Tax Changes: Businesses

Implementation of Global Anti-Base Erosion (“GloBE”) Rules and Domestic Top-up Tax (“DTT”)

Singapore is set to implement the GloBE rules and DTT for businesses’ financial years beginning on or after 1 January 2025. Continuous monitoring of international developments will enable the Government to adjust the implementation timeline if there are any delays globally. In addition, the Government will carry out ongoing engagement with businesses to ensure notices are received in advance before the rules are enforced.

Introduction of Enterprise Innovation Scheme (“EIS”)

To encourage businesses to participate in research and development (“R&D”), innovation as well as capability development activities, tax measures under the EIS will be enhanced or introduced from Year of Assessment (“YA”) 2024 to YA 2028 as follows:-

1. Enhancement of tax deduction to 400% for the first S$400,000 of staff costs and consumables incurred on qualifying R&D projects conducted in Singapore for each YA.
2. Enhancement of tax deduction to 400% for the first S$400,000 of qualifying intellectual property (“IP”) registration costs incurred per YA.
3. Enhancement of tax allowance/deduction to 400% for the first S$400,000 (combined cap) of qualifying expenditure incurred on the acquisition and licensing of IP rights per YA. This is only applicable to businesses that generate less than S$500 million in revenue in the relevant YA.
4. Enhancement of tax deduction to 400% for the first S$400,000 of qualifying training expenditure incurred on qualifying courses (i.e. courses that are eligible for SkillsFuture Singapore (SSG) funding and aligned with the Skills Framework) per YA.
5. Introduction of a new 400% tax deduction for up to S$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.

Eligible companies can opt for a non-taxable cash payout, in lieu of tax deductions / allowances, at a conversion rate of 20% on up to S$100,000 of total qualifying expenditure across all qualifying activities in (1) to (5) above per YA. The cash payout option will be capped at S$20,000 per YA, and will only be available to businesses which have at least three full-time local employees (Singapore Citizens or Permanent Residents with CPF contributions) earning a gross monthly salary of at least S$1,400 in employment for six months or more in the basis period of the relevant YA.

Section 14A: Deduction for costs of protecting IP, Section 14C: Deduction for qualifying expenditure on R&D, Section 14D: Enhanced deduction for qualifying expenditure on R&D, Section 14U: Enhanced deduction for expenditure on licensing IP rights and Section 19B: Writing-down allowance for capital expenditure on acquiring IP rights of the Singapore Income Tax Act 1947 (“SITA”) will be extended till YA 2028 in view of the above enhancements.

Enhancement of Double Tax Deduction for Internationalisation (“DTDi”) Scheme

As businesses increasingly turn to e-commerce as a key avenue to expand globally, it is essential to provide support in overcoming initial obstacles and build up capabilities in internationalising through e-commerce. To achieve that, the DTDi scheme will be enhanced to include a new qualifying activity “e-commerce campaign”, covering the following expenses paid to e-commerce platform/service providers:- 

• Business advisory: Advisory on market promotion and execution plans (e.g. choice of suitable e-commerce platforms);
• Account creation: Assistance with setting up accounts on e-commerce platforms, and the right to sell on e-commerce platforms;
• Content creation: Design of e-commerce campaign publicity materials (e.g. e-store banners, online product images); and
• Product listing and placement: Uploading content on products/services to e-commerce platforms, and selection of suitable frequency and timing to display content on products/services.

Businesses must obtain prior approval from EnterpriseSG to enjoy DTDi on the new qualifying activity and such scheme will only be granted for a maximum period of 1 year per country.

The above enhancement will take effect for qualifying e-commerce campaign startup expenses incurred on or after 15 February 2023. For more information, please refer to the link from EnterpriseSG:

https://www.enterprisesg.gov.sg/financial-support/double-tax-deduction-for-internationalisation

Option to Accelerate the Claim of Capital Allowances for the Cost of Acquiring Plant and Machinery (“P&M”)

As a measure to provide temporary assistance to businesses during this period of restructuring, those that incur capital expenditure for the acquisition of plant and machinery (“P&M”) in YA 2024 will have an irrevocable option to accelerate the write-off of the cost of acquiring such P&M over two years as follows:-

• 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).

Once elected, no deferment of capital allowances (“CA”) claim is allowed.

Option to Accelerate the Claim of Tax Deduction for Renovation and Refurbishment (“R&R”) Expenditure

Similar to the option to accelerate the claim of CA, businesses that incur qualifying expenditure on R&R during YA 2024 will have an irrevocable option to claim 100% R&R deduction. Expenditure of S$300,000 will still be applicable for every relevant 3 consecutive YAs. 

Extension of Investment Allowance (“IA”) Scheme

To continue encouraging businesses to make capital investments in plant and productive equipment in Singapore, the IA scheme will be extended to 31 December 2028.

Extension of IA – 100% Scheme for Automation Projects

The IA-100% scheme will be extended till 31 March 2026 as a move to encourage businesses to transform through automation with the same conditions.

Extension of Pioneer Certificate Incentive (“PC”) and Development Expansion Incentive (“DEI”) 

To encourage businesses to anchor and grow strategic high value-added manufacturing and services activities in Singapore, the PC and DEI have been extended to 31 December 2028.

Extension of IP Development Incentive (“IDI”)

The extension of IDI till 31 December 2028 is to support businesses for the use and commercialisation of IP rights arising from R&D activities in Singapore.

Extension and Refinement of Qualifying Debt Securities (“QDS”) Scheme

To continue supporting the development of Singapore’s debt market, the QDS scheme will be extended until 31 December 2028. Additionally, the scope of qualifying income under the QDS scheme will be refined to include all payments linked to early redemption of a QDS.

For continued relevance, the criteria for QDS to be substantially arranged in Singapore will be rationalised, as follows:-

1. All debt securities that are issued on or after 15 February 2023 must be substantially arranged in Singapore by a financial institution holding a specified licence [as opposed to a Financial Sector Incentive (FSI) company].
2. For insurance-linked securities (“ILS”) that are issued on or after 1 January 2024 and are unable to meet the condition in (a) above, at least 30% of issuance costs of the ILS incurred by the issuer must be paid to Singapore business.

The remaining conditions of the scheme will be the same. More information can be located at:-

https://www.mas.gov.sg/bonds-and-bills/understanding-singapores-bond-market/tax-for-sgs-and-mas-issued-securities

Extension of Tax Exemption on Income Derived by Primary Dealers from Trading in Singapore Government Securities (“SGS”)

In a bid to support primary dealers and promote trading in SGS, the tax exemption on income derived by primary dealers from trading in SGS will be extended till 31 December 2028. 

All other conditions of the scheme will remain unchanged.

Extension and Refinement of Tax Incentive Scheme for Approved Special Purpose Vehicle (“ASPV”) Engaged in Asset Securitisation Transactions (“ASPV Scheme”) and Introduction of New Sub-scheme to Support Covered Bonds

To continue developing the structured debt market, the ASPV scheme will be extended until 31 December 2028.

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

No changes are made to the remaining tax concessions and conditions under the ASPV scheme.

To further support the issuance of covered bonds in Singapore, a new sub-scheme named ASPV (Covered Bonds) will be introduced for the special purpose vehicle holding the “cover pool” in relation to the covered bonds as defined in MAS Notice 648 and will take effect from 15 February 2023 to 31 December 2023.

This new sub-scheme will be administered by MAS.

Extension and Refinement of Financial Sector Incentive (“FSI”) Scheme

To further support the growth of financial sector activities in Singapore, the FSI scheme will be extended and refined as follows:

1. The FSI scheme will be extended till 31 December 2028.
2. The existing concessionary 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, as follows:
3. FSI-Capital Market, FSI-Derivatives Market and FSI-Credit Facilities Syndication – from 5% to 10%;
4. FSI-Fund Management and FSI-Headquarter Services – remain at 10%;
5. FSI-Trustee Companies – from 12% to 13.5%; and
6. FSI-Standard Tier – remain at 13.5%.
7. The qualifying activities will be updated to ensure continued relevance.

Extension of Insurance Business Development – Insurance Broking Business (“IBD-IBB”) Scheme

To further strengthen the position of a leading insurance and reinsurance centre in Singapore, the IBD-IBB scheme will be extended till 31 December 2028, with no changes to the existing conditions.

Extension of 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

In support of promoting the overall robustness and stability of the Singapore financial system, tax deduction under section 14G of the SITA will be extended till YA 2029 (for banks, merchant banks, and qualifying finance companies with a 31-December FYE) or YA 2030 (for banks, merchant banks, and qualifying finance companies with a non-31-December FYE).

Extension of Three Tax Measures Relating to Submarine Cable Systems

In efforts to maintain and enhance Singapore’s international connectivity, the 3 tax measures relating to submarine cable systems will be extended to 31 December 2028 under the existing parameters.

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

The scheme will be withdrawn from 15 February 2023 as it has become less relevant over the years since introduced in Budget 1989.

TAX CHANGES: INDIVIDUALS

Change in Working Mother’s Child Relief (“WMCR”) from a Percentage of an Eligible Working Mother’s Earned Income to a Fixed Dollar Tax Relief for Those with a Qualifying Child who is a Singapore Citizen Born or Adopted on or after 1 January 2024

As part of the review of the Government’s support for Marriage & Parenthood, for qualifying children who are Singapore citizens born on adopted on or after 1 January 2024, the WMCR will be changed to a fixed dollar tax relief for eligible working mothers as follows:-

This above will take effect from the YA 2025. More details can be found at: 

www.go.gov.sg/wmcr

Lapse of Foreign Domestic Worker Levy Relief (“FDWLR”) from YA 2025

As the Government has introduced a number of schemes to support those caring for dependants, including working mothers, the FDWLR will be lapsed for all taxpayers with effect from YA 2025.

Claiming of Grandparent Caregiver Relief (“GCR”) for Resident Individual Taxpayers who have Trade, Business, Profession, Vocation or/and Employment Income not Exceeding $4,000 in the Year Preceding the YA of Claim

To provide caregivers with flexibility for incidental work, working mothers will be eligible to claim GCR for caregivers with income from trade, business, profession, vocation, or employment, as long as the caregivers’ total income from these activities does not exceed S$4,000 in the year preceding the YA of claim, if they have met all other conditions.

This change will be effective from YA 2024.

TAX CHANGES: BUSINESSES, INDIVIDUALS AND BODIES OF PERSONS

Extension of 250% Tax Deduction for Qualifying Donations to IPCs and Eligible Institutions

To continue encouraging Singaporeans to contribute to the community, the 250% tax deduction will be extended for qualifying donations made from 1 January 2024 to 31 December 2026. All existing conditions of the scheme will remain unchanged.

Extend and Enhance the Corporate Volunteer Scheme (“CVS”)

In the continued support for corporate volunteering, 250% tax deduction on qualifying expenditure incurred under the CVS will be extended to 31 December 2026. The qualifying expenditure cap has been doubled to S$100,000 per IPC per calendar year. In addition, the scope of qualifying activities will be expanded to include activities which are conducted virtually or outside of the IPCs’ premises.

All other conditions remain unchanged and will take effect from 1 January 2024. 

Philanthropy Tax Incentive Scheme for Family Offices

For qualifying donors with Family Offices operating in Singapore, a new tax incentive scheme will be introduced for qualifying donors with Family Offices operating in Singapore. In order to qualify for the scheme, these donors must have a fund under MAS’ Section 13O or 13U schemes and meet eligibility conditions.

Under the scheme, qualifying donors can claim 100% tax deduction for overseas donations made through qualifying local intermediaries. The tax deduction is capped at 40% of the donor’s statutory income.

More details can be found at:-

https://www.mas.gov.sg/schemes-and-initiatives/philanthropy-tax-incentive-scheme-for-family-offices

TAX CHANGES: STAMP DUTY

Increase in Buyer’s Stamp Duty (“BSD”) Rates for Higher-value Residential and Non-residential Properties

To enhance the progressivity of Singapore’s BSD regime, the Government will be implementing higher marginal BSD rates for higher-value residential and non-residential properties.

The new marginal BSD rate for residential properties is as follows:-

1. 5% will apply to the portion of the property value in excess of $1.5 million and up to $3 million; and
2. 6% will apply to the portion of the property value in excess of $3 million.

For non-residential properties, a new marginal BSD rate of:-

1. 4% will apply to the portion of the property value in excess of $1 million and up to $1.5 million; and
2. 5% will apply to the portion of the property value in excess of $1.5 million.

The following revised rates will apply to all properties acquired on or after 15 February 2023:-

The BSD rates on or before 14 February 2023 will apply for cases that meet all the following conditions:-

1. The Option to Purchase (OTP) was granted by sellers to potential buyers on or before 14 February 2023;
2. This OTP is exercised on or before 7 March 2023, or within the OTP validity period, whichever is earlier; and
3. This OTP has not been varied on or after 15 February 2023.