Singapore Budget 2022 - Tax and Accounting Budget Report

Index: 2022 Singapore Budget - Tax

HIGHLIGHTS

2022 Budget Highlights

The Minister for Finance, Mr Lawrence Wong, handed down the 2022 Budget Statement at 3:30 pm on 18 February 2022.

The Budget contains various measures to support businesses and individuals with job creation, incentives and tax relief measures.

A $500 million Jobs and Business Support Package was announced to provide targeted help for workers and businesses in segments of the economy that are facing slower recoveries. A $560 million Household Support Package will be provided to help Singaporeans with their utility bills, children’s education and daily essentials. An additional top-up of $640 million will be made to the Assurance Package to cushion the impact of the GST increase for all Singaporeans.

The full Budget Statement is available at mof.gov.sg/singaporebudget and the Ministry of Finance’s media release is available at mof.gov.sg/singaporebudget/media-centre/media-releases.

The tax highlights are set out below.

Business tax

• The corporate tax system will be updated in response to the global minimum effective tax rate under the Pillar 2 Global Anti-Base Erosion rules of the Base Erosion and Profit Shifting 2.0 project, which will include a top-up tax called the Minimum Effective Tax Rate.
• The withholding tax exemption for container lease payments under operating lease agreements will be extended to 31 December 2027.
• The tax framework for facilitating corporate amalgamations will be extended to cover amalgamation of Singapore-incorporated licensed insurers where the court order for the confirmation of a scheme for the transfer of an insurance business is made on or after 1 November 2021.
• The range of withholding tax exemptions for the financial sector will be extended till 31 December 2026, with the exception of the withholding tax exemption for payments made under interest rate or currency swap transactions by financial institutions, which will be allowed to lapse after 31 December 2022.
• Insurers will use the Monetary Authority of Singapore Statutory Returns as the basis of preparing tax computations from year of assessment (YA) 2024 (or YA 2025 for insurers whose financial year end is not 31 December).
• The Income Tax Act 1947 and Goods & Services Tax Act 1993 will be amended to facilitate the disclosure of corporate taxpayers’ information by the Inland Revenue Authority of Singapore.

Personal tax

• From year of assessment 2024, the top marginal personal income tax rate for resident individual taxpayers will be increased. The portion of chargeable income in excess of $500,000 up to $1 million will be taxed at 23%. Chargeable income in excess of $1 million will be taxed at 24%.
• The withholding tax exemption for non-resident mediators will be extended to 31 March 2023.
• The withholding tax exemption for non-resident arbitrators will be extended to 31 March 2023.

Tax incentives

• The withholding tax exemption for ship and container lease payments under finance lease agreements for Maritime Sector Incentive award recipients will be extended to 31 December 2028.
• The Aircraft Leasing Scheme will be extended till 31 December 2027.
• The Approved Royalties Incentive will be extended till 31 December 2028.
• The Approved Foreign Loan scheme will be extended till 31 December 2028.
• The conditions imposed on investments in physical investment precious metals by funds managed by Singapore-based fund managers will be refined from 19 February 2022.
• The tax exemption schemes for project and infrastructure finance will be extended till 31 December 2025. The concessionary tax rate on qualifying income derived by an Infrastructure Trustee-Manager/Fund Management Company will be allowed to lapse after 31 December 2022.
• The Integrated Investment Allowance scheme will be allowed to lapse after 31 December 2022.

Goods and services tax

• With effect from 1 January 2023, the basis for determining whether zero-rating applies to a supply of travel arranging services will be updated to be based on the place where the customer and direct beneficiary of the service belong.
• The GST rate will be increased from 7% to 8% with effect from 1 January 2023, and from 8% to 9% with effect from 1 January 2024.

Other taxes

• The property tax rates for owner-occupied residential properties will be increased for the portion of annual value in excess of $30,000 in 2 steps, starting with property tax payable in 2023.
• The property tax rates for non-owner-occupied residential properties, including investment properties, will be increased in 2 steps, starting with property tax payable in 2023. 

Business tax

Studying the introduction of the Minimum Effective Tax Rate regime

In response to the global tax developments relating to the Base Erosion and Profit Shifting initiative (BEPS 2.0), the Singapore Government will be updating the corporate tax system. The Ministry of Finance (MOF) is exploring a top-up tax called the Minimum Effective Tax Rate (METR), which will top up a multi-national enterprise (MNE) group’s effective tax rate in Singapore to 15%. The METR will apply to MNE groups operating in Singapore that have annual revenues of at least €750 million, as reflected in the consolidated financial statements of the ultimate parent entity. 

The Inland Revenue Authority of Singapore will study the METR further and consult industry stakeholders on the design of the METR.

The MOF will continue to closely monitor international developments before making any decisions on the METR.

Under Pillar 2 Global Anti-Base Erosion (GloBE) rules of the BEPS 2.0 project, if an MNE group with annual global revenues of €750 million or more were to have an effective tax rate of less than 15% in Singapore at the group level, other jurisdictions such as its home jurisdiction can collect the difference up to 15%. The METR, if introduced eventually, will be aligned with the Pillar 2 GloBE rules as far as possible.

Source: Budget Statement, paras F.256–261, Annex C-2 (I-1).

Extending the withholding tax exemption for container lease payments under operating lease agreements

To continue supporting the local demand for containers, container lease payments made to non-resident lessors (excluding payments derived from any operation carried on by the non-resident through its permanent establishment in Singapore) under operating lease agreements entered into on or before 31 December 2027 will be exempted from withholding tax. 

This withholding tax exemption was scheduled to lapse on 31 December 2022.

Source: Budget Statement, Annex C-2 (I-2).

Extending the tax framework for facilitating corporate amalgamations to licensed insurers

To ensure parity in treatment for all companies, including those that are in the insurance business, the tax framework for facilitating corporate amalgamations will be extended to cover amalgamation of Singapore-incorporated companies involving a scheme of transfer of an insurance business, where the court order for the confirmation of the scheme of transfer is made on or after 1 November 2021.

The extension of the framework to licensed insurers is subject to the following conditions: 

• the amalgamated company takes over all property, rights, privileges, liabilities, and obligations, etc, of the amalgamating company on the date of amalgamation 
• the amalgamating company becomes dormant (ie ceases to conduct any business or any other activities, and does not derive any income) on the date of amalgamation and remains so until it is dissolved or wound up, and
• the amalgamating company is dissolved or wound up before the filing due date of the income tax return for the year of assessment related to the basis period in which the scheme of transfer was effected. 

The tax treatments under the existing tax framework for facilitating corporate amalgamations will apply to licensed insurers with modifications where appropriate.

Source: Budget Statement, Annex C-2 (I-7).

Extending and rationalising the withholding tax exemption for the financial sector

To continue supporting the competitiveness of the financial sector, the withholding tax exemption for the following payments will be extended till 31 December 2026:

• payments made under cross currency swap transactions by Singapore swap counterparties to issuers of Singapore dollar debt securities
• interest payments on margin deposits made under all derivatives contracts by approved exchanges, approved clearing houses, members of approved exchanges and members of approved clearing houses
• specified payments made under securities lending or repurchase agreements by specified institutions, and
• payments made under interest rate or currency swap transactions by the Monetary Authority of Singapore (MAS).

This will cover payments made under a contract or agreement that takes effect on or before 31 December 2026. The withholding tax exemption for the above payments were scheduled to lapse on 31 December 2022.

To rationalise the withholding tax exemption for the financial sector, the withholding tax exemption for payments made under interest rate or currency swap transactions by financial institutions will be allowed to lapse after 31 December 2022. Such payments can be covered under the existing withholding tax exemption for payments on over-the-counter financial derivatives.

The MAS will provide any consequential details by 31 May 2022.

Source: Budget Statement, Annex C-2 (I-9).

Changing the basis of preparation of tax computations for insurers

With the adoption of the new Financial Reporting Standard (FRS) 117 for the preparation of financial statements (FS), the Monetary Authority of Singapore (MAS) Statutory Returns instead of FS will be used as the basis for preparing tax computations for insurers. Related consequential adjustments to existing tax treatments will also be introduced.

This change will take effect from year of assessment (YA) 2024 (or YA 2025 for insurers whose financial year end is not 31 December).

This change is in view of the following:

• insurers will not be able to prepare their tax computations using the FS prepared in accordance with FRS 117 as the FS will not provide sufficient information necessary to apply the existing tax rules such as those under s 26 of the Income Tax Act 1947
• using MAS Statutory Returns as the basis for preparation of tax computations will allow the existing tax rules and tax incentives (if applicable) to continue to apply without adding substantial tax compliance burden on insurers.

The Inland Revenue Authority of Singapore will provide further details of the changes by 30 September 2022.

Source: Budget Statement, Annex C-2 (I-12).

Facilitating the IRAS’ disclosure of company-related information for official duties

To support data-driven policymaking, operations, and integrated service delivery, the following changes to the Income Tax Act 1947 and Goods & Services Tax Act 1993 will be made to facilitate the disclosure of information by the Inland Revenue Authority of Singapore (IRAS) for such purposes:

• where taxpayers have provided consent for their information to be shared, the IRAS can disclose such information to a public officer (or any other authorised person outside the public sector who is engaged by the Government of Singapore or a statutory board) for the performance of official duties
• the IRAS can disclose a prescribed list of identifiable information on companies to public sector agencies for the performance of official duties. This sharing of identifiable company-related information within the public sector will be conducted without the need for taxpayers’ consent. Any such information shared will be made less granular by the IRAS to preserve the taxpayer’s confidentiality, while remaining useful to public sector agencies. For instance, the prescribed list will include the sales revenue band an identified company belongs to, but not the exact value of its sales revenue. In addition, such information will not be disclosed to any person outside the public sector even if the person is engaged by the Government of Singapore or a statutory board.

Source: Budget Statement, Annex C-2 (I-14).

Personal tax

Increasing the top marginal personal income tax rate for resident individuals

From year of assessment (YA) 2024, the top marginal personal income tax rate for resident individual taxpayers will be increased. The portion of chargeable income in excess of $500,000 up to $1 million will be taxed at 23%, while that in excess of $1 million will be taxed at 24%; both up from 22%.

The new personal income tax rate structure for resident individual taxpayers, with effect from YA 2024, is as follows: 

Table 1: New personal income tax rates with effect from YA 2024

The corresponding changes to the personal income tax rates for non-resident individual taxpayers will be published on the Inland Revenue Authority of Singapore’s website on 18 February 2022.

Source: Budget Statement, Annex C-2 (II-4).

Extending the withholding tax exemption for non-resident mediators

The withholding tax exemption for non-resident mediators, which is scheduled to lapse on 31 March 2022, will be extended till 31 March 2023. 

From 1 April 2023, gross income derived by non-resident mediators from mediation work carried out in Singapore will be subject to a concessionary withholding tax rate of 10%, subject to conditions.

This concessionary withholding tax rate will apply till 31 December 2027. 

Alternatively, non-resident meditators may elect to be taxed at 24% on net income, from year of assessment 2024 onwards. 

Source: Budget Statement, Annex C-2 (II-5).

Extending the withholding tax exemption for non-resident arbitrators

The withholding tax exemption for non-resident arbitrators, which is scheduled to lapse on 31 March 2022, will be extended till 31 March 2023. 

From 1 April 2023, gross income derived by non-resident arbitrators from arbitration work carried out in Singapore will be subject to a concessionary withholding tax rate of 10%, subject to conditions.

This concessionary withholding tax rate will apply till 31 December 2027.

Alternatively, non-resident arbitrators may elect to be taxed at 24% on net income, from year of assessment 2024 onwards. 

Source: Budget Statement, Annex C-2 (II-6).

Tax Incentives

Extending the withholding tax exemption for ship and container lease payments

To continue developing Singapore as an international maritime centre, ship and container lease payments made by specified Maritime Sector Incentive award recipients to non-resident lessors (excluding payments derived from any operation carried on by the non-resident through its permanent establishment in Singapore) under finance lease agreements entered into on or before 31 December 2028 will be exempted from withholding tax.

This withholding tax exemption was scheduled to lapse on 31 December 2023.

Source: Budget Statement, Annex C-2 (I-3).

Extending the Aircraft Leasing Scheme

To continue encouraging the growth of the aircraft leasing sector in Singapore, the Aircraft Leasing Scheme (ALS) will be extended till 31 December 2027.

Under the ALS, approved aircraft lessors and aircraft investment managers enjoy the following tax benefits:

• a concessionary tax rate of 8% on income derived by approved aircraft lessors from the leasing of aircraft or aircraft engines and qualifying ancillary activities 
• a concessionary tax rate of 10% on income derived by approved aircraft managers from managing an approved aircraft lessor and qualifying activities, and
•  automatic withholding tax exemption on qualifying payments made by approved aircraft lessors to non-residents (excluding a permanent establishment in Singapore) in respect of qualifying loans and finance leases entered into to finance the purchase of aircraft or aircraft engines, subject to conditions.

The ALS was scheduled to lapse on 31 December 2022.

Source: Budget Statement, Annex C-2 (I-4).

Extending and enhancing the Approved Royalties Incentive

To continue encouraging companies to leverage new technologies and know-how to develop the capabilities of the local workforce and capture new growth opportunities, the Approved Royalties Incentive (ARI) will be extended till 31 December 2028.

The ARI will also be simplified to cover classes of royalty agreements based on an activity-set-based approach. The Economic Development Board will provide further details of the changes by 30 June 2022.

Under the ARI, tax exemption or a concessionary withholding tax rate may be granted on approved royalties, technical assistance fees, or contributions to research and development costs made to a non-resident for providing cutting-edge technology and know-how to a company for the purpose of its substantive activities in Singapore. Approval for the ARI is currently granted on an agreement-based approach.

The ARI was scheduled to lapse on 31 December 2023.

Source: Budget Statement, Annex C-2 (I-5).

Extending the Approved Foreign Loan scheme

To continue encouraging companies to invest in productive equipment for the purpose of conducting substantive activities in Singapore, the Approved Foreign Loan (AFL) scheme will be extended till 31 December 2028.

Under the AFL scheme, tax exemption or a concessionary withholding tax rate may be granted on interest payments made to a non-resident for loans to a company to purchase productive equipment.

The AFL scheme was scheduled to lapse on 31 December 2023.

Source: Budget Statement, Annex C-2 (I-6).

Enhancing the tax incentive scheme for funds managed by Singapore-based fund managers

To continue growing Singapore’s asset management industry, with effect from 19 February 2022, the conditions imposed on investments in physical investment precious metals (IPMs) by funds managed by Singapore-based fund managers will be refined as follows:

• the investments in physical IPMs need not be incidental to the trading of derivative IPMs, and
• the trade volume of physical IPMs will be capped at 5% of the total investment portfolio for the taxpayer’s incentive award under ss 13D/13O/13U of the Income Tax Act 1947.

The Monetary Authority of Singapore will provide further details of the changes by 31 May 2022.

Under the ss 13D, 13O and 13U schemes, funds managed by Singapore-based fund managers are granted tax exemption on specified income derived from designated investments, subject to conditions. The designated investments list currently includes physical commodities that are subject to the following conditions:

• the trading of the physical commodity must be incidental to the trading of the derivative commodity, and
• the trade volume of such physical commodity is capped at 15% of the total trade volume of those physical commodities and related commodity derivatives.

Source: Budget Statement, Annex C-2 (I-8).

Extending and rationalising the tax incentives for project and infrastructure finance

To continue supporting the development of Singapore as an infrastructure financing hub, the following tax incentive schemes for project and infrastructure finance will be extended till 31 December 2025:

• exemption of qualifying income from qualifying project debt securities
• exemption of qualifying foreign-sourced income from qualifying offshore infrastructure projects/assets received by approved entities listed on the Singapore Exchange (SGX).

The above schemes were scheduled to lapse on 31 December 2022.

As part of the government’s regular review of tax incentives, the 10% concessionary tax rate on qualifying income derived by an approved Infrastructure Trustee-Manager/Fund Management Company from managing qualifying SGX-listed Business Trusts/Infrastructure funds in relation to qualifying infrastructure projects/assets (ITMFM scheme) will be allowed to lapse after 31 December 2022. Existing ITMFM scheme recipients will continue to enjoy the tax benefits for the remaining tenure of their existing awards.

The Monetary Authority of Singapore will provide any consequential details by 31 May 2022.

Source: Budget Statement, Annex C-2 (I-10).

Allowing the Integrated Investment Allowance scheme to lapse

As part of the government’s regular review of tax incentives, the Integrated Investment Allowance (IIA) scheme will be allowed to lapse after 31 December 2022.

The IIA scheme grants a qualifying company an additional allowance (on top of capital allowances) on fixed capital expenditure incurred for qualifying productive equipment placed overseas for approved projects.

Source: Budget Statement, Annex C-2 (I-13). 

Goods and services tax

Updating the GST treatment for travel arranging services

To ensure that the GST system remains resilient in a growing digital economy, with effect from 1 January 2023, the basis for determining whether zero-rating applies to a supply of travel arranging services will be updated to be based on the place where the customer (ie the contractual customer) and direct beneficiary of the service belong: 

• if the customer of the service belongs in Singapore, the travel arranging service will be standard-rated, or
• if the customer of the service belongs outside Singapore and the direct beneficiary either belongs outside Singapore or is GST-registered in Singapore, the travel arranging service will be zero-rated.  

Travel arranging services refer to:

• services comprising the arranging of international transport of passengers and the arranging of insurance related to such transportation (currently zero-rated), and
• services comprising the arranging of accommodation (currently standard-rated if the property is located in Singapore, and zero-rated if the property is located outside Singapore).

This change will ensure that the GST rules accurately reflect the place of consumption of travel arranging services. The change will also ensure parity in GST treatment between local and overseas suppliers on the supplies of travel arranging services. 

The change will not affect the GST treatment of the supply of the underlying travel product such as international air tickets, hotel accommodation and travel insurance.

The Inland Revenue Authority of Singapore will provide further details on the changes by 31 July 2022.

Source: Budget Statement, Annex C-2 (I-11).

Delaying the GST rate increase to 2023

The GST rate increase will be delayed to 2023.

To meet increased recurrent spending needs, the GST rate will be increased in 2 steps:

• from 7% to 8% with effect from 1 January 2023, and
• from 8% to 9% with effect from 1 January 2024.

The government will continue to absorb GST on publicly-subsidised healthcare and education.

The GST rate has been 7% since 1 July 2007.

Source: Budget Statement, paras F.276–280, Annex C-2 (II-1). 

Other taxes

Increasing the property tax rates for owner-occupied residential properties

The progressive property tax rates for owner-occupied residential properties will be increased for the portion of annual value in excess of $30,000. This change will be phased in over 2 years as shown in Table 2 below, starting with property tax payable in 2023.

This increase of property tax rates for owner-occupied residential properties affects only residential properties with annual values over $30,000.

Table 2: Property tax rates for owner-occupied residential properties

	Property tax rate for owner-occupied residential properties
Annual value	Effective 1 Jan 2023	Effective 1 Jan 2024
First $8,000	0%	0%
Next $22,000	4%	4%
Next $10,000	5%	6%
Next $15,000	7%	10%
Next $15,000	10%	14%
Next $15,000	14%	20%
Next $15,000	18%	26%
Above $100,000	23%	32%

Source: Budget Statement, paras F.272–273, Annex C-2 (II-2, Factsheet 1).

Increasing the property tax rates for non-owner-occupied residential properties

The progressive property tax rates for non-owner-occupied residential properties will be increased. This change will be phased in over 2 years as shown in Table 3 below, starting with property tax payable in 2023.

This change will affect all non-owner-occupied residential properties.

Table 3: Property tax rates for non-owner-occupied residential properties

Source: Budget Statement, para F.271, Annex C-2 (II-3, Factsheet 1).

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Contributors

The Wolters Kluwer Tax Team

Ng Chay Hoon BAcc; Chow May Kuan Grad ISCA; Lochana Nanthacumar BA.

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