Singapore Budget 2024: Highlights For Businesses & Individuals

On February 16, 2024, Deputy Prime Minister and Minister for Finance, Mr. Lawrence Wong, delivered the 2024 Singapore Budget Statement.

Taking into account the modest 1.1% economic growth experienced in 2023, as well as the geopolitical tensions and increasing cost of living, Budget 2024 introduces various measures to support both Singaporeans and businesses, fostering a stronger and more united nation, while also ensuring the stability of Singapore’s fiscal position.

Below are the highlights applicable to businesses and individuals. For more information, you can refer to the complete FY2024 Budget Statement.

Implementation of Pillar Two for MNEs

The 2024 Budget introduced the implementation of the Pillar Two, which were first mentioned in the 2023 Budget.

Pillar Two emerged from the Base Erosion and Profit Shifting (BEPS) project, which was introduced by the Organization for Economic Co-operation and Development (OECD).

This rule mandates that multinational corporations pay a minimum effective corporate tax rate of 15% on the profits generated in the jurisdictions where they operate, regardless of the local tax rate or tax base.

Scope of application

The Pillar Two rules apply to relevant multinational enterprises (MNEs) with annual group revenue of €750 million or more in at least two of the previous four financial years.

What are the Pillar Two measures?

Under Pillar Two, two specific measures will be introduced: the Income Inclusion Rule (IIR) and the Domestic Top-up Tax (DTT).

• Income Inclusion Rule (IIR): This rule applies to MNE groups with Singapore-based parent companies. The IIR focuses on the profits earned by subsidiaries outside of Singapore, which are subject to low tax rates. Under this rule, if the overseas subsidiaries or entities of the MNE group are subject to a tax rate below a specified threshold, the parent company in Singapore must include a portion of those profits in their taxable income.
• Domestic Top-up Tax (DTT): This rule applies to MNE groups that are foreign-headquartered, with their parent company located outside Singapore. The DTT focuses on the profits earned by subsidiaries within Singapore, which are subject to low tax rates. If the Singaporean subsidiaries or entities within the MNE group are subject to a tax rate below a certain threshold, the group is required to pay additional tax in Singapore to ensure a minimum effective tax rate.

These rules serve to prevent tax avoidance, ensuring that MNE groups are not able to shift profits to low-tax jurisdictions to minimize their overall tax liabilities.

These measures will apply to businesses falling within the scope, starting from their financial years commencing on or after January 1, 2025.

Given that the new rules are scheduled for 2025, the timeline for MNEs to prepare is relatively limited. It is advisable for businesses to seek the assistance and guidance of professional consultants to ensure compliance with the upcoming regulations.

Enterprise Support Package: Tax incentives for SMEs

The Budget introduced a new Enterprise Support Package worth $1.3 billion, with the aim of assisting Singapore’s small and medium enterprises (SMEs) in managing the challenges posed by rising costs. This support package consists of three key components:

• Corporate Income Tax (CIT) Rebate and CIT Rebate Cash Grant for YA (year of assessment) 2024:
  • Companies are eligible for a 50% Corporate Income Tax Rebate, which will be automatically incorporated in companies’ tax assessments raised after they file their Form C-S/ Form C-S (Lite)/ Form C for YA 2024.
  • Companies that have employed and made CPF contributions for at least one local employee (Singapore Citizen or Permanent Resident) in 2023 will receive a CIT Rebate Cash Grant of at least $2,000. This grant will be automatically credited by the third quarter of 2024.
  • The combined total benefits from the CIT Rebate and CIT Rebate Cash Grant cannot exceed $40,000 per company.
• Enhancements and revisions to the Enterprise Financing Scheme (EFS):
  • The maximum loan amount under the EFS-SME Working Capital Loan will be permanently increased from $300,000 to $500,000.
  • The maximum trade loan amount under the EFS-Trade Loan will be extended until 31 March 2025, with a maximum loan quantum of $10 million.
  • The EFS-Project Loan Scheme, which provides financing for domestic construction projects, will also be extended until 31 March 2025, with a maximum loan quantum of $15 million.
• Extension of SkillsFuture Enterprise Credit (SFEC): The SFEC will be extended until 30 June 2025, allowing employers an additional year to claim any unused credit for supported schemes, promoting workforce development and upskilling initiatives.

Refundable Investment Credit (RIC) for businesses

As part of the 2024 Budget, a new tax measure called the Refundable Investment Credit (RIC) has been introduced.

The RIC is a tax credit that includes a refundable cash feature, allowing businesses to offset their corporate tax payable. Any unused tax credits can be refunded to the company as cash within a four-year period, starting from the time the company meets the eligibility criteria for receiving the credit.

Under the RIC framework, companies may receive a credit of up to 50% of their qualifying activity expenditures during a specified qualifying period. These qualifying activities encompass various areas, including:

• Establishing or expanding facilities for manufacturing activities;
• Undertaking new innovation and research and development (R&D) activities; and
• Engaging in activities that support the transition towards environmental sustainability, often referred to as the green transition.

By taking advantage of the RIC, companies can benefit from substantial tax savings or obtain cash refunds. This provides them with enhanced financial support to invest in qualifying activities and contribute to overall economic growth.

Additional tax measure for businesses

Additional measures have been introduced to further support business growth in Singapore.

By extending and revising the tax incentive schemes, the government aims to attract more funds and investments, enhance competitiveness, and promote Singapore as a thriving hub for businesses.

• Introduce an enhanced tax deduction for Renovation or Refurbishment (R&R) expenditure from YA 2025:
  • The scope of qualifying expenditure will be expanded to include designer fees or professional fees.
  • A relevant three-year period will be fixed to compute the R&R expenditure cap, with the first period being from YA 2025 to YA 2027. All businesses will transition to this fixed three-year period.
  • There will be an option to claim R&R deductions in one YA, subject to the prevailing expenditure cap.
• Extend and enhance the tax incentive schemes for funds managed by Singapore-based fund managers until 31 December 2029. Starting from 1 January 2025, the following key changes will come into effect:
  • Limited Partnerships registered in Singapore will be included in the section 13O scheme.
  • The economic requirements for Qualifying Funds under the sections 13D, 13O, and 13U schemes will be updated.
• Starting from YA 2024, an alternative net tonnage basis of taxation will be introduced for shipping enterprises under the Maritime Sector Incentive (MSI) scheme.
  • The qualifying income of eligible shipping entities will be taxed based on the net tonnage of their ships.
  • The existing tax treatment under the relevant sub-schemes of the MSI will continue to apply to MSI entities that are not under the alternative net tonnage basis of taxation.

Further details regarding these incentives will be provided by the Singapore government by the third quarter of 2024.

Key changes for individuals

Personal Income Tax Rebate

To address concerns about the cost of living, a Personal Income Tax (PIT) Rebate will be implemented for YA 2024. This rebate will amount to 50% of the tax payable and will be capped at $200 per taxpayer. The objective is to provide relief to middle-income workers.

Workfare Income Supplement Scheme

Starting from January 2025, low-wage workers earning 3,000 SGD or less per month will be eligible for the Workfare Income Supplement Scheme. This scheme provides cash payouts and Central Provident Fund (CPF) top-ups as incentives to encourage continued work and savings for retirement. The current qualifying monthly salary for the scheme is 2,500 SGD.

GST voucher fund top-up

The GST Voucher Fund will be topped off with an additional $6 billion, according to government plans. This illustrates the government’s continued commitment to using the GST Voucher Scheme to permanently offset lower- and middle-class households’ expenses.

Property-related taxes

Starting from January 1, 2025, tax bands relating to property will be adjusted. The highest threshold will rise from over $100,000 to over $140,000, while the lowest Annual Value (AV) band requirement will rise from $8,000 to $12,000.

Corresponding adjustments will also be made to the bands in between. As a result, homeowners can expect to pay the same or lower property taxes within each band, assuming no change in their AVs and before any rebates are applied.

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