Singapore Budget 2023 and beyond

Key changes announced for businesses

• Extension of various incentive schemes

  • The IA Scheme was due to expire on 31 December 2023. It has been extended to 31 December 2028.
  • The Scheme provides for additional tax allowances on qualifying fixed capital expenditure on approved projects. It is administered by the EDB.
  • In addition, the IA-100% Scheme for Automation Projects which was due to expire on 31 March 2023, has now been extended to 31 March 2026. The Scheme applies to approved capital expenditure on automation projects. It is administered by Enterprise SG.
  • The PC and DEI that were due to expire on 31 December 2023 have now been extended to 31 December 2028.
  • The IDI was due to expire on 31 December 2023. It has now been extended to 31 December 2028.
  • Tax exemption for income derived by primary dealers from Trading in Singapore Government Securities was due to expire on 31 December 2023. It has now been extended to 31 December 2028.
  • The IBD - Insurance Broking Business scheme was due to expire on 31 December 2023. It has now been extended to 31 December 2028.
  • The 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 was due to lapse after YA 2024 (for those with December year-ends) and YA 2025 (for those with non-December year-ends). It has now been extended to YA 2029 and YA 2030 respectively.
  • The three tax measures relating to submarine cable systems, namely, WHT exemption for payments to non-residents for the use of IRUs, writing down allowances and/or IA on IRUs were due to expire between December 2023 and 2025. These have now all been extended until 31 December 2028.
• Withdrawal of tax deductions

  The scheme that allows employers to claim tax deductions for approved expenditure incurred on additions or alterations to business premises for facilitating movement of its disabled employees has been withdrawn from 15 February 2023.

• Extension and refinement of the QDS Scheme

  • Scheduled to end on 31 December 2023. It has been extended to 31 December 2028.
  • Confers a 10% tax rate on interest paid to qualifying local companies and bodies of persons
  • Gives interest WHT exemption on payments to qualifying non-residents
  • Refinements:
    • Will include all payments in relation to early redemption;
    • All QDS issued on or after 15 February 2023 will have to be substantially arranged by a financial institution holding a specific licence for the purpose (currently an FSI Company Standard Tier);
    • 30% of the issue costs of an Insurance-linked Security, issued on or after 1 January 2024 and which is not substantially arranged by a specially licensed financial institution, must be paid to Singapore businesses.
  • Further details: By 31 May 2023
• Extension and refinement of the ASPV Scheme

  • Scheduled to end on 31 December 2023. It has been extended to 31 December 2028.
  • Confers a tax exemption on income from asset securitisation transactions
  • Gives interest WHT exemption on payments to qualifying non-residents on over-the-counter financial derivatives in connection with an asset securitisation.
  • Can recover 76% of its GST input tax.
  • Refinements:
    • The 76% GST recovery rate will follow the prevailing rate applicable to licensed full banks for the year in question.
    • Introduction of new sub-scheme for covered bonds as defined in MAS Notice 648 (w.e.f. 15 February 2023)
  • Further details: By 31 May 2023
• Extension and refinement of the Double Tax Deduction for Internationalisation Scheme

  • This incentive is in place until 31 December 2025.
  • It has been enhanced to cover e-commerce campaigns, and will cover the following e-commerce start-up expenses paid to e-commence platforms and service providers:
    • Advisory on market promotion and execution plans (e.g., on the choice of suitable e-commerce platforms)
    • Assistance with setting up accounts on e-commerce platforms and the right to sell on e-commence platforms
    • Design of e-commerce campaign publicity materials
    • Product listing and placement on the e-commerce platforms
  • Prior approval is required from Enterprise SG
  • Approval will be granted on e-commerce campaigns for a maximum period of one year applied on a per country basis
  • Effective: 15 February 2023
  • Further details: By 28 February 2023
• Introduction of EIS

  • From YA 2024 to YA 2028, companies may claim:
    • A 400% tax deduction on the first SGD 400,000 of qualifying expenses incurred on R&D, IP Registration, IP Rights Acquisition and Licensing, and Training expenditure on courses eligible for SkillsFuture Singapore funding; and
    • A 400% tax deduction on the first SGD 50,000 of qualifying expenses incurred on qualifying innovation projects carried out with Polytechnics, ITEs or approved partner institutions.
  • The enhancement for R&D, IP registration, IP rights acquisition and licensing will be based on the existing conditions of the current enhanced deduction scheme.
  • The enhancement for training expenditure and innovation projects will be subject to new qualifying conditions.
  • For IP rights acquisition and licensing, only companies with annual revenues of less than SGD 500 million will qualify.
  • In lieu of the enhanced deduction, companies may opt for a cash payout of 20% of the qualifying expenses (capped at SGD 100,000 of the qualifying expenses per YA) across all qualifying activities.
• Enhancement of the ‘Business & IPC Partnership Scheme’ into ‘Corporate Volunteer Scheme’

  • The ‘Business & IPC Partnership Scheme’ which allows companies to claim a 250% tax deduction for qualifying expenses (e.g., basic wages) for corporate volunteerism with IPCs will be upgraded into the ‘Corporate Volunteer Scheme’.
  • The upgrading will increase the following:
    • the scope of eligible activities to include activities that are conducted virtually as well as activities outside of the IPC’s premises; and
    • the qualifying deduction cap from SGD 50,000 per IPC to SGD 100,000 per IPC, per calendar year.
  • The scheme will be extended from 31 December 2023 to 31 December 2026.
  • The maximum claim per business remains at SGD 250,000 per YA.
• Capital allowance claims over two years for YA 2024

  • An irrevocable option to claim capital allowance over two years can be made as follows:
    • 75% of the cost incurred in YA 2024; and
    • 25% of the cost incurred in YA 2025.
  • No deferral is allowed once the claim has been made for the first year.
• Accelerated deduction for renovation or refurbishment expenditure for YA 2024

  • A one-year claim under Section 14N (previously 14Q) may be made (instead of three years); and
  • The cap of SGD 300,000 for every relevant period of three consecutive years will continue to apply.
• OECD’s BEPS Pillar 2 implementation targeted for 2025

  • The aim of BEPS Pillar 2 is to end the 'race to the bottom' on tax rates by ensuring that multinationals pay a minimum effective corporate tax rate of 15%, regardless of the local tax rate.
  • Although the EU is starting implementation from 2024 in stages, and countries like the UK and Switzerland are following suit, Singapore has decided to hold back until 2025 given the fluidity still inherent in the plan. Even that date is not cast in stone if there are further delays internationally.
  • The aim is to introduce a domestic minimum effective tax rate of 15%. This will prevent an allocation of the top-up tax to an overseas parent.
  • Many Singapore-based subsidiaries of large multinationals may be affected. The numbers were estimated at around 1,800 in 2022.
  • The impact on Singapore’s tax incentives regime is yet to be evaluated.