifying income under the QDS scheme will be streamlined and clarified to include all payments related to early redemption of a QDS.

  • The requirement that the QDS has to be substantially arranged in Singapore will be rationalized.

  • For debt securities issued on or after February 15, 2023, they must be substantially arranged in Singapore by a financial institution holding a specified license.

  • For insurance-linked securities (ILS) issued on or after January 1, 2024, at least 30% of the ILS issuance costs incurred by the issuer must be paid to Singapore businesses if they cannot meet the condition in (a) above.

  • All other conditions of the scheme remain the same.

  • The Monetary Authority of Singapore (MAS) will provide further details by May 31, 2023.

Extend the Tax Exemption on Income Derived by Primary Dealers from Trading in Singapore Government Securities (SGS)

  • The tax exemption on income derived by primary dealers from trading in SGS will be extended till 31 December 2028.

  • The aim is to continue supporting primary dealers and encourage trading in SGS.

  • All other conditions of the scheme remain the same.

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 will be extended till 31 December 2028 to continue developing the structured debt market.

  • The GST recovery rate for ASPV will be the prevailing rate accorded to licensed full banks under MAS for the specific year in question, instead of a fixed rate of 76%.

  • All other tax concessions and conditions of the ASPV scheme remain the same.

  • A new sub-scheme named ASPV (Covered Bonds) will be introduced to support the issuance of covered bonds in Singapore.

  • The ASPV (Covered Bonds) scheme will be effective from 15 February 2023 to 31 December 2028 and will be administered by MAS.

  • MAS will provide further details on the new sub-scheme by 31 May 2023.

Extend and Refine the Financial Sector Incentive (FSI) Scheme

  • The FSI scheme will be extended until 31 December 2028 to support the growth of financial sector activities in Singapore.

  • The existing tax rates will be streamlined to two tiers of 10% and 13.5% for new and renewal awards approved on or after 1 January 2024.

  • The qualifying activities will be updated for continued relevance.

  • The specific changes are as follows:

  • FSI-Capital Market, FSI-Derivatives Market, and FSI-Credit Facilities Syndication will have their tax rate increased from 5% to 10%.

  • FSI-Fund Management and FSI-Headquarter Services will remain at 10%.

  • FSI-Trustee Companies will have their tax rate increased from 12% to 13.5%.

  • FSI-Standard Tier will remain at 13.5%.


  • Further details of the changes will be provided by MAS by 31 May 2023.

Extend the Insurance Business Development – Insurance Broking Business (IBD-IBB) Scheme

  • The IBD-IBB scheme, which supports the growth of Singapore's insurance and reinsurance industry, will be extended until December 31, 2028.

  • No changes will be made to the existing conditions of the scheme.

Extend the Tax Concession for Deduction of General Provisions for Doubtful Debts and Regulatory Loss Allowances Made in Respect of Noncredit-impaired Financial Instruments for Banks (Including Merchant Banks) and Qualifying Finance Companies

  • The tax deduction under section 14G of the ITA will be extended for banks, merchant banks, and qualifying finance companies with a 31-December FYE until YA2029.

  • For banks, merchant banks, and qualifying finance companies with a non-31-December FYE, the tax deduction will be extended until YA2030.

  • This extension aims to promote the overall robustness and stability of the Singapore financial system.

Extend Three Tax Measures Relating to Submarine Cable Systems

  • Three tax measures relating to submarine cable systems: a) Withholding Tax exemption on payments made to non-residents for use of international telecommunications submarine cable capacity under indefeasible right to use (IRU) agreements. Will be extended till 31 December 2028. b) Writing-down allowance for the acquisition of an IRU over their useful life. Will be extended till 31 December 2028. c) IA for the construction and operation of submarine cable systems in Singapore. Will be extended till 31 December 2028.

  • All three tax measures will maintain the same parameters.

Withdraw the Tax Deduction for Expenditure Incurred on Building Modifications for Benefit of Disabled Employees

  • The scheme will be withdrawn from 15 February 2023.

  • The scheme was introduced in Budget 1989 to support employers to hire and retain disabled employees and provide workplace accommodations.

  • Over the years, other support schemes have been introduced for the same purpose, such as the Open Door Programme Job Redesign Grant.

  • Section 14N on tax deductions for Renovation and Refurbishment, introduced in Budget 2008, can also be used for workplace modifications without prior approval from government agencies.

Extend the 250% Tax Deduction for Qualifying Donations to IPCs and Eligible Institutions

  • 250% tax deduction for qualifying donations extended from 1 January 2024 to 31 December 2026

  • Aimed at encouraging Singaporeans to give back to the community

  • All other conditions of the scheme remain the same

Business & IPC Partnership Scheme

Extend and Enhance the Corporate Volunteer Scheme (CVS)

  • The 250% tax deduction on corporate volunteering expenses under CVS will be extended until 31 December 2026.

  • The scope of qualified volunteering activities will expand to include virtual activities and activities outside of IPC premises.

  • The cap on qualified expenditure per IPC per year is doubled to $100,000.

  • These changes take effect from 1 January 2024.

  • All other scheme conditions remain the same.

Philanthropy Tax Incentive Scheme for Family Offices

  • Tax incentive scheme for Family Offices in Singapore introduced

  • Donors must have fund under MAS' section 13O or 13U schemes and meet eligibility conditions (e.g. incremental business spending of $200,000) to qualify

  • Qualifying donors can claim 100% tax deduction for overseas donations made through qualifying local intermediaries

  • Tax deduction is capped at 40% of donor's statutory income

  • MAS to provide more information by 30 Jun 2023.



10 views0 comments

Recent Posts

See All

If you sell goods or services that will be delivered or used before and after the GST increase, there are certain rules you need to follow. This may include adjusting the GST percentage you charge on

bottom of page