Singapore Budget 2023 Snapshot

A Valentine's Budget for Singapore

Deputy Prime Minister and Minister for Finance, Mr Lawrence Wong, delivered the annual Singapore Budget speech on 14 February 2023. Explore the highlights of key tax-related proposals in our Singapore Budget 2023 Snapshot.

Deputy Prime Minister and Minister for Finance, Mr Lawrence Wong, delivered his second Budget speech on 14 February 2023.

Budget 2023 began on a positive note, with the Minister stating that Singapore's economic fundamentals remain strong despite this year's slower economic growth. However, he warned of major uncertainties and downside risks to this year's forecast, such as the impact of a decline in the US and EU economies, an escalation of the Ukraine war, and the possible emergence of a new COVID-19 variant.

Budget 2023 identified three key thrusts to address the challenges in the future economy:

  1. Grow economy
  2. Strengthen social compact
  3. Enhance resilience

To sustain pervasive innovation across the economy, Budget 2023 introduces a new Enterprise Innovation Scheme that increases tax deductions to 400% of qualifying expenditure for certain qualifying activities. In addition, businesses that have yet to become profitable or do not have enough profits to maximise the benefits of tax deductions will now be able to convert 20% of their total qualifying expenditure per Year of Assessment (YA) into a cash payout, subject to a cap of $20,000. This will assist smaller businesses in offsetting the costs of their innovation activities, even if they pay little or no taxes. Among other changes, the Enterprise Innovation Scheme, SME Co-Investment Fund, and Singapore Global Enterprises initiative are just a few that demonstrate the Government's emphasis on the need for local entities to innovate and grow in order to compete and survive in the future economy.

The theme of our Deloitte Budget is "A Valentine's Budget for Singapore," and indeed Budget 2023 is the Minister's "Valentine's Day present" to help Singaporeans cope with rising prices caused by an unpleasant cocktail of higher inflation and GST increases. The Minister announced enhancements to the permanent GSTV scheme and the Assurance Package, as well as additional one-time support measures under the Assurance Package to address immediate cost-of-living issues. This slew of measures reflects the Government's commitment to assist Singaporeans during this trying time. However, the Minister warns that higher inflation is here to stay, and the best way to deal with it is to become more productive and competitive so that our real wages grow. As a result, Singapore will need to continue with economic transformation and restructuring.

This budget will bring much joy to parents and soon-to-be parents. To provide more support for eligible lower- to middle-income working mothers, the Working Mother's Child Relief will be changed from a percentage of the mother's earned income to a fixed dollar relief beginning in the YA 2025. In conjunction with the Baby Bonus Cash Gift, increased government contributions to the Child Development Account, flexible work arrangements for working parents, and increased Unpaid Infant Care Leave, the Government is sending a strong message to encourage people to start families and raise more children.

Climate change remains high on Singapore’s agenda, and rightly so, given that it is one of the most pressing challenges faced by the world. Building on his previous announcement that Singapore will establish a Coastal and Flood Protection Fund, the Minister stated that Singapore will continue to commit more resources as Singapore progressively implements the extensive infrastructure plans to protect our coastline from rising sea levels, including a polder at Pulau Tekong that is already more than halfway completed.

As Singapore seeks to balance the short-term needs of the population and businesses with the long-term goal of transformation, Budget 2023 announces further adjustments to our tax system, including higher marginal Buyer Stamp Duty rates for higher-value residential and non-residential properties, a cap on Preferential Additional Registration Fee rebates at $60,000 to avoid providing excessive rebates to more expensive cars when they are deregistered, and a 15% increase in tobacco excise duty.

On the international front, Singapore announced its intention to implement Pillar Two measures in 2025, as part of a broader international effort to align minimum global corporate tax rates for large multinational enterprise (MNE) groups, as well as a Domestic Top-Up Tax, which will raise the effective tax rate for MNE groups in Singapore to 15%. Simultaneously, Singapore will review and update its broader suite of industry development schemes in order to maintain Singapore's competitiveness in attracting and retaining investments. However, developments in the taxation of MNE profits are fluid, and Singapore will continue to monitor international developments. Singapore will adjust its implementation timeline if there are further delays globally. The Government will continue to engage companies and provide ample notice before making any changes to Singapore's tax rules or schemes.

In many ways, Budget 2023 foreshadows significant changes in the road ahead, as it is about securing our future in the face of great uncertainty and volatility, one that will necessitate bolder and more decisive moves to move the country forward, but will also cultivate a fairer and more inclusive society.

Singapore Budget 2023
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