Singapore Budget 2024: Announcements for businesses

For businesses

• Corporate income tax (CIT) Rebate and CIT cash grant for Year of Assessment (YA) 2024

  • All companies will enjoy a 50% corporate income tax rebate, capped at SGD 40,000 and net of any CIT cash grant received for YA 2024.
  • Companies with at least one local employee (other than a shareholder who is the director and where CPF contribution has been made in 2023) will receive SGD 2,000 CIT cash grant by third quarter of 2024.

  Insights

  • This is the highest corporate tax rebate given to companies since it was first introduced in Budget 2013.
  • The SGD 2,000 CIT cash grant will benefit companies with low or no chargeable income who cannot enjoy the full benefit of the corporate tax rebate.
• Refundable Investment Credits (RIC)

  • To enhance Singapore’s competitiveness for investment. This largely targets investment into sizeable projects in key economic sectors and new growth areas.
  • Companies may apply to the Economic Development Board (EDB) or Enterprise Singapore (Enterprise SG) for RIC in respect of qualifying projects and more information will be available by Q3 of 2024.
  • Subject to meeting the agreed conditions, the RIC will be offset against corporate tax payable
  • Unutilised credits will be refunded in cash within four years.
  • The project qualifying period is 10 years
  • The credit is restricted to 50% of the qualifying expenditure on each category of qualifying expenditure

  Insights

  • This is as expected under the roll out of the Base Erosion and Profit Shifting (BEPS) Pillar 2 initiative. It looks as if it will be of appeal mainly to companies with heavy capital, manpower or research and development (R&D) investment spending needs. 
  • Service companies that are light on capital requirements (such as commodity trading companies) may end up being left out in the cold although it is not clear what transitional provisions may exist for companies currently enjoying beneficial tax rates under an existing incentive. That remains to be seen, although it may not be under Singapore’s control.
  • It is debatable whether it will enhance anything. At best it will staunch any outflows, while not diminishing Singapore’s overall attractiveness.
• BEPS Pillar 2 – Income Inclusion Rule, Domestic Top-up Tax, Undertaxed Profit Rule

  • To implement necessary parts of BEPS Pillar Two
  • The Income Inclusion Rule (IIR) and Domestic Top-up Tax (DTT) will be implemented for companies with an accounting period beginning on or after 1 January 2025 as previously envisaged.
  • Implementation of the Undertaxed Profit Rule (UTPR) has been delayed until further notice.

  Insights

  • Singapore has little choice but to forge ahead with implementation of the IIR and DTT on the stated dates.
  • Otherwise, tax revenues will risk being handed to jurisdictions where Pillar Two is already up and running.
  • Tax revenues are expected to increase in the next few years. However, flight risk is limited, except for asset light companies who can operate from anywhere at the drop of a hat.
  • Deferral of the UTPR implementation date is unremarkable given its limited relevance to Singapore in practice.
• Enhance the tax deduction for Renovation or Refurbishment (R&R) expenditure

  • Qualifying R&R expenditure will be enhanced to allow a tax deduction for designer and professional fees, with accelerated deductions within one year. The relevant three-year period will be fixed from YA 2025 to YA 2027 for all businesses.
  • The deduction for qualifying R&R expenditure will be simplified as companies no longer need to identify designer and professional fees separately.
  • In addition, the administrative effort to track the relevant three-year period will be reduced after it is standardised. 

  Insights

  Companies with their first or second year (within the relevant three-year period) falling in YA 2024 and have fully utilised the R&R deduction cap of SGD 300,000 may benefit from the transition to the fixed three-year period. 

• Additional concessionary tax rates for various incentives

  • In addition to the current concessionary tax rates (CTRs), the following new tiers will be introduced with effect from 17 February 2024:
    • Finance and Treasury Centre (FTC) incentive, Aircraft Leasing Scheme (ALS) – 10% 
    • Development and Expansion Incentive (DEI), Intellectual Property Development Incentive (“IDI”),  Global Trader Programme (GTP) – 15%
  • Businesses are required to commit to certain economic requirements during the tenure of the tax incentives before they can be awarded the CTRs under the respective incentives.
  • Such economic requirements are monitored on an annual basis and where the requirements are not met, the incentive awards may be withdrawn.

  Insights

  • Typically, businesses that wish to enjoy lower CTRs have to commit to higher economic investment.
  • With the introduction of additional (higher) CTR tiers, businesses that previously could not qualify for the tax incentives can now try to apply for the new CTRs with lower economic commitments.
  • Existing incentive recipients that are unable to keep to the pre-agreed level of economic commitments may potentially “downgrade” to a higher CTR with reduced commitments.
  • Given the slight differential between the prevailing corporate tax rate (17%) and the additional tier of 15%, the incentives may not be attractive to some businesses, given the onerous monitoring and reporting requirements.
  • The introduction of the additional tiers may signal that the incentive schemes are here to stay for “normal” companies and will remain undisturbed by the introduction of the BEPS initiatives.
• Overseas Humanitarian Assistance Tax Deduction Scheme (OHAS)

  • From 1 January 2025 to 31 December 2028, taxpayers will be allowed a 100% tax deduction for cash donations, capped at 40% of statutory income, made towards overseas emergency humanitarian assistance under the OHAS.
  • This will benefit companies and individuals donating towards an overseas humanitarian crisis.
  • The donations have to be made through designated charities.

  Insights

  • Currently, only qualifying donations that benefit the local community or the Singapore Government are allowed a 2.5 times tax deduction, unless they are made through the Philanthropy Tax Incentive Scheme for Family Offices.
  • The introduction of the OHAS will hopefully encourage businesses and individuals to donate for humanitarian purposes beyond the Singapore shores.
• Extend and revise the tax incentive schemes for funds managed by Singapore-based fund managers

  • The tax concessions under sections 13D, 13O and 13U of the ITA will be extended to 31 December 2029 and the economic criteria will be revised. The Singapore Resident Fund scheme will be enhanced to include Singapore Limited Partnerships. 
  • Extension of existing funds schemes which was due to expire on 31 December 2024.
  • Previously, the section 13O concession was only applicable to Singapore resident funds set up as companies. It is now expanded to include limited partnerships registered in Singapore.
  • The economic criteria for tax concessions will be revised and details will be provided by the MAS by Q3 of 2024.

  Insights

  • The extension of the tax concessions for qualifying funds is very much welcomed to keep the Singapore asset and wealth management industry vibrant.
  • The inclusion of Singapore limited partnerships will provide more operational flexibility for fund managers and investors.
  • Asset and fund managers may be inclined to submit their fund incentive applications before Q3 of 2024 such that the funds will not be affected by the revised economic criteria which are likely to be less favourable than the current rules (if recent history is anything to go by).
• Revisions to Additional Buyer’s Stamp Duty (ABSD) remission clawback rates for housing developers (HDs)

  • For residential land acquired on or after 6 July 2018, the ABSD remission clawed back will be reduced by 1 percent to 10 percent, depending on the proportion of units sold at the five-year mark.
  • This will provide relief to HDs who have difficulties selling units developed.

  Insights

  • Lowering the cost to hold unsold units mean that HDs will have more holding power to maintain the pricing of the units.
  • Care needs to be taken to ensure there is no perceived change in intention of the retained units which could trigger a deemed disposal at market value.