Singapore Budget 2023: Key Highlights for Businesses
The 2023 Singapore Budget speech was delivered by Singapore’s Deputy Prime Minister and Finance minister, Lawrence Wong on Feb 14 2023.
As Singapore looks to tackle long-term challenges in its first post-pandemic Budget, the Government is providing support for businesses to grow through the introduction, extension and enhancement of schemes, grant and tax incentives.
Read our summary of the key takeaways on how Budget 2023 will impact businesses in Singapore in the coming years.
Base Erosion and Profit Shifting Initiatives (BEPS 2.0)
Singapore plans to implement initiatives under BEPS 2.0, a global framework for the reform of international tax, in phases starting on or after 1 January 2025.
A minimum effective tax rate of 15% will be introduced for large multinational enterprises (MNEs) with global revenues of €750 million or more in 2025.
MNEs that are enjoying tax incentives or planning to apply for tax incentives are likely to have an effective tax rate of less than 15% and if subject to the rules, such companies would be subject to a domestic top-up tax.
The Government will continue to monitor the international developments and adjust the implementation timeline as needed if there are delays internationally.
The Government will also continue to engage businesses and provide them with sufficient notice ahead of any rules becoming effective.
Central Provident Fund (CPF)
CPF monthly salary ceiling to be raised to $8,000 by 2025
The monthly salary ceiling will be raised from $6,000 to $8,000 by 2026. The increase will take place in four steps to allow employers and employees to adjust to the changes.
There will be no change to the current CPF annual salary ceiling of $102,000.
Increase in CPF contribution rates for senior workers and CPF Transition Offset
The employee CPF contribution rates for employees aged above 55 to 70 will be raised by up to 1 percentage point each from 1 January 2024 and employee CPF contribution rates for employees aged above 55 to 70 will be raised by up to 1 percentage point each from 1 January 2024
A one-year CPF Transition Offset equivalent to half of the 2024 increase in employer CPF contribution rates will be provided to employers to mitigate the rise in business costs due to this increase. This will be provided automatically and employers need not apply for the offset.
Introduction of the Enterprise Innovation Scheme (EIS)
To encourage businesses to engage in R&D, innovation and capability development activities, the following tax measures will be enhanced or introduced under the EIS.
From YA 2024 to YA 2028 companies can claim an enhanced deduction of 400% on their first S$400,000 of qualifying activities such as:
- Research and development conducted in Singapore
- Registration of intellectual property (IP), including patents, trademarks and designs
- Acquisition and licensing of IP rights
- Training via courses approved by SkillsFuture Singapore and aligned to the Skills Framework
From YA 2024 to YA 2028 companies can claim an enhanced deduction of 400% on their first S$50,000 of qualifying activities on:
- Innovation carried out with polytechnics and Institutes of Technical Education (ITEs)
In addition, the EIS also allows businesses to, in lieu of tax deductions/allowances, opt for a non-taxable cash payout at a cash conversion ratio of 20% on up to $100,000 of total qualifying expenditure across all qualifying activities per YA. The cash payout option will be capped at $20,000 per YA, and will only be available to businesses which have at least three full-time local employees4 (Singapore Citizens or Permanent Residents with CPF contributions) earning a gross monthly salary of at least $1,400 in employment for six months or more in the basis period of the relevant YA.
Enhancement of the Double Tax Deduction for Internationalisation (DTDI) Scheme
To support businesses in their efforts to overcome challenges and build up capabilities in internationalising via e-commerce, the scope of the DTDi scheme will be enhanced to include a new qualifying activity “e-commerce campaign” and cover the following e-commerce campaign startup 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.
Option to accelerate write-off cost of plant and machinery
Companies will be given an option to accelerate the write-off of the cost of purchasing plant and machinery (P&M). This means when the company purchases P&M during the basis period YA 2024 (i.e. financial year 2023), they will have the option to claim the cost of the P&M over 2 years instead of the usual 3 years.
The rate of claim for the accelerated write-off is as follows:
- 75% of the cost incurred to be claimed in the first year (i.e. YA 2024); and
- 25% of the cost incurred to be claimed in the second year (i.e. YA 2025).
This option if exercised is irrevocable.
Option to accelerate deduction of expenses incurred for renovation and refurbishment (R&R)
Companies will be given an option to accelerate the deduction of expenses incurred for R&R works. This means when the company purchases qualifying expenditure on R&R during the basis period YA 2024 (i.e. financial year 2023), they will have the option to claim deduction on the R&R cost in one YA instead of the usual 3 YAs.
This option if exercised is irrevocable. In addition, the cap of S$300,000 for every relevant period of 3 consecutive YAs will still apply.
Extension of Schemes and Incentives
1. Extend the 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 till 31 December 2028
2. Extend the IA-100% Scheme for Automation Projects
To continue to encourage businesses to transform through automation, the IA-100% scheme will be extended till 31 March 2026
3. Extend the Pioneer Certificate Incentive (PC) and Development and Expansion Incentive (DEI)
To continue encouraging companies to anchor and grow strategic high value-added manufacturing and services activities in Singapore, the PC and DEI will be extended till 31 December 2028.
4. Extend the IP Development Incentive (IDI)
To continue supporting the use and commercialisation of IP rights arising from R&D activities in Singapore, the IDI will be extended till 31 December 2028.
5. Extend the 250% Tax Deduction for Qualifying Donations to IPCs and Eligible Institutions
To continue encouraging Singaporeans to give back to the community, we will extend the 250% tax deduction to qualifying donations made from 1 January 2024 to 31 December 2026.
6. Extend and Enhance the Corporate Volunteer Scheme (CVS)
To continue supporting corporate volunteering, the 250% tax deduction on qualifying expenditure incurred under the CVS will be extended until 31 December 2026.
The scope of qualifying volunteering activities will be expanded to include activities which are conducted virtually (e.g. online mentoring and tuition support for youths/children) or outside of the IPCs’ premises (e.g. refurbishment of rental flats).
The cap on qualifying expenditure per IPC per calendar year will be doubled to $100,000.
The above enhancements will take effect from 1 January 2024.
Extension of Senior Employment Credit (SEC)
The Senior Employment Credit (SEC), which provides wage support to employers, will be extended to 2025.
Under the scheme, employers will continue to receive wage offsets for hiring Singaporean senior workers aged 55 and above, and earning up to $4,000 a month to adjust to the higher retirement and re-employment age.
Enhancement of Progressive Wage Credit Scheme (PWCS)
The government is raising its co-funding share this year for the Progressive Wage Credit Scheme (PWCS), which helps employers adjust to the upcoming mandatory wage increases for lower-wage workers.
The PWCS for 2023 will be enhanced by increasing Government’s co-funding share from 50% to 75% for the first tier and from 30% to 45% for the second tier, while maintaining all other parameters.
