New Tax Measures Impacting Businesses and Individuals in Singapore’s Budget 2022

In the first of our series covering Singapore’s 2022 budget, we look at the new tax measures impacting businesses and individuals in the city-state.

On February 18, 2022, Singapore unveiled its S$109 billion (US$80 billion) 2022 budget which provides a slew of tax hikes for higher-income groups and an expected increase in the goods and services tax in 2023.

The moves come as Singapore emerges from an economic slump as the government has committed over S$100 billion (US$74 billion) over the last two years to cushion the economy from the impact of the pandemic.

Singapore’s Finance Minister Lawrence Wong announced that this year’s budget will run up an expected deficit of S$3 billion (US$2.2 billion) or 0.5 percent of GDP, down from the S$5 billion (US$3.7 billion) deficit in 2021 and lower than earlier estimates of S$11 billion (US$8.1 billion). Further, the government will draw S$6 billion (US$4.4 billion) from Singapore’s vast reserve to fund the COVID-19 public health measures.

The economy grew 7.4 percent in 2021, rebounding from a pandemic-induced 5.4 percent contraction in 2020, and is expected to expand three to five percent for this year. Still, recovery is expected to remain uneven, especially for the aviation and tourism industries, which will take longer as concerns over the virus and new variants remain.

What are the new tax measures in Singapore’s 2022 budget?

Increase in personal income tax in Singapore

The top marginal personal income tax (PIT) will be increased for the 2024 year of assessment (YA).

Increase in Personal Income Tax in Singapore 2024
Portion of chargeable income	Tax rate (%)
More than S$500,000 (US$371,000) and up to S$1 million (US$743,000)	23 (increase from 22)
Excess of S$1 million (US$743,000)	24 (increase from 22)

Increase in goods and services tax in Singapore

The goods and services tax rate (GST), also known as the value-added tax (VAT) will be increased in two steps:

• From 7 percent to 8 percent from January 1, 2023; and
• From 8 percent to 9 percent from January 1, 2024.

GST treatment for travel arranging services

With the growth of the online travel booking industry, the government aims to ensure the GST system remains resilient in supporting the industry.

The basis as to whether zero-rating of GST applies to a supply of travel arranging services will be updated and will be based on the place where the customer and direct beneficiary of the service belong.

 

This means:

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

This change will take effect on January 1, 2023.

Increase in property tax in Singapore

From 2023 to 2024, the government will increase the marginal tax rates for non-owner-occupied residential properties and for owner-occupied residential properties. The rates are illustrated below:

Property Tax for Owner-Occupied Residential Properties in Singapore
Annual value	Effective January 1, 2023 (%)	Effective January 1, 2024 (%)
First S$8,000 (US$5,947)	0	0
Next S$22,000 (US$16,356)	4	4
Next S$10,000 (US$7,434)	5	6
Next S$15,000 (US$11,152)	7	10
Next S$15,000 (US$11,152)	10	14
Next S$15,000 (US$11,152)	14	20
Next S$15,000 (US$11,152)	18	26
Above S$100,000 (US$74,344)	23	32

 

Property Tax for Non-Owner-Occupied Residential Properties in Singapore
Annual value	Effective January 1, 2023 (%)	Effective January 1, 2024 (%)
First S$30,000 (US$22,300)	11	12
Next S$15,000 (US$11,152)	16	20
Next S$15,000 (US$11,152)	21	28
Above S$60,000 (US$44,606)	27	36

The minimum effective tax rate regime

In response to the proposal by the Organization for Economic Co-operation and Development (OECD) for a global minimum effective tax rate, Singapore’s Ministry of Finance (MoF) is exploring a top-up tax called the minimum effective tax rate (METR).

The METR will impose a tax rate of 15 percent on multinational enterprise groups with annual revenues of at least €750 million (US$849 million). The MoF will continue to consult with industry stakeholders on the design of the METR.

Extension of the approved royalties incentive scheme

Although the approved royalties incentive (ARI) scheme will lapse on December 31, 2023, the government has decided to extend the scheme until December 31, 2028.

Under the ARI, a reduced or nil withholding tax rate (WHT) is available on royalty payments to access advanced technology and know-how to capture new growth opportunities.

Shipping and container leasing

The WHT exemption for container lease payments made to non-tax resident lessors under operating lease agreements has been extended until December 31, 2027.

Further, the WHT exemption on ship and container lease payments made to non-tax resident lessors under finance lease (FL) for Maritime Sector Incentive (MSI) recipients has also been extended until December 31, 2028.

The pandemic caused a global shortage in containers with the knock-on effect on the production for new containers causing prices to rise sharply. The WHT exemption for container lease payments can help businesses alleviate these rising costs.

International mediation and arbitration

The income derived by non-tax resident mediators and arbitrators from work undertaken in Singapore is exempt from tax until March 31, 2023.

From April 1, 2023, the gross income of non-tax resident mediators and arbitrators for work carried out in Singapore will be subject to a 10 percent WHT rate. Alternatively, non-resident mediators can choose to be taxed at 24 percent of their net income instead of the 10 percent on gross income.

Extension of the aircraft leasing scheme

The aircraft leasing scheme offers a concessionary tax rate of eight percent on income derived from the leasing of aircraft engines or aircraft and other qualifying ancillary activities. The incentive had been due to end December 31, 2022, but was extended until December 31, 2027.

Extension of the approved foreign loan scheme

The approved foreign loan (AFL) scheme, which was due to lapse on December 31, 2023, has been extended until December 31, 2028.

This scheme provides a reduced or nil WHT tax rate on interest payments on loans used for the purchase of productive equipment.

Extension and rationalization of withholding tax exemption for the financial sector

The withholding tax (WHT) exemption for the following payments is scheduled to end after December 31, 2022.

The WHT exemption for payments a) to d) will be extended till December 31, 2026. The WHT exemption for payment e), will be allowed to lapse on December 31, 2022.

1. Payments made under a currency swap transaction by Singapore swap counterparties to issuers of Singapore dollar debt securities;
2. Interest payments on margin deposits under derivative contracts by approved clearinghouses, approved exchanges, members of approved clearinghouses, and members of approved exchanges;
3. Payments made under currency swap transactions or interest rate by the Monetary Authority of Singapore (MAS);
4. Specific payments made under repurchase agreements or securities lending; and
5. Payments made under currency swap transactions or interest rates by financial institutions.

Extension of tax incentives for project and infrastructure financing

The following incentives under Singapore’s project and infrastructure financing scheme will be extended until December 31, 2025:

• Exemption of qualifying income from qualifying project debt securities; and
• Exemption of qualifying foreign-sourced income from qualifying offshore infrastructure projects/assets received by approved entities listed on the Singapore Exchange.

The concessionary tax rate on qualifying income derived by an approved Infrastructure Trustee-Manager/Fund Management Company (ITMFM) will be allowed to lapse after 31 December 2022. MAS will provide greater detail by May 31, 2022.

The government hopes these measures will continue to strengthen Singapore’s position as the region’s infrastructure financing hub.

Carbon tax

Singapore’s carbon tax will be progressively increased from the current rate of S$5 (US$3.71) per ton to between S$50 (US$37.19) and S$80 (US$59.50) by 2030.

Carbon Tax Rates in Singapore
Year	Rate (per ton)
Current	S$5 (US$3.71)
2024-2025	S$25 (US$18.59)
2026-2027	S$45 (US$33.46)
By 2030	S$50 (US$37.19) and S$80 (US$59.50) by 2030

This is higher than the previous target of S$10 and S$15 set in the 2018 national budget. The revised carbon trajectory comes as Singapore aims to bring forward its net-zero target by the mid-century.

Further Reading

• Why Use Singapore as a Base for ASEAN Expansion
• Singapore Amends Central Provident Fund Act and Retirement and Re-Employment Act
• Minimum Global Corporate Tax Rate: Implications for Singapore

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• Next Article Incentives and Support for Businesses in Singapore’s Budget 2022