Budget 2024 is a good opportunity to look at how Singapore's tax regime needs to be fine-tuned so as to stay appealing to global businesses and family offices, say KPMG Singapore leaders.
The firm brings together its director of corporate tax consulting, Vishesh Dhuldhoya; partner and head of tax, Ajay Kumar Sanganeria; and Mark Addy, partner of energy & natural resources, telecommunications, media & technology tax, to discuss what lies ahead for Singapore after the global minimum tax is implemented.
Singapore is home to more than 7,000 multinational corporations (MNCs) that have been enjoying tax incentives and not paying corporate taxes at its 17% rate, says Sanganeria. However, once the Organisation for Economic Co-operation and Development’s Base Erosion and Profits Shifting (OECD’s BEPS) 2.0 comes into play, these MNCs will have to pay more in taxes.
Therefore, tax certainty around qualified refundable tax credits, grant funding, and a re-look at the long-standing Singapore tax provisions would be desirable in this upcoming Budget, Addy notes.
“If we compare this to other countries, it tends to be a little bit stricter. So maybe this is an opportunity to look at that, and relax some of those rules to make sure Singapore continues to be attractive to MNCs,” Addy adds.
In addition, Sanganeria notes that should Singapore wish to maintain its leadership position as an innovation hub, it needs to consider both tax and non-tax factors — such as attracting talent pool and strengthening regional partnerships where ideas and talent can be shared.
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On tax-related factors, Addy suggests liberalising the rules around tax deductibility such as the issuance of new shares that can qualify, as tech companies often utilise equity-based incentives to attract top talent to Singapore.
Finally, Sanganeria raises that there are opportunities to fine tune Singapore’s tax incentive regime to ensure that the country remains attractive as the choice destination for wealth management.
He says that it “would be great” to see tax incentive schemes renewed without an increase in economic conditions tied to them in the asset management space which is due for renewal after December 2024. For example, the minimum $200,000 business spending.
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On that note, conditions associated with the tax incentive schemes accorded to single family offices have become more stringent over the past year, says Sanganeria.
He raises that there are restrictions under these schemes against single family offices holding controlling stakes even in private equity and venture capital investments, whereby the family members hold executive or managerial roles — which can be counterintuitive to encouraging investments.
