Singapore budget 2022 and how it affects local businesses
Last updated on 14 March 2022
The Singapore Budget 2022 announced by Minister of Finance Lawrence Wong on 18 February 2022 outlined various tax measures to increase tax revenue for Singapore’s recurrent social spending. Below are some of the salient highlights of Budget 2022 that affects local businesses.
GST Hike
The most significant announcement was raising the Goods and Services Tax (GST) to 8% in 2023 and 9% in 2024. The postponement and staggering of the increase in GST are meant to help Singaporeans and businesses prepare for the impending hike.
The delay in GST increase will allow businesses, particularly small and medium enterprises (SMEs), to adjust their operations and factor the impending GST hike into their projections for 2023 and beyond.
The changes in GST rates will take effect from 1 January 2023 and 1 January 2024. This means that invoices issued prior to 1 January 2023 are to include 7% GST on standard rated goods and services, 8% between 1 January 2023 to 31 December 2023, and 9% from 1 January 2024 onwards.
However, for invoices straddling across the periods, for example, invoice issued on 31 December 2022, that are not fully paid up and are only delivered/fulfilled in January 2023, will have to be reversed via credit notes and re-invoiced at applicable GST rate for the period (ie. 8% GST).
For invoices that are partially paid up or fulfilled on or before 31 December 2022, businesses may elect to issue credit notes for a partial of the original invoiced value, based on the lower amount of the portion unpaid and unfulfilled.
SMEs are encouraged to check with their service provider for GST compilation and accounting services in Singapore to prepare their accounts to be ready for 2023, particularly if their accounting or billing period spans across the periods.
CPF Contribution for Senior Workers
Another significant announcement is the increase of CPF Contribution rates by between 0.25% to 0.5% for senior workers above 55 and below 70 years old from 1 January 2023. The increase affects both employer and employee CPF contributions. The Government will provide an automatic one-year CPF Transition Offset for the 2023 increase.
Companies should take note of the increase and consult their HR and payroll services provider to understand the impact on their business operations and HR policies.
Increase in FWL and Qualifying Salaries for Foreign Workers
For SMEs employing foreign workers, particularly S-Passes, there will be increases in the Foreign Worker Levy (FWL) for these passes.
The FWL for Tier 1 S-Passes will increase from $330 to $450 in September 2022 to $650 in September 2024. For Tier 2 S-Passes, the FWL will remain at $650 per worker.
The minimum qualifying salary for new S-Pass applicants will be raised from the current $2,500 to $3,300 in 2025. See the table below for the increment by year.
The Budget 2022 has been designed to improve Singapore’s long-term sustainability in recurrent social spending, climate change, strengthening the Singaporean core in the workforce and supporting local businesses as the economy recovers from Covid-19.
Other measures that may impact local SMEs are:
- the waiver of Skills Development Levy requirement for SkillsFuture Enterprise Credit,
- the Jobs and Business Support Package, including the Small Business Recovery Grant,
- the extension of the Job Growth Incentive to September 2022, and
- the increase of carbon tax from the current $5 per tonne of emissions to between $50 and $80 per tonne by 2030.
Companies that need assistance in the above measures, restructuring, or advisory services can contact us today.
