On Friday, 18 February 2022, Minister for Finance, Mr. Lawrence Wong announced the Budget Statement for the Financial Year 2022. In his speech, he stressed upon the importance of a fair and progressive tax rate in the country. The major tax changes and increased social spending in Budget 2022 also highlight that the Government is investing in strengthening Singapore’s social compact.
IMC Group has deeply analysed the budget 2022 and brings to you key changes that can impact the tax structure in Singapore.
One of the biggest announcements from the budget is the increase in GST rate which will happen in two stages.
Year | GST Rate |
1 January 2023 | 7% to 8%. |
| 1 January 2024 | 8% to 9% |
Furthermore, a committee will be set up to ensure that businesses in Singapore do not try to profit from this increase by raising the prices of their products and services in the name of GST increase. The Ministry of Finance has also announced an additional top-up of $640 million to Singaporeans to cushion the impact of the GST increase making the Assurance Package to $6.6 billion.
The increase is complemented by the permanent enhancement of GST Voucher scheme in the following 3 ways:
- Every adult Singaporean aged 21 and above will get cash payouts ranging from $700 to $1,600 over the next 5 years;
Eligible Singaporean households will get additional GST Voucher U-Save rebates ranging from $330 to $570 over the next 4 years to offset the cost of utilities;
Eligible lower-income seniors will get GST Voucher cash payout ranging from $600 to $900 over the next 3 years. - All Singaporean children aged 20 and below and seniors aged 55 and above will get a total of $450 in MediSave top-ups over the next 3 years
- All Singaporean households will get another two rounds of Community Development Council (CDC) vouchers worth $400 over 2023 and 2024. These vouchers can be used at heartland stores as well as major supermarkets.
The above move will support retiree households to combat the impact of the total increase in GST that they have to pay. For lower-income households, without seniors in their family, these vouchers will offset about half their total GST expenses every year.
Over and above this, for vulnerable households who may need additional support, the Citizens’ Consultative Committees ComCare Fund will get a $5 million top-up over the period of five years, while the four self-help groups will get a total of $12 million over the period of four years. The personal income tax rate for individuals in the top marginal tax bracket in Singapore will increase from the year of assessment 2024. Those earning between $500,000 and $1 million will see an increase in personal income tax rate from 22% to 23%. While those earning in excess of $1 million will see an increase in personal income tax rate from 22% to 24%.
Note: Those earning between $320,000 and $500,000 will not see any change in their income tax rate in this budget. They will still be taxed at 22% without any change. For small and medium sized enterprises various support packages are announced to provide temporary relief for businesses and workers.
- H4 Skills Future Enterprise Credit
This grant aims to support businesses to upskill their employees by waiving Skills Development Levy contribution requirements on them. As a part of the initiative, up to $10,000 credit can be used to offset up to 90% of expenses for transformation initiatives. - Productivity Solutions Grant
Around $40 million will also be set aside for businesses to apply for subsidised accounting and point of sale solutions to combat the impact of GST increase and raise productivity. - Small Business Recovery Grant
Small and medium sized enterprises in the eligible sectors will receive $1,000 per local employee they hire, up to $10,000 per firm.
Sole-proprietor, partnerships and stallholders including SFA-licensed hawkers, market and coffeeshop stallholders in eligible sectors that do not hire local employees will be given a $1,000 one-off grant. - Jobs Growth Incentive
The said grant will be extended to September 2022 to support the hiring of mature and vulnerable workers. - Advanced Digital Solutions
Starting from 1 April 2022, SMEs offering advanced digital solutions will receive up to 70% funding support for qualifying costs on digital solutions. - Grow Digital
Starting from 1 April 2022, SMEs will receive 70% co-funding to onboard cross-border digital platforms.
Another important tax rate hike was seen for those who own a non-owner-occupied residential property in Singapore which includes investment properties. At present they are taxed at 10% to 20% but following the budget, the property tax rate for such properties will be raised to
Year | Tax Rate |
2023 | 11% to 27% |
| 2024 | 12% to 36% |
The excess amount to pay will depend on the annual value of the home. The said tax rate increase will apply to all non-owner-occupied property in all annual value tiers.
The property tax rate for owner-occupied homes with an annual value above $30,000 will also be raised. At present they are taxed at 4% to 16% but following the budget, the property tax rate for such properties will be raised to 6% to 32%. The tax rate change will only affect families who stay in a private property with an annual value above $30,000.
The hike in tax rate signals that the government is taking initiatives to resolve rising wealth inequality in a country. The move is set to increase the government’s property tax revenue by approximately S$380 million annually i.e. around 12% of the existing property tax collection of $3.1 billion. The government has announced an increase in carbon tax rate from the present
Year | Tax Rate |
2024 and 2025 | $5 per tonne to $25 per tonne |
2026 and 2027 | $45 per tonne |
2030 | $50 to $80 (Goal of reaching) |
The current tax of $5 per tonne remains unchanged until 2023.
No additional carbon tax will be imposed on petrol and diesel.
Going forward from 2024, large emitters in Singapore will be able to buy international carbon credits to reduce the carbon tax they pay. The minimum qualifying salary for Employment Pass will be increased from $4,500 to $5,000. For the financial services sector, the minimum qualifying salary for Employment Pass will be increased from $5,000 to $5,500. The above-mentioned changes will be applicable from September 1, 2022, for new Employment Pass applications and September 1, 2023, for renewal applications.
Besides Employment Pass salaries, the salary thresholds for S Pass holders will also be raised. The minimum qualifying salary for foreign workers on S Pass will be increased from the current $2,500 to $3,000 for new applicants from September 1, 2022. For the financial services sector, a higher salary threshold of $3,500 will be in effect.
From January 1, 2024, the Dependency Ratio Ceiling (i.e., the proportion of foreign workers a firm can employ) will be reduced from 1.7 to 1.5.
The above write-up summarises the key changes in Budget 2022.
