Page 6 - RSM Budget 2022 Highlights

Develop a Fairer and More Resilient Revenue Structure

The Minister of Finance announced that there will be major enhancements to strengthen our tax structure.
Budget 2022 outlined a number of measures with the aim of levying a heavier tax charge on those with the
means and are well able to afford.

Our corporate tax system will be updated due to global tax developments relating to the Base Erosion and
Profit Shifting initiative (“BEPS 2.0”). Under Pillar 1 of BEPS 2.0, profits of the largest and most profitable
MNEs will be re-allocated from where activities are conducted to where consumers are located.
International discussions are currently ongoing on how to determine the jurisdictions which will surrender
profits for re-allocation to the markets and how much each country will surrender.

Pillar 2 introduces, amongst others, a global minimum effective tax rate of 15% for MNE groups with annual
global revenues of Euro 750 million or more, under its Global Anti-Base Erosion (“GloBE”) Model Rules. This
would mean that if such an MNE were to have an effective tax rate of less than 15% in Singapore at the
group level, other jurisdictions such as its home jurisdiction could collect the difference up to 15%.

In this Budget, the Government introduced Minimum Effective Tax Rate (“METR”) in response to Pillar 2
GloBE rules. The METR will top-up the MNE group’s effective tax rate in Singapore to 15%.

Where personal income tax is concerned, the wealthy and high wage-earners are expected to pay and
contribute more. The top marginal personal income tax rate will be increased with effect from YA 2024. The
portion of chargeable income in excess of $500,000 up to $1 million will be taxed at 23%. Chargeable income
in excess of $1 million will be taxed at 24%.

One of the means to collect wealth taxes is through the levy of property tax on properties owned by
individuals. The property tax rate for owner-occupied and non-owner occupied residential properties will
be increased progressively starting from the year 2023.

A new Additional Registration Fee (“ARF”) tier for luxury cars is introduced to take effect from 19 February
2022. The portion of Open Market Value of a vehicle in excess of $80,000 will be taxed at 220%, an increase
from the current rate of 180%.

Finally, the previously announced GST hike of 2% will go ahead but in two stages. The first increase will take
place on 1 January 2023, from 7% to 8%, and the second increase on 1 January 2024, from 8% to 9%.
Measures will be put in place to cushion the impact of the GST increases for the lower-income households,
publicly-subsidised healthcare and education and Government levied fees and charges.

The following pages, from page 5 to page 33, summarise the key changes proposed in Budget 2022.

Partner
18 February 2022

4 | RSM