Budget 2022: How Could Your Business in Singapore Be Impacted?
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One of the most talked about topics in Singapore recently, the Budget 2022 announcement by Finance Minister Lawrence Wong encompasses an overall theme of “charting our new way forward together”. An encouraging theme as Singaporeans look to put the pandemic behind them, the Budget statement touches on a range of topics which will impact business owners and individuals in Singapore in the months and years ahead.
Wondering how your business could be affected? Read on for our breakdown of the key topics for business owners to be aware of.
THE GST HIKE
Originally planned for 2022 based on Prime Minister Lee Hsien Loong’s New Year message in December, the Goods and Services Tax (GST) increase has been delayed to next year and will take place in two phases. Singapore has consistently been ranked as one of the best places for ease of doing business, and one of the biggest factors has been the relatively low tax rate compared with the rest of the world. This rate will slowly begin to rise in the years to come, going up from 7% to 8% on 1 January 2023, then to 9% on 1 January 2024.
While there are planned government support schemes on an individual level, business owners will need to take the increase into account particularly when they sell to private individuals or businesses who are not GST registered and therefore cannot reclaim input GST. Beyond an overall rise in business expenses due to the rising GSTs, this also will likely bring increased scrutiny by tax authorities on GST compliance.
JOBS AND BUSINESS SUPPORT PACKAGE
A S$500 million Jobs and Business Support package will begin providing immediate assistance to local employers. With businesses across all sectors still impacted on a day-to-day basis by COVID-19, this includes a new Small Business Recovery Grant for small- and medium-sized companies that have been most affected by pandemic restrictions, namely food and beverage, retail, travel and hospitality.
This grant offers a $1,000 cash payout for each local employee who had compulsory CPF contributions between 1 November 2021 and 31 December 2021; there are conditions to be aware of including a $10,000 cap per business, fewer than 200 employees and annual operating revenue under $10 million.
CPF TO BE INCREASED
In an effort to improve retirement adequacy for Singapore’s elderly, the Government has been making gradual efforts towards raising the Central Provident Fund (CPF) contribution rates for workers aged 55 to 70, with the first increase in rates taking place on 1 January 2022. The next increase is set to take effect from 1 January 2023, with a total increase of 3 - 4% in CPF contribution rates over these two years.
As with the 2022 increases, one-year CPF Transition Offset will be automatically afforded to employers to help manage the increase in costs for the business as a result of these measures.
INCREASED MINIMUM QUALIFYING SALARIES FOR WORK PASSES
The Budget statement also includes updates to minimum qualifying salaries for EP and S Pass across financial and non-financial sectors. These increases will commence from 1 September 2022, with new salary requirements for renewals in effect from 1 September 2023.
While these increases were created with the goal of maintaining calibre and quality of talent, they could also create challenges for smaller companies who aren’t able to sustain the high minimum salaries required to attract and retain foreign talent (for more insights on the impacts on work passes, check out our Q1 update from Accela Talent).
These changes will bring further challenges in attracting and retaining foreign talent and could be particularly detrimental to SMEs which aren’t able to sustain the high minimum salaries.
Do you need assistance navigating how Budget 2022 might impact your business? Let’s chat: [email protected].