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Opportunities for High Earners: SG Budget 2025 Tax Optimisations & Investment Incentives

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This article delves into the Singapore Budget 2025, focusing on tax optimisations and investment incentives for high earners, covering both individual and corporate impacts.

Presented on March 2, 2025, the budget, delivered by Prime Minister and Minister for Finance Lawrence Wong on February 18, 2025, aims to balance economic resilience with social support, particularly in its 60th year of independence.

Key Summary of Changes in Tax Policies under SG Budget 2025:

Category Details
Personal Income Tax 60% rebate, capped at $200, for Year of Assessment 2025 (income earned in 2024). Minimal impact on high earners.
- Designed to benefit middle-income workers more significantly.Designed to benefit middle-income workers more significantly. | | GST and Consumption | - GST rate at 9%, with no immediate plans for increases in 2025.
GST and Consumption - GST rate at 9%, with no immediate plans for increases in 2025.
- High earners will feel the impact on consumption.
- No specific offsets like GST vouchers for lower-income households.
Property Tax Changes - Increased property tax rates for non owner-occupied and higher-value owner-occupied residential properties, effective January 2025.
- Rebates (up to 20%, capped at $1,000) for most owner-occupiers, especially in HDB or lower-value private properties.
Corporate and Investment Incentives - 50% corporate tax rebate, capped at $40,000, with a minimum benefit of $2,000 for active companies employing at least one local employee.
- New tax incentives for SGX listings and investments may benefit high earners, with specific details pending.
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Tax Policies for Individuals

Personal Income Tax Rebate: The budget introduces a 60% personal income tax rebate for the Year of Assessment 2025, capped at $200 per taxpayer, applicable to income earned in 2024. This rebate is automatically computed and granted by the Inland Revenue Authority of Singapore (IRAS) without the need for application.

For high earners, typically those with incomes exceeding $500,000 annually, where the top marginal tax rate is 24%, this rebate is negligible.

For instance, a high earner with a $500,000 income might face a tax liability of approximately $70,800 before rebates, making the $200 cap insignificant. This measure is explicitly aimed at middle-income workers, offering little direct benefit for high earners seeking tax optimization.

GST Impact: The current GST rate stands at 9%, following increases from 7% to 8% in January 2023 and to 9% in January 2024, with no further increases announced for 2025.

High earners, due to their higher consumption levels, will bear a larger burden of this consumption tax.

The budget reaffirms the use of GST revenue for healthcare and senior support, with permanent GST vouchers ensuring lower effective rates for lower-income households, but high earners receive no such offsets.

This effectively increases their tax burden through consumption, with no specific strategies to mitigate this within the budget.

Property Tax Adjustments: Effective from January 1, 2025, property tax rates have been raised for non-owner-occupied residential properties and higher-value owner-occupied properties.

The annual value (AV) bands for owner-occupied properties were revised to ensure that most HDB and 90% of private residential owner-occupiers pay lower taxes, with rebates up to 20% in 2025, capped at $1,000.

For high earners, particularly those owning multiple properties or high-value residences, this means increased property tax liabilities.

For example, owners of luxury properties or investment properties will face higher rates without the benefit of rebates, potentially increasing their overall tax burden.

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Tax Policies for Corporations

Corporate Income Tax Rebate: The budget offers a 50% corporate income tax rebate for Year of Assessment 2025, capped at $40,000, with a minimum cash payout of $2,000 for active companies employing at least one local employee.

This measure aims to support corporate cash flow, particularly for smaller businesses. For high earners who own or manage corporations, this can provide significant relief, especially if their companies have taxable incomes within the cap.

However, for larger corporations with higher tax liabilities, the $40,000 cap may limit the benefit.

Additionally, corporate income tax collections increased to 4.1% of GDP in FY2024, up from 3.2%,

Furthermore, future revenue is expected from FY2027 with the Domestic Top-up Tax raising large multinational enterprises’ effective tax rate to 15%, which may affect long-term corporate strategies.

Investment Incentives: New tax incentives were announced for Singapore-based companies and fund managers listing on the Singapore Exchange (SGX), as well as for fund managers investing substantially in Singapore-listed equity.

These measures, part of the Equities Market Review Group’s recommendations, aim to revitalise the local stock market.

Specific details, such as the form of incentives (e.g., rebates, exemptions), are pending. However, they could include listing corporate income tax rebates capped at $6 million for qualifying entities with market capitalisation of at least $1 billion, or $3 million for those below.

For high earners involved in fund management or owning companies eligible for listing, these incentives could offer significant tax optimisation opportunities, enhancing their investment returns and market participation.

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Analytical Insights

Impact on High Earners:

  • Direct Tax Benefits: The personal income tax rebate is too small to significantly impact high earners, given the $200 cap. Their primary tax burden increases through GST and property tax, particularly for those with high-value or investment properties.
  • Corporate Benefits: High earners with corporate interests can leverage the 50% corporate tax rebate, especially for smaller entities, and potentially benefit from SGX-related incentives if involved in listings or fund management.
  • Investment Strategies: The lack of direct investment incentives for individuals suggests high earners should explore existing schemes like the Supplementary Retiree Scheme (SRS) or Qualifying Debt Securities (QDS) for tax advantages, rather than relying on new budget measures.

Economic Context: The budget’s focus on SG60, marking Singapore’s 60th year of independence, emphasises broad-based support.

However, high earners face a net increase in tax burden due to consumption and property taxes.

The corporate measures, nevertheless, provide a counterbalance for those with business interests, aligning with Singapore’s strategy to remain competitive in global markets.

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Recommended Actionable Steps

To optimise tax strategies under Budget 2025, high earners can consider the following:

  1. Review Property Holdings: Assess the impact of increased property tax rates, particularly for non-owner-occupied or high-value properties. Consider selling or restructuring holdings to minimise tax liability, and explore any available rebates, though capped at $1,000 for owner-occupiers.
  2. Leverage Corporate Rebates: Ensure corporations qualify for the 50% corporate tax rebate by maintaining active status and employing local staff, maximising the $40,000 cap where possible.
  3. Explore Investment Incentives: Stay informed on SGX listing and investment incentives, especially if involved in fund management or company listings, to capitalise on potential tax benefits once details are announced.
  4. Utilise Tax-Advantaged Accounts: Increase contributions to SRS for tax-deductible benefits, and invest in QDS for tax-exempt interest income, enhancing overall tax efficiency.
  5. Plan Consumption: While GST is unavoidable, plan significant purchases to minimise taxable consumption, such as timing large expenditures or seeking GST-exempt options where applicable.

Supporting Data and Tables

To illustrate the impact, consider the following table summarising tax changes and their effects on high earners:

Tax Type Change in Budget 2025 Impact on High Earners
Personal Income Tax 60% rebate, capped at $200 Minimal benefit, negligible for high tax liabilities
GST Rate at 9%, no increase Increased consumption cost, no offsets
Property Tax Rates raised for non-owner-occupied and high-value owner-occupied Increased tax for relevant property owners
Corporate Tax 50% rebate, capped at $40,000 Beneficial for corporations, indirect benefit for owners
Investment Incentives Incentives for SGX listings and investments Potential benefits for fund managers and company owners

For a high earner with $500,000 income, the tax calculation before rebate shows a liability of approximately $70,800, with the rebate reducing it by only $200, highlighting its limited impact.

Conclusion

Budget 2025 presents a mixed bag for high earners, with limited direct tax benefits for individuals but potential corporate and investment opportunities.

High earners should focus on leveraging corporate rebates and staying informed on SGX incentives, while managing increased GST and property tax burdens through strategic financial planning.

Key Citations:

Disclaimer: TFC is not a financial adviser; please consult one. Don't share information that can identify you.

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