Corporate Tax News Issue 65 - February 2023

Budget 2023 measures include introduction of GloBE rules and domestic top-up tax

Singapore’s Budget 2023, delivered by the Deputy Prime Minister and Minister for Finance on 14 February 2023, proposes many measures to address social issues but is also packed with tax changes to support businesses to innovate, maintain competitiveness and thrive. Continuing the Government’s effort to make the Singapore tax system more progressive, higher stamp duty and vehicular tax will be imposed on high-end properties and luxury cars with immediate effect. This article highlights the key tax changes that impact businesses (click here for a comprehensive analysis of the 2023 budget measures).

Probably the most important measure announced for businesses is the announcement that the government intends to implement the GloBE rules and domestic top-up tax under Pillar Two of the OECD BEPS 2.0 initiative. The rules will apply to multinational groups operating in Singapore with annual global consolidated revenues of EUR 750 million or more. The rules are intended to apply as from financial years starting on or after 1 January 2025, although the government will continue to monitor the international developments and adjust the implementation timeline as needed. Businesses will be provided with sufficient notice before any rules become effective.

Among the proposals targeting businesses are the following:

  • To encourage businesses to engage in research and development (R&D), innovation and capability development activities, tax measures will be enhanced or introduced from years of assessment (YA) 2024 to 2028 under the Enterprise Innovation Scheme (EIS), such as:
    • Enhancing the tax deduction to 400% for the first SGD 400,000 of staff costs and consumables incurred on qualifying R&D projects conducted in Singapore for each YA;
    • Enhancing the tax deduction to 400% for the first SGD 400,000 of qualifying intellectual property (IP) registration costs incurred per YA;
    • Enhancing the tax allowance/deduction to 400% for the first SGD 400,000 (combined cap) of qualifying expenditure incurred on the acquisition and licensing of IP rights per YA. This enhancement will be available only to businesses that generate revenue of less than SGD 500 million in the relevant YA;
  • The Double Tax Deduction for Internationalisation (DTDi) Scheme will be extended to include a new qualifying activity, i.e., e-commerce campaign and startup expenses paid to e-commerce platform/service providers as follows:
    • Business advisory: Advisory on market promotion and execution plans (e.g., choice of suitable e-commerce platforms);
    • Account creation: Assistance with setting up accounts on e-commerce platforms, and the right to sell on e-commerce platforms;
    • Content creation: Design of e-commerce campaign publicity materials (e.g., e-store banners, online product images); and
    • Product listing and placement: Uploading content on products/services to e-commerce  platforms, and selection of suitable frequency and timing to display content on products/ services.

Prior approval from Enterprise Singapore will be required to enjoy the DTDi on the new qualifying activity. Approval will be granted to each business for a maximum period of one year applied on a per country basis. This enhancement will take effect for qualifying e-commerce startup expenses incurred on or after 15 February 2023.

  • The Investment Allowance Scheme will be extended through 31 December 2028 to continue encouraging businesses to make capital investments in plant and productive equipment in Singapore.
  • The Pioneer Certificate Incentive and Development and Expansion Incentive also will be extended through 31 December 2028 to continue encouraging companies to anchor and grow strategic high value added manufacturing and services activities in Singapore.

Evelyn Lin