As Singapore positions itself for continued economic growth and global competitiveness, the government has announced a slate of corporate tax changes that will take effect in the coming financial years. These changes reflect both domestic priorities (encouraging innovation, equity market development) and alignment with global tax norms (such as BEPS 2.0).
For companies — from SMEs to large multinational groups — understanding these developments early is essential for tax planning, compliance readiness, and strategic restructuring. In this article, we break down the key changes, explain who is affected, and suggest how businesses should prepare.
1. Global Minimum Tax (BEPS 2.0) / Top-Up Taxes
One of the most consequential changes is Singapore’s implementation of top-up taxes under the OECD’s Pillar Two / GloBE (Global Anti‑Base Erosion) regime.
What is changing
- From 1 January 2025, two new statutory tax regimes will apply to large multinational enterprise (MNE) groups whose global revenue is at least €750 million in at least two of the preceding four years.
- Domestic Top-Up Tax (DTT): If the effective tax rate (ETR) on profits derived in Singapore is below 15%, the DTT will top up to the 15% threshold.
- Multinational Top-Up Tax (MTT): For Singapore‑parented groups, where foreign jurisdictions tax certain profits at an effective rate below 15%, MTT may apply to top them up.
- Certain investment entities or insurance investment entities may be excluded from DTT if they satisfy prescribed conditions.
- The rules require careful calculation of jurisdictional ETRs, re‑allocation of profits, and compliance in many jurisdictions.
Implications and preparatory moves
- Large groups will need to enhance data gathering across subsidiaries, align accounting periods, and compute local and jurisdictional tax rates accurately.
- Existing tax incentives may become less effective if they result in ETRs below 15%; firms may need to reassess incentive strategies.
- Consider whether Refundable Investment Credits (RICs) or equivalent mechanisms may offset some top-up exposure.
2. Corporate Income Tax Rebate & Cash Grant
To support businesses amid cost pressures, Singapore announced special rebates for the Year of Assessment (YA) 2025.
Key features
- A 50% corporate income tax rebate is granted on tax payable.
- Eligible active companies that employed at least one local employee in 2024 will receive a minimum benefit of S$2,000 in the form of a cash grant.
- The combined cap (rebate + cash grant) is S$40,000.
- Active registered business trusts and variable capital companies (VCCs) may also be eligible.
What to watch
- The rebate is automatic; companies don’t need to file a separate claim.
- For smaller companies that would otherwise receive a rebate below S$2,000, the cash grant ensures a baseline benefit.
- The measure is time‑limited (for YA 2025) — businesses should view it as short-term relief, not a permanent shift.
3. Enhanced Incentives: Innovation, Equity Remuneration & Listing Support
Beyond rebates, incoming changes seek to stimulate innovation, talent retention, and capital market activity.
Innovation and R&D support
- 100% tax deduction for payments under approved Cost Sharing Agreements (CSA) for innovation activities will be allowed.
- Singapore is broadening the scope of qualifying expenditure — including designer fees and professional fees under certain provisions.
Employee Equity-Based Remuneration (EEBR)
- Tax deduction will be allowed for payments made to a holding company or special purpose vehicle for issuance of new shares under EEBR schemes.
- The expansion increases flexibility in how companies structure equity incentive plans.
- This will take effect starting YA 2026 under the revised rules.
Listing incentives & capital markets support
- New CIT rebates (10%-20%) will be offered for primary or secondary listings in Singapore, with caps per YA (e.g. S$3–6 million).
- A 5% concessionary tax rate will apply to newly listed fund managers, and tax exemption will apply on their qualifying income from funds investing substantially in SGX equities.
- The safe‑harbor for disposal gains under Section 13W is being enhanced and made permanent from 1 January 2026.
- The scope of 13W will expand to include disposal of preference shares and shareholding thresholds will be assessed on a group basis.
Other incentive adjustments
- The Land Intensification Allowance (LIA) scheme is extended to 31 December 2030.
- Incentives for Internationalisation and Mergers & Acquisitions (M&A) will also run until 2030.
- Some schemes, such as the Qualifying Project Debt Securities, will lapse after 31 December 2025.
4. Changes in Capital Gains / Share Disposal Taxation
While Singapore traditionally does not impose a capital gains tax, there are changes affecting disposals of foreign assets and share transactions.
- Under Section 10L, gains from sale/disposal of foreign assets by entities in a “relevant group” may be taxable in Singapore, even if such gains would ordinarily be treated as capital in nature.
- Enhancements to Section 13W strengthen certainty for disposal gains by investee companies under qualifying conditions.
- Companies will need to monitor whether their share disposals (especially outside Singapore) could now attract tax where previously not considered taxable.
5. Practical Steps & Strategic Considerations
Given the spectrum of changes, businesses should act proactively:
A. Reassess tax incentive strategies
Incentives that lead to very low effective tax rates may expose firms to top-up tax. Model post‑top-up outcomes and retain flexibility in incentive use.
B. Strengthen tax data infrastructure
Multinational groups must consolidate tax and financial data across jurisdictions, align accounting periods, and compute effective tax rates accurately.
C. Review shareholding structures
With 13W moving to a group basis, some reorganisations may help retain relief eligibility.
D. Plan equity remuneration and R&D arrangements
Companies should re-evaluate incentive plans and R&D strategies to leverage new deductions.
E. Portfolios of foreign assets & disposals
Firms with foreign investments must assess whether previously exempt gains now attract tax under Section 10L.
F. Engage early with advisors
Given complexity, early discussions with tax consultants and, where possible, obtaining advance rulings from the IRAS may reduce risk.
Conclusion & Outlook
The upcoming changes to Singapore’s corporate tax framework represent a pivotal shift. On one hand, Singapore remains committed to pro‑business incentives, innovation support, and capital market development. On the other, alignment with global norms (such as the 15% minimum tax) imposes new compliance demands.
Businesses — whether established multinationals or fast-growing startups — need to respond by reworking incentive plans, tightening tax governance, and assessing exposure to new rules. The transition period is your window to adapt proactively rather than reactively.For tailored guidance on how these changes affect your business, contact the Raffles Corporate Services team at [email protected].
Yours sincerely,
The editorial team at Raffles Corporate Services