Singapore’s S$109 billion 2022 Budget was announced on February 18, 2022. While the last two budgets were concerned with getting the country through the pandemic crisis, devoting over S$100 billion to the economy’s recovery, this year’s budget is mainly focused on long-term economic goals.
“Budget 2022 is a first step in renewing and strengthening Singapore’s social compact in a post-pandemic world, and in realizing our vision of a fairer, more sustainable, and more inclusive society.”Singapore Minister of Finance, Lawrence Wong
Budget 2022 sets out several core goals:
- invest in new capabilities;
- advance the country’s green transition;
- renew and strengthen the social compact;
- develop a fairer and more resilient revenue structure.
Ajay Kumar Sanganeria, Partner, Head of Tax, KPMG in Singapore, said that in order to stay attractive, Singapore needs to continue to innovate. He also added that it is vital for the country to position itself as a choice destination for green finance, wealth and asset management, as well as technology.
In Budget 2022, the Government introduced new and enhanced initiatives to support businesses to seize new opportunities, strengthen digital capabilities, develop a skilled workforce, and advance Singapore’s green transition. Various tax measures were introduced in the Budget, including raising the goods and services tax, carbon tax, and personal income tax. Below we outline some critical changes and other important announcements introduced in Singapore Budget 2022 that can impact Singapore businesses.
At a Glance
- Post-pandemic support packages and loan programs for businesses have been extended
- New programs were introduced to strengthen trade partnerships
- New frameworks aim to build a strong and skillful workforce
- Upcoming changes to corporate tax rates for certain taxpayers
- Changes to personal income tax rates
- Changes to property tax rates
- Increased GST rates
- Increased carbon tax rates
- Increased minimum qualifying salary for EP and S Pass holders
Government officials believe that a move towards a tax increase is necessary for now, as tax revenue will help the country restore its finances after two years of a pandemic crisis. Finance Minister Lawrence Wong said that this additional revenue will go to support the country’s growing health care needs. Economists forecast that a 2% GST hike will increase Singapore’s annual collections by S$3.6 billion, making it the second main source of the government’s operating revenue after corporate income tax.
Singapore’s government believes that with a fairer and more progressive method of tax contributions, Singapore society will hold together while entering a post-pandemic world that is expected to be more volatile.
These new tax measures should not affect Singapore’s status as a business hub. Singapore’s attractiveness goes beyond low taxes, as the country relies on other factors that it can offer to multinational enterprises to remain competitive.
Personal Income Tax Increase
Singapore offers one of the lowest personal income tax rates in the world. Singapore tax residents are taxed at a progressive rate ranging from 0% to 22%. The highest income tax bracket, 22%, applies to income beyond the S$320,000 threshold.
To achieve greater progressivity, the Singapore government, in its Budget for 2022, revealed a plan to increase the top marginal personal income tax rate for Singapore tax residents. Changes will come into effect starting from the 2024 tax year and basically will affect high-net-worth individuals with income of more than S$500,000 per year. Chargeable income from S$500,000 up to S$1 million will be taxable at a rate of 23%; income in excess of S$1 million will be subject to a tax rate of 24%.
Goods and Services Tax Changes
Following the announcement of a coming GST hike in Singapore Budget 2018, in Singapore Budget 2022 the Government announced the timeline for the planned increase in the goods and services tax (GST), also known as the value-added tax. GST is an indirect tax paid by consumers and is levied on most goods and services sold for domestic consumption. In Singapore, companies are not obliged to register for GST if their revenue does not exceed a certain threshold.
The GST rate increase will take place in two steps: (i) from January 1, 2023, the GST rate will be increased from 7% to 8%; (ii) from January 1, 2024, GST will be further increased to 9%. But even at 9%, Singapore’s GST still remains among the lowest in Asia.
The GST rise may have a negative impact on consumers, as businesses can use tax hikes as a cover to raise prices. To address these concerns, the Government announced a S$6 billion Assurance Package to reduce the impact of the GST hike. Also, an additional top-up of $640 million to the Assurance Package will be provided. This enhanced package will provide significant payouts to Singaporeans over the next 5 years.
Additionally, about S$40 million will be set aside under the Productivity Solutions Grant for businesses to adjust to the GST increase. Under this program, businesses will be able to apply for subsidized accounting and sale solutions.
Additional wealth taxation measures were introduced in Budget 2022 that will help bolster government coffers and minimize wealth disparities. The Government will increase the marginal tax rates for non-owner-occupied residential properties and owner-occupied residential properties. Property tax rates in Singapore are applied on a progressive scale and are taxed at the annual value. The increases in property tax will be implemented in two steps, starting from January 1, 2023. The next adjustments will be effective from January 1, 2024.
In general, tax rates for owner-occupied residential properties in Singapore are lower than for non-owner-occupied residential properties. For example, tax rates for owner-occupied properties will range from 0% to 23%, but 11% to 27% for non-owner-occupied properties, during the first phase of adjustments. More details about property tax rates can be found on this government website.
The Government will also raise the tax rate on luxury cars by introducing a new Additional Registration Fee tier for cars, taxis, and goods-cum-passenger vehicles. The maximum rate of 220% will be applicable to those whose vehicle’s Open Market Value exceeds $80,000. New rules will apply to all cars registered with the Certificate of Entitlements obtained from the second bidding exercise in February 2022.
Singapore is moving towards joining global tax developments relating to the Base Erosion and Profit Shifting (BEPS) initiative, by making an effort to adjust its corporate tax system. Singapore is planning to integrate a global minimum tax rate of 15% applied to its corporate system. This tax rate will be applicable to multinational corporations with annual global revenues of 750 million euros under the Global Anti-Base Erosion Model Rules. For example, if such enterprises had an effective tax rate lower than 15% in Singapore at the group level, other jurisdictions are allowed to collect the difference required to top the rate of 15%.
The Inland Revenue Authority will continue monitoring global development to find the most effective way to implement new tax adjustments. The Government is sure that new tax rules will not affect the vast majority of Singapore companies. While BEPS rules may have reduced tax competition among tax-friendly countries, it has not reduced global competition for investments, which is even more likely to rise, as governments will seek to rebuild their economies. Singapore has much more to offer than just low tax rates and remains one of the best places to incorporate a company.
“Singapore’s competitiveness goes beyond taxation. We have built a vibrant technology hub with deep capabilities, secure infrastructure, a strong intellectual property protection regime, and a dense ecosystem of local and global enterprises. We are therefore confident that even as the window for tax competition narrows, global technology companies will continue to find Singapore a compelling place to do business.”Singapore’s Minister for Trade and Industry, Mr. Gan Kim Yong
Adjustments to Employment Policies
One of the major news of the Singapore 2022 Budget was the announcement of the Ministry of Manpower (MOM) about the increase of the minimum qualifying salary for Employment Pass (EP) and S Pass holders. Also, the new points-based Complementarity Assessment Framework (COMPASS) will be introduced for EP applications. Changes will progressively apply from September 1, 2022. Despite the new implementations, employers must still continue to meet job advertising requirements before submitting new EP or S Pass applications.
Updates to Employment Pass
Starting from September 1, 2022, MOM will be raising the qualifying minimum monthly salary for new Employment Pass applicants for all sectors except financial services. For those who will be renewing their EPs, the increase applies from September 1, 2023. EP is designed for foreign professionals, c-suite executives, and company directors who want to work and live in Singapore.
|Sector||Current minimum qualifying salary||Revised minimum qualifying salary|
(except financial services)
(increases up to $8,400 for candidates in mid-40s)
(increases up to $10,500 for candidates in mid-40s)
|Financial services||S$5,000 |
(increases up to $9,300 for candidates in mid-40s)
(increases up to $11,500 for candidates in mid-40s)
In addition to the changes in qualifying salary, starting September 1, 2023, MOM will introduce a points-based Complementary Assessment Framework (COMPASS), which helps employers to select highly qualified foreign professionals. The new system will evaluate EP applications based on the individual’s set of qualifications and company attributes and be scored on several criteria: salary, qualification, diversity, support for local employment, skills bonus, and strategic economic priority bonus.
An EP application that meets the required 40 points will pass COMPASS. The program also considers certain cases when EP applicants are exempted from COMPASS. For instance, an EP applicant earns at least S$20,000 fixed monthly salary or fills a role just for 1 month, or applies as an intra-corporate transferee under the WTO agreement.
Updates to S Pass
The Ministry of Manpower will be raising the minimum qualifying salary and levy rates for S Pass holders. S Pass is a visa designed for mid-level skilled foreign employees. Currently, the minimum qualifying salary for S Pass applicants is S$2,500 per month. It will be raised in three steps:
|Sector||From September 1, 2022, for new applications and from September 1, 2023, for renewals||From September 1, 2023, for new applications and from September 1, 2024, for renewals||From September 1, 2025, for new applications and from September 1, 2026, for renewals|
(except financial services)
(increases up to S$4,500 for candidates in mid-40s)
|At least S$3,150||At least S$3,300|
|Financial services||S$3,500 |
(increases up to S$5,500 for candidates in mid-40s)
|At least S$3,650||At least S$3,800|
As of January 1, 2023, S Pass quotas will also be updated. Businesses in Singapore can hire a certain number of S Pass holders limited by quota. With the new changes, the quota for hiring S Pass holders in manufacturing, construction, marine shipyard, and process sectors will be reduced from 18% to 15% of the company’s total workforce. However, for services sector workers, the 10% quota will remain.
Singapore businesses must also pay a monthly levy for their S Pass employees, from the day the S Pass is issued until the pass expires or is canceled. From September 1, 2022, the basic S Pass tier levy will be also progressively increased from S$300 to S$650 by 2025.
New Incentives and Extended Support Programs
Singapore Finance Minister Lawrence Wong announced a S$6 billion draw on the reserves of Singapore’s 2022 budget as part of the country’s fight against COVID-19, and more than S$1 billion in support for businesses, individuals, and households hit by the pandemic. Singapore also continues stimulating business growth and extending its incentives business programs that provide support in the form of grants, loan schemes, expanded reskilling programs for workers, etc. Some of these programs are listed below.
Jobs Support Package
The Government has extended its measures targeted to support businesses and workers highly affected by the COVID-19 restrictions. Lawrence Wong, Finance Minister of Singapore, announced that additional funding of S$500 million will be provided through the Jobs and Business Support Package and an extension of the Jobs Growth Incentive. In total, the Government committed to providing support of around S$100 billion over the past two years of the pandemic.
Small Business Recovery Grant
As a part of the extended jobs support package, a new Small Business Recovery Grant was introduced. Under this package, the Government provides one-off cash support to small and medium enterprises (SMEs) in sectors that have been most affected by COVID-19 pandemic: food and beverage, retail, tourism, and hospitality.
Eligible businesses can receive S$1,000 per local employee. Additional support of S$1,000 is offered to licensed hawkers, markets, coffee shop holders, and local sole proprietors.
Jobs Growth Incentive
The Government prolonged the Jobs Growth Incentive Program till September 2022, which helped local businesses pay a portion of salaries to their employees. It will be the fourth extension of the program since the pandemic crisis started in 2020.
The businesses must show an increase in the local workforce hired, as well as an increase in local employees earning gross monthly wages of at least S$1400 (compared to previous years) to be eligible to apply for government support.
Progressive Wage Credit Program
A new wage support program, the Progressive Wage Credit Scheme, was introduced in Singapore Budget 2022 to help employers adapt to upcoming mandatory minimum wage increases. The program will also provide support for employers who voluntarily raise the wages of lower-wage workers.
The Government will co-fund the wages of lower-wage employees from 2022 to 2026. Some 30% of the gross monthly wage of workers earning in a range between S$2,500 and S$3,000 will be funded by the Government. Those who receive less than S$2,500 will receive funding of 50% of their monthly wages. Starting from 2024, the co-funding rate will be reduced to 15% and 30% respectively. Only Singapore-registered businesses who had an average gross monthly wage increase of at least S$100 in the qualifying year are eligible for support.
Household Support Package
The Ministry of Finance also introduced S$560 million in aid to support Singapore citizens with the rising cost of living driven by supply chain disruptions, the rise in energy prices, etc. The Household Support Package is aimed at helping Singaporeans deal with utility bills, education expenses, and other daily essentials. For more detailed information on the Household Support Package, please refer to this government website.
Enterprise Financing Program – Project Loan
Singapore has also extended the Enterprise Financing Scheme Project Loan till March 2023. This program supports overseas and domestic projects for certain enterprises. Up to S$50 million of funding is available for overseas projects and S$50 million for domestic projects.
To be eligible for a loan, a business entity must be registered in Singapore as well as physically present in the country. Additionally, at least 30% local equity must be held by Singapore citizens or permanent residents. Also, the applicant must prove it has a group annual sales turnover of not more than S$500 million. However, only construction enterprises can apply for a loan to support domestic projects.
Enterprise Financing Program – Merger and Acquisitions Loan
This program was enhanced for 4 more years, till March 2026. Financing will be provided to domestic and overseas enterprises that conduct merger and acquisition activities. The program encourages companies to expand via mergers and acquisitions.
Eligible enterprises have to be registered and physically present in Singapore and have at least 30% local equity held by Singapore citizens or permanent residents. Also, the applicant must prove it has a group annual sales turnover of not more than S$500 million. The maximum repayment period for the loan is 5 years.
Food Services and Retail Business Revitalisation Package
To strengthen enterprise capabilities, accelerate companies’ digital and productivity efforts, transform business operations, and hire more local employees to facilitate business growth, Singapore extended further assistance to food service and retail firms. The package will be available from April 1, 2022, to March 31, 2023.
The package will extend the enhanced maximum support level for the Productivity Solutions Grant for pre-scoped solutions; Enterprise Development Grant for projects that support the transformation of business model; and enhanced support to train and hire local job seekers via the SGUnited Mid-Career Pathways Program and Career Conversion Program.
Singapore Global Enterprise Initiative
Singapore Global Enterprise (SGE) is one of the initiatives that will help cultivate a new generation of Singapore companies. Second Minister for Trade and Industry Tan See Leng said that, “Over the last few years, we have witnessed the emergence of a new generation of local champions. We now have 22 home-grown startups that have reached unicorn status. Many of our home-grown companies, such as Secretlab, Hegen, and Nanofilm, have made a name for themselves internationally.”
Under this new initiative, promising large local enterprises in Singapore will receive customized assistance in areas such as innovation, internationalization, and fostering of partnerships with other firms. Under the SGE initiative, local companies will be supported in the development of global-ready executives through the Singapore Global Executive Program; creation of new corporate ventures; facilitation of mergers and acquisitions; and creation of enhanced access to financing.
Trade Associations and Chambers Partnership Programs
Singapore introduced several new programs to strengthen trade partnerships between key intermediaries and enhance their digital and human capital capabilities to move in line with the emerging needs of the digital economy and post-pandemic world.
The Singapore Business Federation, SGTech, with support from Enterprise Singapore, will launch three new initiatives:
- The Digitalisation of Trade Associations and Chambers (TAC) Program aims to adopt digital solutions to improve and boost capabilities, and train enterprise staff to equip them with foundational digital capabilities that enable them to support their respective industries and members.
- The TAC Fellowship Program for Leadership Development will help to upskill secretariat leaders and build the next generation of leaders from secretariat staff, via executive leadership training courses.
- The TAC Leadership Accelerator Program will provide support in attracting, recruiting, and developing outstanding professionals who will be effective for TAC.
Input in Green Transition
Being a small country with a lack of natural renewable energy sources, Singapore is committed to doing its part in the global initiative to combat climate change through enhancing our green technologies. Several years ago, the Government introduced the Singapore Green Plan (SGP) 2030, showing its commitment to halve emissions by 2050 and achieve net zero emissions by around mid-century.
To achieve this goal, the Government has implemented various green initiatives, with the main focus on creating a more energy-efficient transportation system by maintaining a zero growth rate policy for private vehicles. Singapore announced its intention to phase out internal combustion engine vehicles by 2040. Also, Singapore wants to become a frontrunner in the development of sustainable aviation and marine transportation.
The Government will also set up a transition framework to offer existing companies allowances for a portion of their emissions to help firms in emissions-intensive and trade-exposed sectors. The Government will provide assistance to households to help cushion the impact of the changeover.
As a part of the SGP, Singapore aimed to develop a robust green finance market. The Government is willing to issue up to S$35 billion of green bonds by 2030 to invest in public-sector green infrastructure projects.
In Singapore Budget 2022, the Government has revised its carbon trajectory as Singapore aims to bring forward its net-zero target. Singapore’s current rate of S$5 per tonne on companies that produce at least 25,000 tonnes of carbon dioxide–equivalent greenhouse gasses is on the low end of the spectrum in comparison to what other countries are charging.
The carbon tax will be progressively increased from the current S$5 rate per tonne of emissions to S$25 in 2024, S$45 in 2026, and S$80 per tonne by 2030. Additionally, starting in 2024, businesses will be allowed to use high-quality international carbon credits to offset up to 5% of taxable emissions, in lieu of paying a carbon tax.
A large part of the revenue received from carbon taxes will be used to support the country’s move towards decarbonization through investments in new low-carbon solutions. This funding will help to lower Singapore’s emissions and bring the country closer to its net-zero goal.
“The Republic’s carbon tax has to reflect its stand on environmental, social, and governance issues, which is “of material importance” to businesses looking to invest in Singapore.”Minister for Trade and Industry of Singapore, Mr. Gan Kim Yong
With Budget 2022, Singapore’s government established a strong foundation for the country in areas of sustainability, digitalization, innovation, and workforce development, making it a clear and efficient roadmap on the way to Singapore’s economic growth and prosperity.
Despite its orientation towards economic recovery, the 2022 Budget attempts to address some long-term goals the country is aiming to achieve. As the investment pipeline is remaining strong due to the numerous investment initiatives and programs implemented, Singapore’s government predicts that the economy should grow by 3% to 5% in 2022. Government incentives and funding programs provided to startups and tech companies will upscale the Singapore economy, build capacity, encourage innovation, create more job opportunities, and help Singapore companies remain front-runners in the global economy.
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