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Singapore Budget 2022: Key tax updates

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In brief

Singapore Budget 2022 makes significant strides in charting Singapore’s path into the future. As the nation faces an ageing population and seeks to recover from a prolonged pandemic amidst an increasingly volatile global landscape, Budget 2022 aims to prepare Singapore to meet these challenges while securing the opportunities of the future.

What is of particular note in Budget 2022 is the announcement of changes to the tax system that are broadly aimed at building a fairer and more resilient revenue structure for Singapore. Importantly, Singapore is exploring the possible introduction of a minimum effective tax rate for multinational enterprise groups. While the oft-mentioned Goods and Services Tax (GST) increase will not take place this year, the government has confirmed that the increase will be implemented in a staggered, two-step process beginning 1 January 2023. Adjustments will also be made to the carbon tax, property tax and personal income tax rates.

We highlight below the key tax developments from Budget 2022.

Key takeaways

  • The Ministry of Finance is exploring the introduction of a minimum effective tax rate of 15% for multinational enterprise (MNE) groups with annual revenues of at least EUR 750 million.
  • The GST rate increase will not take place in 2022 and will remain at 7% for the remainder of the year. Instead, the increase will be staggered over a two-year period and implemented in two steps, taking effect on 1 January 2023 (from 7% to 8%) and on 1 January 2024 (from 8% to 9%).
  • The carbon tax rate will be progressively increased from 2024 onwards, with a view to reaching SGD 50 to SGD 80 per tonne by 2030. To support businesses, a transition framework will be introduced to provide companies with allowances for a share of their emissions.
  • There have been extensions and enhancements to various tax schemes, including the Approved Royalties Incentive scheme, the Approved Foreign Loan scheme and the withholding tax exemption for the financial sector. Some schemes have also been allowed to lapse, such as the tax incentive scheme for infrastructure trustee-managers/fund management companies.
  • Adjustments will be made to the personal income tax rates and property tax rates for residential properties. The top marginal personal income tax rate will be increased with effect from Year of Assessment (YA) 2024, with two additional tax brackets introduced for chargeable income in excess of SGD 500,000 and SGD 1 million. Additionally, property tax rates for residential property will generally be increased across the board, with significantly greater increments for non-owner-occupied residential property and owner-occupied residential property with higher annual values.

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Allen Tan is the head of the Tax, Trade and Wealth Management practice in Baker McKenzie Wong & Leow. He has extensive experience working on both international and local tax issues, with a special focus on the regional tax aspects of the transactions that he is involved in. Allen’s clients include Global Fortune 500 multinational corporations and major Singapore conglomerates. He is recognised as a leading lawyer for his tax controversy and corporate tax work in many leading legal and tax directories including International Tax Review, Chambers Asia Pacific and Legal 500 Asia Pacific. Allen was also named the Asia Tax Practice Leader of the Year 2018 by International Tax Review.

Author

Dawn Quek is a leading tax and private client lawyer in Singapore with many years of experience in corporate tax and international tax planning. She is the Head of the Wealth Management practice in Singapore and is the Asia Pacific representative on the Firm's Global Wealth Management Steering Committee. Dawn is consistently ranked as a leading tax and private client/wealth lawyer by various legal publications including Chambers High Net Worth (HNW) Guide, International Tax Review Women in Tax Leaders Guide and the Legal 500 Asia Pacific. She was named "Private Client Lawyer of the Year" at the 2018 Asia Legal Awards by The Asian Lawyer, and named "Women in Wealth Management" at the 2018 and 2020 WealthBriefingAsia Awards. Dawn is a key player in the local wealth management and financial services scene. She frequently participates in formal and informal consultations with government authorities on law reform on issues relating to the wealth management and financial services industry from a tax and legal perspective. She has also co-written articles on international tax planning issues in various tax and legal journals published by CCH and BNA. In addition, Dawn has been quoted extensively in publications such as the New York Times, the International Herald Tribune, Reuters, the Financial Times, the Straits Times, the Business Times and Asian Private Banker on issues and developments affecting the wealth management industry in Singapore.

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Shih Hui Lee has advised on both regional and Singapore tax issues, with focus on advising MNCs on international tax aspects of cross-border transactions. Her practice includes advising clients on tax issues arising from mergers and acquisitions, indirect taxes, transfer taxes, foreign direct investment and cross-border tax planning issues. Prior to joining Baker McKenzie, Shih Hui worked in one of the Big Four accounting firms in Singapore. She has experienced being an in-house regional tax advisor in one of the multinational cable and satellite television channel.

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Jaclyn has over 10 years of experience and specialises in solving the tax needs of multinational corporations and Singapore-headquartered companies across various industries globally and regionally.
She is adept at complex tax transformations to help clients unlock and maximise long term value, and achieve sustainable and tangible benefits, in tandem with business current and target operating models.
Jaclyn has extensive and deep experience in unlocking corporate synergies across the spectrum of tax-related services that Baker & McKenzie offers. Whether it is an international tax issue, restructuring strategies and implementation, intellectual property planning, M&A, or tax incentive negotiations with the relevant authorities, Jaclyn is a trusted advisor to her clients with her practical, sophisticated, innovative, and tailored solutions.
Jaclyn focuses on international taxation, cross-border taxation, group and business restructuring, transfer taxes and mergers and acquisitions.

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