Key Tax Changes From Singapore Budget 2024

Introduction
Deputy Prime Minister and Finance Minister, Mr. Lawrence Wong delivered the 2024 Budget Statement in Parliament on 16 February 2024. The Budget, themed building our shared future together, is a budget to keep Singapore competitive and moving forward, equip our people to realise their fullest potential and give more assurance to Singaporean families and seniors.

Amidst the initiatives to enhance social support, skills of our people, artificial intelligence strategy and environmental sustainability, the Government has introduced major changes to the tax system.

The key change is the implementation of the Income Inclusion Rule (“IIR”) and a Domestic Top-up Tax (“DTT”) under Pillar 2 of the Base Erosion and Profit Shifting (“BEPS”) 2.0 initiative. The Government also introduced the Refundable Investment Credit (“RIC”), which is consistent with the GloBE Rules for Qualified Refundable Tax Credits, for Singapore to stay competitive and attract the right talent and investment. The RIC will support up to 50% of qualifying expenditures in high-value and substantive economic activities, and will be offset against corporate tax payable, with unutilized credits refunded as cash within 4 years. Innovation, research and development, the setting up or expansion of manufacturing facilities are some of the investments eligible for the RIC.

To support businesses, a corporate tax rebate of 50% of the tax payable will be given in the Year of Assessment 2024, and to ensure even loss-making companies receive benefits, there will be a minimum corporate income tax rebate cash grant of $2,000 for companies employing at least one local employee in 2023. There is a cap of $40,000 on the combined benefits from both rebates.

To encourage the continued growth of the asset and wealth management industry in Singapore, the tax incentive schemes for funds managed by Singapore-based fund managers will be extended till 31 December 2029. In addition, the Section 13O scheme will be enhanced to include limited partnerships registered in Singapore with effect from 1 January 2025 to give greater flexibility to Singapore-based fund managers considering the Section 13O scheme (which has less onerous requirements compared with the Section 13U scheme) in choosing a suitable legal form. Further, the economic criteria for the Sections 13D, 13O and 13U schemes will be revised. The expectation is that the bar will be raised. More details will be released by MAS later this year.

Here are some of the key tax measures announced:

Key tax measures from Budget 2024
For Businesses
Corporate Income Tax (“CIT”) Rebate for the Year of Assessment (“YA”) 2024

CIT Rebate of 50% of tax payable will be granted for YA 2024.
Companies that have employed at least one local employee in 2023 will receive a minimum benefit of $2,000 in the form of a cash payout (“CIT Rebate Cash Grant”).
The maximum total benefits of CIT Rebate and CIT Rebate Cash Grant is $40,000.
Refundable Investment Credit (“RIC”)

RIC will support up to 50% of qualifying expenditures in high-value and substantive economic activities for up to 10 years
Qualifying expenditure may include capital expenditure, manpower costs, intangible asset costs, freight and logistics costs, etc.
The credits are to be offset against CIT payable.
Any unutilised tax credits will be refunded to the company as cash within four years
Awarded on application on a case-by-case basis
EDB and EnterpriseSG will provide further details by 3Q 2024
RIC is consistent with the GloBE Rules for Qualified Refundable Tax Credits
Pillar Two of the Base Erosion and Profit Shifting (“BEPS”) 2.0 initiative

Income Inclusion Rule (“IIR”) and Domestic Top-up Tax (“DTT”) will be implemented from financial years starting on or after 1 January 2025
This will apply to relevant multinational enterprise (“MNE”) groups with annual group revenue of 750 million Euros or more in at least two of the four preceding financial years.
IIR will apply to in-scope MNE groups that are parented in Singapore, in respect of the profits of their group entities that are operating outside Singapore.
DTT will apply to in-scope MNE groups in respect of the profits of their group entities that are operating in Singapore.
Undertaxed Profits Rule (“UTPR”) will be considered at a later stage
Introduce an additional concessionary tax rate tier for the following incentives

10% for

Finance and Treasury Centre (“FTC”) incentive;
Aircraft Leasing Scheme (“ALS”)
15% for

Development and Expansion Incentive (“DEI”);
Intellectual Property Development Incentive (“IDI”); and
Global Trader Programme (“GTP”)
Enhance the tax deduction for Renovation or Refurbishment (“R&R”) expenditure from YA 2025

Expand the scope of qualifying expenditure to include designer fees or professional fees;
Fix the relevant three-year period for the purpose of computing the R&R expenditure cap; and
Allow an option to claim R&R deductions in one YA, subject to the prevailing expenditure cap.
IRAS will provide further details by 3Q 2024
Extend and revise the tax incentive schemes for funds managed by Singapore-based fund managers (” Qualifying Funds”)

Schemes which were due to lapse on 31 December 2024, will be extended till 31 December 2029.
With this extension, the withholding tax exemption on interest and qualifying payments and the Goods and Services Tax (“GST”) remission scheme for Qualifying Funds will also be extended to 31 December 2029
With effect from 1 January 2025, the following key changes will be made: the section 13O scheme will be enhanced to include limited partnerships registered in Singapore; and the economic criteria for Qualifying Funds under the sections 13D, 13O and 13U schemes will be revised.
MAS will provide further details by 3Q 2024
For Individuals
Personal Income Tax (“PIT”) Rebate for YA 2024

PIT Rebate of 50% of tax payable will be granted to all tax resident individuals for YA 2024.
Capped at $200 per taxpayer to benefit mostly middle-income workers
Other Tax Changes
Introduce an Overseas Humanitarian Assistance Tax Deduction Scheme

Available to individual and corporate donors
Piloted for four years from 1 January 2025 to 31 December 2028
100% tax deduction for qualifying overseas cash donations made through a designated charity towards a fundraiser with a valid permit
Important: The above is a discussion of the key tax measures announced in the Budget. These are subject to final legislation, the enactment of which may lead to a different outcome or result from what we have stated.

CONTACT OUR ASIA TAX TEAM

https://www.alvarezandmarsal.com/insights/key-tax-changes-from-singapore-budget-2024