Singapore’s Budget 2026, delivered on 18 February 2026, introduced a raft of measures designed to support businesses amid global uncertainties and rising energy costs. For company owners, directors, and finance teams, the headline measures — a generous corporate income tax (CIT) rebate, new AI-related tax incentives, and expanded grant programmes — represent meaningful opportunities to reduce costs and invest in growth.
This guide breaks down the key Budget 2026 tax measures and business incentives that matter most to Singapore companies, from SMEs to startups. Whether you are filing your corporate tax returns, considering AI investments, or looking to tap into government grants, this article covers what you need to know.
Enhanced Corporate Income Tax Rebate for YA 2026
The centrepiece of Budget 2026’s business support package is the enhanced Corporate Income Tax (CIT) Rebate for the Year of Assessment (YA) 2026.
Initially announced at 40%, the CIT rebate was subsequently enhanced to 50% of corporate tax payable, in response to the impact of rising energy costs on businesses. Here are the key details:
- Rebate rate: 50% of corporate tax payable for YA 2026 (enhanced from the initial 40%).
- Cash grant: Active companies that employed at least one local employee (Singapore citizen or permanent resident) in 2025 will receive a minimum benefit of S$2,000 in the form of a CIT Rebate Cash Grant (enhanced from S$1,500).
- Maximum cap: The total combined benefits of the CIT Rebate and CIT Rebate Cash Grant are capped at S$40,000 per company (enhanced from S$30,000).
- Eligibility: The rebate applies to all taxpaying companies, whether tax resident or not. For the cash grant, the company must be active and have made CPF contributions for at least one local employee.
- Automatic disbursement: IRAS will compute the rebate automatically based on the company’s filed Form C-S or Form C. Companies do not need to submit a separate application. The cash grant will be disbursed from Q2 2026.
This is particularly welcome news for small and medium enterprises (SMEs) that may be feeling the pinch from higher operating costs. Companies that are not yet profitable will still benefit from the cash grant if they meet the local employee condition.
For a broader overview of Singapore’s corporate tax system and filing obligations, refer to our guide on Singapore company compliance requirements.
Singapore’s Corporate Tax Rate Remains at 17%
It is worth noting that Singapore’s headline corporate tax rate remains unchanged at 17% — one of the lowest in the world. This rate applies to all companies, regardless of size or industry.
In practice, many companies pay an effective tax rate that is significantly lower than 17%, thanks to the various exemption schemes available:
Startup Tax Exemption Scheme (SUTE)
Qualifying new companies in their first three YAs can enjoy:
- 75% exemption on the first S$100,000 of chargeable income
- 50% exemption on the next S$100,000 of chargeable income
This can result in tax savings of up to S$125,000 over the first three years — a significant benefit for startup founders setting up their first Singapore company.
Partial Tax Exemption (PTE)
All companies (including those that have exhausted their SUTE eligibility) can benefit from the Partial Tax Exemption:
- 75% exemption on the first S$10,000 of chargeable income
- 50% exemption on the next S$190,000 of chargeable income
These exemption schemes were not changed in Budget 2026 and continue to apply as before.
400% Tax Deduction for AI Investments
One of the most forward-looking measures in Budget 2026 is the expansion of the Enterprise Innovation Scheme (EIS) to include qualifying AI expenditures.
Under the expanded EIS, businesses can claim a 400% tax deduction on qualifying AI spending for YA 2027 and YA 2028, subject to a cap of S$50,000 per YA. This means that for every S$1 spent on qualifying AI investments, a company can deduct S$4 from its taxable income.
Key details include:
- The 400% deduction applies to all businesses operating in Singapore, not just SMEs.
- The expenditure cap is S$50,000 per YA, translating to a maximum additional deduction of S$150,000 (i.e., 300% x S$50,000) on top of the base deduction.
- Loss-making businesses that cannot utilise the tax deduction can opt for a 20% cash payout instead, up to S$20,000 per YA.
- Qualifying AI expenditures include costs related to adopting AI-enabled solutions, AI training, and AI-related software and services.
For businesses considering their first foray into AI, this incentive effectively reduces the cost of AI adoption by a meaningful margin. Companies should keep detailed records of their AI-related expenditures to ensure they can substantiate their claims when filing with IRAS.
Businesses looking to understand which expenses are tax-deductible more generally can refer to our article on IRAS-approved allowable business expenses.
Expanded Productivity Solutions Grant (PSG)
The Productivity Solutions Grant (PSG), administered by Enterprise Singapore, has been expanded in scope under Budget 2026. The PSG helps companies adopt pre-approved digital and productivity solutions, with the government co-funding up to 50% of the qualifying costs.
Under Budget 2026, the PSG now covers a wider range of AI-enabled digital solutions, making it easier for SMEs to adopt AI tools without bearing the full cost. This complements the 400% EIS tax deduction, giving businesses two pathways to reduce the cost of digitalisation and AI adoption.
Eligible SMEs can apply for the PSG through the Enterprise Singapore Business Grants Portal. The grant is available to companies that are registered and operating in Singapore, have at least 30% local shareholding, and have a group annual sales turnover of not more than S$100 million or group employment of not more than 200 workers.
National AI Impact Programme (NAIIP)
Beyond tax incentives, the government has launched the National AI Impact Programme (NAIIP), which aims to support 10,000 enterprises and 100,000 workers over three years. The programme includes:
- Grant support for enterprise-wide AI transformation
- Leadership bootcamps for business owners and senior management
- Sector-specific AI training programmes
- The Champions of AI programme, a joint initiative by Enterprise Singapore and Digital Industry Singapore (DISG), which supports leading firms in undertaking enterprise-wide AI transformation
For business owners who are not yet sure where to start with AI, the NAIIP provides a structured pathway that includes both funding and capability development.
S$1 Billion Boost for Startup SG Equity
Startups and growth-stage companies received a significant boost in Budget 2026, with the government committing an additional S$1 billion to the Startup SG Equity scheme. The key enhancements include:
- The scheme’s scope has been expanded beyond early-stage startups to also cover growth-stage companies.
- There is a particular focus on deep tech startups, addressing funding gaps for companies scaling internationally.
- An additional S$1.5 billion tranche of the Anchor Fund, co-invested with Temasek, has been launched to attract high-quality listings to the Singapore Exchange (SGX).
For entrepreneurs considering incorporating a company in Singapore, these measures further strengthen Singapore’s position as a leading startup ecosystem in Asia.
GST and Other Tax Measures
Budget 2026 did not introduce any changes to the Goods and Services Tax (GST) rate, which remains at 9% following the increase from 8% on 1 January 2024. For companies navigating GST obligations, our guides on GST filing in Singapore and GST InvoiceNow provide comprehensive step-by-step guidance.
Companies should also be mindful of their filing deadlines — late filing of corporate tax returns or GST returns can attract penalties from IRAS, and the enhanced CIT rebate only applies to companies that file their Form C-S or Form C on time.
Key Takeaways for Business Owners
Here is a summary of the most important Budget 2026 measures for Singapore businesses:
- CIT Rebate: 50% rebate on corporate tax for YA 2026, with a S$2,000 cash grant for active companies with local employees. Maximum benefit: S$40,000.
- AI Tax Deduction: 400% tax deduction on qualifying AI expenditures for YA 2027–2028, capped at S$50,000 per year. Loss-making companies can opt for a 20% cash payout.
- PSG Expansion: Wider range of AI-enabled solutions covered, with up to 50% co-funding.
- Startup Support: S$1 billion boost to Startup SG Equity, now covering growth-stage companies.
- Tax Exemptions Unchanged: The Startup Tax Exemption Scheme and Partial Tax Exemption continue to apply as before.
- GST Rate Unchanged: GST remains at 9%.
Conclusion
Budget 2026 delivers a well-balanced package of tax relief and forward-looking incentives for Singapore businesses. The enhanced CIT rebate provides immediate cash flow relief, while the AI tax deductions and expanded PSG programme position companies to invest in the technologies that will drive future competitiveness.
For business owners, the key action items are straightforward: ensure your corporate tax filings are up to date to benefit from the CIT rebate, explore the AI incentives if you are considering digitalisation, and check your eligibility for the expanded PSG and other Enterprise Singapore grants.
If you need help with your corporate tax filing, understanding your eligibility for these incentives, or any other aspect of running your Singapore company, Raffles Corporate Services is here to assist. Our in-house accounting and tax team can help you navigate the tax landscape and ensure you make the most of the available schemes. You may also wish to read about the latest corporate law changes taking effect this April 2026 to stay fully informed.
— The Editorial Team, Raffles Corporate Services