Overview of Singapore’s 2024 Budget
On February 16, 2024, Singapore’s Deputy Prime Minister and Finance Minister Lawrence Wong presented the country’s 2024 Budget, which includes important tax updates aimed at supporting businesses, encouraging investment, and maintaining competitiveness in a post-BEPS world. One of the key measures is the 50% Corporate Income Tax (CIT) rebate for all companies, capped at SGD 40,000, designed to help businesses manage increasing costs. This rebate applies directly to the income tax payable for the Year of Assessment (YA) 2024, reducing the tax burden on companies. Additionally, a minimum cash grant of SGD 2,000 will be offered to companies with at least one local employee, helping those with low or no chargeable income to benefit from government support despite not fully utilizing the CIT rebate.

Incentives for Business Investment and Growth
The Budget also includes significant changes aimed at encouraging businesses to invest in their operations and improve productivity. One such measure is the enhancement of tax deductions for renovation or refurbishment (R&R) expenditure, which will apply to qualifying expenses starting from YA 2025. This adjustment is intended to encourage businesses to enhance their physical premises, improving operational capabilities and overall economic productivity. Additionally, the Budget introduces the Refundable Investment Credit (RIC) scheme, which provides refundable credits for businesses undertaking high-value economic activities such as investing in new productive capacity, expanding digital services, and conducting R&D. These credits can be offset against CIT payable, and any unused credits will be refunded to the company within four years, creating an attractive incentive for businesses looking to invest in growth and innovation.

Implementation of OECD’s BEPS 2.0 Framework
A key focus of the 2024 Budget is also the implementation of the OECD’s BEPS 2.0 framework, specifically Pillar Two, which includes the Income Inclusion Rule (IIR) and a Domestic Top-up Tax (DTT). These rules, effective from 2025, aim to ensure multinational companies pay a minimum level of tax to avoid tax base erosion and profit shifting. While other countries have already implemented similar rules, Singapore is moving forward with the IIR and DTT to remain competitive and prevent the loss of revenue to jurisdictions that have already adopted the Undertaxed Profits Rule (UTPR). However, the Finance Minister clarified that the UTPR will be considered at a later stage to allow for a smoother implementation of the IIR and DTT.

Revisions to Fund Tax Incentives
The Budget also introduces revisions to the fund tax incentive schemes under Section 13D, 13O, and 13U of the Singapore Income Tax Act (ITA), which provide tax exemptions to funds managed by Singapore-based fund managers. These incentives will now be extended until December 31, 2029. From January 2025, Section 13O will be expanded to include Singapore Limited Partnerships, offering more flexibility for investment funds in choosing their legal structure. Additionally, the economic criteria for qualifying funds, such as minimum spending and fund size, will be revised, though specifics have yet to be provided. This revision of the fund tax incentives is intended to keep Singapore competitive as a hub for investment management, though the inclusion of minimum fund size requirements could impact the flexibility currently offered by Section 13O.

Sector-Specific Tax Measures
In the Budget, other sector-specific tax measures include the introduction of additional concessionary tax rate (CTR) tiers for key industries such as aircraft leasing, finance, and intellectual property. For example, the Aircraft Leasing Scheme will have a new 10% CTR, while the Development and Expansion Incentive and Global Trader Programme will have a 15% CTR. These CTRs are designed to stimulate growth and innovation, although businesses must meet specific economic commitments to qualify. There is some concern that the difference between the new CTRs and the existing corporate tax rate of 17% may reduce the attractiveness of these incentives, as the economic commitments required to qualify may not be as advantageous as before. The Budget also introduces a new basis of tax for selected Maritime Section Incentive (MSI) sub-schemes, where qualifying income will be taxed based on the net tonnage from YA 2024.

Conclusion and Future Outlook
The 2024 Budget signals Singapore’s ongoing efforts to stay competitive in the global economy while aligning with international tax standards. However, the full details and implementation guidelines for many of these measures, especially those affecting the fund tax incentives and the RIC scheme, will be revealed in the second half of 2024. These updates, along with revisions to the minimum fund size requirements and tax incentives, will be critical in shaping Singapore’s tax regime and ensuring that the country remains an attractive business and investment hub.