A NEW tax credit with a refundable cash feature has been introduced by the Singapore government, to support high-value and substantive economic activities.

Such activities that the Refundable Investment Credit (RIC) scheme will support include the set-up or expansion of manufacturing facilities, new innovation and research and development (R&D) activities, as well as activities in support of the green transition.

Finance Minister Lawrence Wong said in his Budget speech on Friday (Feb 16) that the new tax credit scheme will help Singapore stay competitive and attract investments from global companies with the right know-how.

The RIC is awarded on qualifying expenditures incurred by a company in respect of a qualifying project during the qualifying period.

Each RIC award will have a qualifying period of up to 10 years.

The credits are to be offset against the corporate income tax payable by a company. The quantum of RIC that a company can receive will depend on the support rates predetermined for the company’s qualifying expenditure categories.

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Such categories include capital expenditure, manpower costs, training costs and materials and consumables.

Support rates will commensurate with the economic outcomes – or decarbonisation outcomes for decarbonisation projects – that the project is expected to bring.

Here are some quick takes from observers on the new tax credit scheme:

PwC Singapore financial services tax leader, Lennon Lee:

• “We welcome the new investment tax credit scheme with refundable cash features for R&D, setting up manufacturing facilities and green transition activities.”

• “Such investment and activities are important for our economy but are generally costly with no immediate returns given the long investment horizon, the refundable cash features would help to cushion such expenditure and spur more companies to embark on such activities.”

Deloitte Singapore global investment and innovation incentives leader Yvaine Gan:

• “RIC, newly introduced in Budget 2024, has been highly anticipated and will be welcomed by both potential investors and existing multinationals in Singapore impacted by Pillar 2 (of the Inclusive Framework on Base Erosion and Profit Shifting, or BEPS 2.0).”

• “This new tax credit with a refundable cash feature will help Singapore remain globally competitive in attracting foreign investments, hence shaping Singapore’s economy to achieve sustainable growth.”

• “The flexibility of the RIC in supporting a wide range of activities, which includes manufacturing, digital services, headquarter activities, commodity trading, R&D and green transition plans, is encouraging and may be a powerful tool in supporting companies in scope under Pillar 2.”

KPMG Singapore partner Harvey Koenig:

• “Singapore’s newly introduced RIC (scheme) serves as a strategic solution to the challenges faced by multinational enterprises due to the global minimum tax rate of 15 per cent. This will enable Singapore to remain competitive amid global competition for investments.”

• “While we await details of the RIC scheme, it is expected that the scheme will be designed to meet the requirements of a Qualified Refundable Tax Credit scheme under the BEPS 2.0 Pillar 2 rules.”

• “This provides for a more favourable treatment of such tax credit schemes compared to other forms of tax incentives, which will help mitigate the impact under the Pillar 2 rules that many multinational groups have been very concerned with.”

BDO Singapore executive director for transfer pricing Elis Tan:

• “Singapore sets into motion our multipronged strategy to offset the looming effects of BEPS 2.0. The new RIC will help us remain competitive and attractive to global businesses looking to optimise their returns on investments.”

For more of BT’s Budget 2024 coverage, go to bt.sg/budget24