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;
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.
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© Shan & Co 2024