The Minister for Finance, Mr Lawrence Wong, delivered his Budget proposal on 14 February 2023. Pending approval from the Parliament, here are the key proposals that may have an impact on your business:
Enterprise Innovation Scheme
From 2024 to 2028, businesses that engage in Research & Development, innovation and capability development activities will be able to enjoy Enhanced Tax Deductions of 400% for each Year of Assessment. The Scheme will be targeted at:
- Staff costs and consumables incurred on qualifying Research & Development Projects
- Qualifying Intellectual Property Registration costs
- Acquisition or licensing of qualifying Intellectual Property rights
- Qualifying training expenditure incurred on courses that are eligible for SkillsFuture Singapore funding and aligned with the Skills Framework
- Innovation Projects carried out with Polytechnics, the Institute of Technical Education (ITE), or other qualified partners.
- A Cash Conversion option of up to $100,000 of qualifying expenditure at 20% is also available. More information can be found at go.gov.sg/iras-eis
Double Tax Deduction for Internationalisation
The current scheme (in place until December 2025) will be enhanced to include e-commerce campaigns as a qualifying activity. Further information will be released by EnterpriseSG.
Accelerated Capital Allowance
Fixed assets suffer ‘wear and tear’ and depreciate over time. Depreciation accounted for in financial statements is not tax-deductible. Your company can instead claim capital allowances for the wear and tear of qualifying fixed assets bought and used in its trade or business. Claiming capital allowances over a period of time is also known as ‘writing off the asset’.
Your company can claim capital allowances when the expense is incurred. An expense is incurred when the legal liability to pay arises, regardless of the date of actual payment of the money. This will be available for expenditure incurred on Plant and Machinery in the Year of Assessment 2024. Capital Allowances will be allowable at 75% for the first year with the balance to be taken in the Year of Assessment 2025.
Accelerated Deduction for Renovation and Refurbishment
Taxpayers who spent money on qualifying renovation or refurbishment during the relevant three-year period have the option to claim a deduction over one year instead of three with a single deduction of up to $300,000.
Investment Allowance Scheme
To support businesses during this period of restructuring, businesses that incur capital expenditure on the acquisition of Plant and Machinery in the basis period for YA2024 will have the option to write off the cost of acquiring such equipments over two years. This will be extended until 31 December 2028.
Pioneer Certificate Incentive
The Pioneer Certificate Incentive (PC) and Development and Expansion Incentive (DEI) are two programs that aim to encourage companies to expand their operations and conduct new or expanded economic activities in Singapore. By incentivizing companies to grow their capabilities, these programs aim to spur economic growth and development in Singapore. This will be extended until 31 December 2028.
Development and Expansion Incentive
The Development and Expansion Incentive for Manufacturing encourages companies to engage in high-value-added manufacturing activities in Singapore, either through a new setup or an expansion of existing operations in Singapore. This incentive provides support for companies to increase their manufacturing capabilities and deepen their commitment to Singapore as a manufacturing hub. This will be extended until 31 December 2028.
IP Development Incentive
The Intellectual Property Development Incentive (IDI) is designed to promote the use and commercialization of intellectual property rights resulting from research and development (R&D) activities. This will be extended until 31 December 2028.
Please note that the proposals in Budget 2023 may still evolve and need to be approved by Parliament. If you require further information, please contact our Tax Partner at Taihee.yong@a8ile.com. The complete Budget 2023 proposal can also be found at https://www.mof.gov.sg/singaporebudget/budget-2023/budget-statement.