Budget 2023: tax changes

Taxpayers who incur capital expenditure on plant and machinery during the basis period for Year of Assessment (YA) 2024 have an option to accelerate capital allowances (CA) over two years (i.e. 75% in YA 2024 and 25% in YA 2025) with no deferment of claims. This option, if exercised, is irrevocable.

A new scheme valid from YA 2024 to YA 2028 that provides 400% tax deductions/allowances on qualifying expenditure incurred on:

1. Staff costs and consumables incurred on R&D conducted in Singapore
2. Registration of qualifying intellectual property (IP)
3. Acquisition and licensing of qualifying IP rights (available to businesses that generate <$500m in revenue in relevant YA)
4. Innovation projects carried out with partner institutions
5. Training via courses approved by SkillsFuture Singapore

It is capped at $400k of qualifying expenditure per YA for each activity ($50k cap for item 4). Eligible companies can opt for a non-taxable cash pay-out in lieu of tax deductions, capped at $20k per YA, across all 5 qualifying activities. Sections 14A, 14C, 14D, 14U and 19B will be extended till YA 2028. IRAS will provide further details by 30 June 2023.

Applicable to acquisitions on or after 15 February 2023:

• For residential properties:
  • Portion of property value above $1.5m and up to $3m: 5% BSD
  • Portion of property value above $3m: 6% BSD

• For non-residential properties:
  • Portion of property value above $1m and up to $1.5m: 4% BSD
  • Portion of property value above $1.5m: 5% BSD 

Applicable to vehicles registered with Certificate of Entitlements (COEs) obtained from second COE bidding exercise in February 2023 (new rates will apply on or after 15 February 2023 for vehicles that do not need COE):

• ARF rate for portion of Open Market Value above $40k and up to $60k will be increased to 190%

• ARF rate for portion of Open Market Value above $60k and up to $80k will be increased to 250%

• ARF rate for portion of Open Market Value above $80k will be increased to 320%

A new tax incentive scheme introduced for qualifying donors with family offices operating in Singapore. Donors must have a fund under the Monetary Authority of Singapore’s (MAS) section 13O or 13U schemes and meet eligibility conditions (e.g. incremental business spending of $200k) to qualify. Qualifying donors can claim 100% tax deduction for overseas donations made through qualifying local intermediaries under the scheme, capped at 40% of the donor’s statutory income. MAS will provide further details by 30 June 2023.

Singapore plans to implement the Global Anti-base Erosion (GloBE) rules and DTT from financial year starting on or after 1 January 2025. Implementation timeline will be adjusted if there are delays internationally. Businesses will be engaged to provide them with sufficient notice ahead of any rules becoming effective.

Taxpayers who incurred qualifying renovation or refurbishment (R&R) expenditure during the basis period for YA 2024 have an option to claim R&R deduction over one YA (instead of three YAs). The cap of $300k for every relevant three-year period continues to apply. This option, if exercised, is irrevocable.

The GCR would be allowed for working mothers where the caregiver derived income from trade, business, profession, vocation and/or employment, if the total income from these activities does not exceed $4k in a year. The change will take effect from YA 2024.

The WMCR amount for a qualifying child who is a Singapore citizen born or adopted on or after 1 January 2024 will be changed from a percentage of the mother’s earned income to a fixed dollar relief. The amount of WMCR relief (subject to certain existing caps) will be: 

• $8k for first child
• $10k for second child
• $12k for third child and beyond

The WMCR amount for quailifying children born or adopted before 1 January 2024 will remain unchanged. 

The Foreign Domestic Worker Levy Relief will lapse from YA 2025.

Excise duties for all tobacco products will be increased by 15% with effect from 14 February 2023.