Singapore's Budget 2023: Tax Hikes for Higher-value Properties, Luxury Cars

Bigger taxes are in store for owners of higher-value residential and non-residential properties and luxury cars, as announced by Deputy Prime Minister and Minister of Finance Lawrence Wong during his Budget 2023 speech on Feb. 14.

Wong underscored that "collective responsibility" is the foundation of the government's system, wherein every Singaporean must contribute to nation building.

"Everyone contributes something, but those who are better off contribute more," Wong was quoted as saying. "Likewise, everyone benefits from the State’s spending, with the vulnerable benefiting more. This is a fair and inclusive approach."

Higher Taxes for Residential and Non-residential Properties

With this being said, Wong said he would make further adjustments to the city-state's tax system. For one, the Buyer's Stamp Duty (BSD), which pertains to the tax one pays on documents signed upon buying or acquiring property, will be increased, with bigger rates for higher-value residential and non-residential properties. These changes began to be implemented on Feb. 15.

For residential properties, a BSD rate of 5% will be applied to the portion of the property’s value in excess of S$1.5 million to S$3 million. Meanwhile, 6% will be applied to properties in excess of S$3 million, an increase from 4%. As per Wong, this would affect about 15% of Singapore's residential properties.

Meanwhile, Wong said a BSD rate of 4% will be applied to the portion of the value of the property in excess of S$1 million to S$1.5 million, while properties in excess of $1.5 million will be taxed 5%, an increase from 3%. These are anticipated to apply to around 60% of non-residential properties in Singapore.

While these changes are foreseen to bring in an extra S$500 million in revenue annually for the government, Wong noted that the exact figure would rely on the shape of the property market.

Higher Taxes for Luxury Cars

In 2022, Wong adjusted Singapore's vehicle taxes, but during his speech, he shared that "there is still scope to make them more progressive."

The Additional Registration Fee (ARF), or the tax imposed when one registers a vehicle, will be changed to distinguish better between higher-end cars and to apply higher taxes on owners of luxury cars.

As per Wong, buyers of cars with an Open Market Value (OMV) of more than S$40,000 must pay higher ARF rates. For those in the highest OMV tier, the ARF rates shall be adjusted to 320% from the current 220%.

"These changes are expected to affect the top one-third of cars by OMV," said Wong. "Buyers of cars with an OMV of $40,000 or less will not be affected."

According to the Minister of Finance, the new ARF rates will be applied to new and imported used cars and Goods-cum-Passenger Vehicles (GPVs) that have Certificates of Entitlement (COEs) from the second bidding exercise this month and beyond. Meanwhile, the ARF rates of vehicles that do not bid for COEs such as classic cars and taxis were applied for those that were registered on or beyond Feb. 15.

The rebates of the Preferential Additional Registration Fee (PRAF), which is applied to those deregistering their vehicles that are below 10 years old, will also be capped at S$60,000. The new ARF rates and PARF cap are expected to bring in an extra S$200 million in revenue per year, but like the property market, the real figure is dependent on the vehicle market's conditions.

View more information on the adjusted ARF rates and BSD rates.

To deter people from consuming tobacco, Wong likewise raised the tobacco excise duty to 15% from Feb. 14. This adjustment, he said, shall bring in S$100 million in added revenue annually and applies to all tobacco products, such as cigars, cheroots, cigarillos, cigarettes, beedies, and ang hoon, among many others.