New Incentives and Tax Measures That Will Impact Businesses from 2022 to 2030

tax incentives

Last February 18, 2022, a S$109 billion budget was passed by the government to contain income, consumption, and wealth taxation. With the financial impact of COVID-19 still fresh in everyone’s minds, the government is working hard to improve its tax system.

Key Tax Changes That Will Affect Companies

Here are some of the new measures they’re implementing that may impact businesses in the following years.

  • GST rate increase

The Singapore government is scheduled to increase the Goods and Services Tax (GST) from 7% to 9% in 2023 and 2024.

This GST increase will affect many industries and sectors, including retail, construction, financial services, and healthcare. The public will feel the impact of this change through higher prices of goods and services.

  • Property tax increase

The new changes will make it so the tax on the property will range from a low of 5% to a high of 32%.

An increase in property taxes can lead to increased housing costs which will affect both landlords and tenants. Landlords will need to charge more rent to cover their increased costs, while tenants will be paying more for their monthly rent payments. This could have a negative impact on both businesses and consumers, and people looking to buy homes or rent apartments/houses.

  • Minimum effective tax rate regime

A minimum effective tax rate regime is on the horizon for multinational enterprises. If your company has at least EURO 750 million in the consolidated financial statement and is based in Singapore, you will eventually be subject to a 15% effective tax rate.

  • Carbon tax increase

The carbon tax in Singapore will gradually increase from SGD 50 to SGD 80 per tonne of emissions by 2030. To meet the country’s target of achieving net-zero emissions by mid-century.

  • The corporate income tax increase

Corporate income tax is one of the primary sources of revenue for the government. It is also a significant source of revenue for corporations. The government needs money to fund its programs and projects, and corporations need to invest in their business operations.

When corporate income tax increases, it reduces the funds available for investment by the corporation. Thus, there will be a significant effect on businesses if corporate income taxes are increased.

Government Minimising the Effect of the Tax Increase

While the government has recently introduced adjustments to the tax system, these were also made considering COVID-19’s financial impacts on businesses. The government is implementing incentives and support programs to help businesses grow and expand.

These include the following:

  • Aviation support packages

The aviation sector will get $500 million to continue to support recovery efforts amid the Covid-19 pandemic. The package is made up of three key components – human resources support, support to make air travel safe and help with transitioning the workforce.

  • Progressive wage credit scheme

The Progressive Wage Credit Scheme (PWCS) was introduced to provide a wage subsidy for employers who commit to raising the wages of their low-wage workers.

The Wage Increase Initiative will be running until the start of 2026 and is set for a gross monthly wage ceiling of $2,500. Meanwhile, support for increasing wages up to and including $3,000 will run from 2021 to 2025

The PWCS is designed to help employees at the bottom of the income distribution ladder. It will also contribute to Singapore’s efforts in improving income equality and social mobility.

  • New Singapore global enterprises

The Singapore Global Enterprises initiative gives customised assistance to promising large local enterprises in the areas of innovation, internationalisation and fostering partnerships.

These will help scale up to large Singapore companies that want to invest overseas and grow their workforce. They will also be able to support the next generation of leaders in the country.

  • Enhanced merger and acquisition loan

The Enterprise Financing Scheme (EFS) has been extended to include domestic M&A activities. The extension will last until March 31 2026. In addition to supporting and scaling M&A, this helps companies explore new regions and develop their business portfolio

Conclusion: How Can Businesses Adapt?

These initiatives are crucial as Singapore continues to recover from the COVID and head towards pre-COVID levels. It is important for governments around the world to work together and come up with these policies that would help boost their economies.

To find out how the recent changes can impact your business, engage with Singapore accounting firms.

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