On 18th February Lawrence Wong, the Finance Minister, presented his first Budget to Parliament and the nation.
Following 2 tumultuous years for Singapore and the world due to Covid 19, he told us that the time has come to turn our eyes to the future and to prepare Singapore’s finances to face the challenges of our collective recovery post Covid and providing for the needs of an aging population.
Amongst measures to provide for the needs of an aging population, changes to CPF were announced which recognise that people are working longer and will have greater needs in retirement. From January 2023 CPF contributions will rise further for those aged 55 and over, with the additional contributions going to the Special Account to provide additional funds for retirement. The increases are as follows:
A number of revenue raising measures were introduced:
Increases to tax on income, principally targeted at the top 1.2% of income earners with the new rates applying on incomes in excess of S$500,000 from YOA 2024. The new rates are:
- 23% on income from S$500,000 to S$1,000,000
- 24% on income over S$1,000,000
Increases to Wealth Taxes as follows:
- Property tax – currently Singapore’s principal means of taxing wealth – will increase in 2 steps starting in 2023
- Property tax rates for non-owner-occupied residential properties, including investment properties will increase from 10% to 20% which is the current range, to 12% to 36%
- Property tax rates for owner-occupied residential properties, will increase for the portion of Annual Value in excess of $30,000, from today’s 4% to 16%, to 6% to 32%.
- Tax on vehicles
- luxury cars will be taxed at a higher rate to make the vehicle tax system more progressive through the introduction of an additional ARF tier for cars at a rate of 220% for the portion of Open Market Value in excess of $80,000. This new tax was effective from the second COE bidding round in February 2022.
There is a desire in Government to consider extending Wealth Taxes, ideally by taxing the net wealth of individuals. Mr Wong recognised that it is not easy to implement this type of tax effectively given that “estimating wealth accurately and fairly is a more complex exercise than estimating incomes” and also as “many forms of wealth are mobile, and as long as there are differences in wealth taxes across jurisdictions, such wealth can and will move”.
This means that it is important to consider how wealth is structured and to have the flexibility to adapt to future changes which may be introduced.
The final thrust of the Budget was the confirmation of the timing of the increase to GST announced in previous Budgets. In his speech, Mr Wong confirmed that the increase in GST from 7% to 9% will take place over 2 years with the first increase taking place on 1 January 2023, from 7% to 8%, and the second increase on 1 January 2024 from 8% to 9%.
In short whilst we will all be affected by changes to GST, other measures are likely to impact:
- high earners
- property owners
- buyers of luxury cars
- Singaporeans and PRs aged between 55 and 70
Whilst Singapore remains an attractive jurisdiction from a taxation perspective, it is important to consider the potential impact of taxation when planning to meet your future goals. Speak to your AAM Wealth Manager or contact us to find out how you can ensure that you do not suffer from over taxation.
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