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November 6, 2024
2024-2038

Singapore publishes requirements for concessionary tax rate tiers under Development and Expansion Incentive

  • Singapore has released minimum conditions for the new 15% concessionary tax rate (CTR) tier under the Development and Expansion Incentive (DEI), as well as updated conditions for the existing 5% and 10% CTR tiers.
  • The updated requirements appear to be accessible for many companies looking to place strategic functions and activities in Singapore.
  • Prior to discussions with relevant governmental authorities, companies will likely want to consider the DEI in their tax strategy and how these developments influence their overall incentive strategy.
 

The Singapore Economic Development Board (EDB)1 has released minimum conditions for the new 15% concessionary tax rate (CTR) tier2 under the Development and Expansion Incentive (DEI), as well as updated conditions for the existing 5% and 10% CTR tiers.

The Development and Expansion Incentive-International Headquarter Award (DEI-IHQ) is a tax incentive administrated by the EDB that encourages companies to set up or expand global or regional HQ activities in Singapore, such as that of managing, coordinating and controlling business activities for a group of companies.

Although the new and updated CTR tiers are publicly released entry-level benchmarks, companies should note that tax incentives are ultimately subject to an application, negotiation and approval process with the relevant governmental authority.

CTR

For every five-year qualifying period

5%

  • Carry out at least one headquarter (HQ) activity in Singapore
  • Employ at least 18 and 30 additional skilled employees, based in Singapore by Years 3 and 5, respectively
  • Incur additional annual Total Business Expenditure (TBE) of at least SGD* 8m and SGD 13m by Years 3 and 5, respectively

10%

  • Carry out at least one HQ activity in Singapore
  • Employ at least 15 and 25 additional skilled employees based in Singapore by Years 3 and 5, respectively
  • Incur additional annual TBE of at least SGD 5.5m and SGD 9m by Years 3 and 5, respectively

15%

  • Carry out at least one HQ activity in Singapore
  • Employ at least 8 and 13 additional skilled employees, based in Singapore by Years 3 and 5, respectively
  • Incur additional annual TBE of at least SGD 3m and SGD 5m by Years 3 and 5, respectively

* SGD refers to Singapore dollars.

Key observations and takeaways

The revised conditions for the 5% concessionary rate incentive are lower than prior benchmarks. In general, the revised minimum conditions appear to be accessible for many companies looking to place strategic functions and activities in Singapore.

As 1 January 2025 draws closer and with Singapore's upcoming implementation of the Income Inclusion Rule and Domestic Top-up Tax, it becomes opportune for companies to consider how these recent developments influence their overall incentive strategy, particularly prior to discussions with the relevant governmental authorities.

In a post-Pillar Two world, where a 15% effective tax rate is now the "new minimum," obtaining the lowest CTR through an incentive may no longer be as attractive for in-scope multinational enterprise (MNE) groups.3 Companies may consider tapping into a combination of support provided by the government, such as tax incentives, cash grants and Refundable Investment Credits (RICs)4 to help achieve their business, operational and tax objectives.

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Endnotes

1 The Singapore EDB is a government agency under the Ministry of Trade and Industry responsible for strategies that enhance Singapore's position as a global center for business, innovation and talent.

2 The 15% CTR tier was introduced for various tax incentives, including the DEI, as part the Singapore Budget 2024. See EY Global Tax Alert, Singapore Budget 2024 - Introduction of Refundable Investment Credit and additional concessionary tax rate tier on various incentives, dated 22 February 2024.

3 In-scope MNE groups are those with consolidated group revenue of €750m or more in at least two of the four preceding financial years.

4 The RIC was introduced during the Singapore Budget 2024 announcement as a Global Anti-Base Erosion (GloBE) rules-compliant Qualifying Refundable Tax Credit (QRTC) with the aim to encourage sizeable investments that bring substantive economic activities to Singapore in key economic sectors and new growth areas. See EY Global Tax Alerts, Singapore Budget 2024 - Introduction of Refundable Investment Credit and additional concessionary tax rate tier on various incentives, dated 22 February 2024, and Singapore proposes legislative changes for Refundable Tax Credits, dated 19 July 2024.

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Contact Information

For additional information concerning this Alert, please contact:

Ernst & Young Solutions LLP, International Tax and Transaction Services, Singapore          

Ernst & Young Solutions LLP, Business Incentives Advisory, Singapore       

Ernst & Young LLP (United States), Singapore Desk, New York and Chicago

Ernst & Young LLP (United States), ASEAN Tax Desk, New York

Ernst & Young LLP (United States), Asia Pacific Business Group, New York

Ernst & Young LLP (United States), Asia Pacific Business Group, Chicago

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor
 
 

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