From his analysis, we’ve highlighted two critical business topics to help our clients and businesses navigate the complexities of operating in Singapore. These insights also shed light on potential opportunities for companies looking to establish or expand their presence in the region.

 

Corporate Tax Measures

 

To support businesses in managing cash flow and driving growth, several tax measures have been introduced:

1. Double Tax Deduction for Internationalisation (DTDi):

 

The DTDi scheme has been extended until 31 December 2030, empowering businesses to expand their global footprint.

• Comparison: The DTDI scheme was already in place in Budget 2024, but the extension in Budget 2025 provides businesses with greater certainty and a longer runway to plan their international expansion strategies.

• Commentary: The extension of the DTDI scheme underscores the government’s commitment to supporting businesses in their globalisation efforts, which is critical for Singapore’s trade-dependent economy.

 

2. Mergers and Acquisitions (M&A) Scheme:

 

To encourage growth through mergers and acquisitions, the M&A scheme has been extended until 31 December 2030.

• Comparison:The M&A scheme was also extended in Budget 2024, but the further extension in Budget 2025 signals the government’s continued focus on encouraging corporate consolidation and growth through M&A activities.

• Commentary:The extension of the M&A scheme is a positive move for companies looking to expand through acquisitions, as it reduces the tax burden associated with such transactions.

 

3. Land Intensification Allowance (LIA):

 

The LIA scheme has been extended to 31 December 2030, with reduced shareholding requirements to incentivize efficient land use.

• Comparison: The LIA scheme was already in place in Budget 2024, but the reduction in the shareholding requirement in Budget 2025 makes it easier for more businesses to qualify for the allowance.

• Commentary:The extension and relaxation of the LIA scheme encourage businesses to optimise land use, which is crucial in land-scarce Singapore.

 

4. Tax Incentives for Innovation:

 

A 100% tax deduction on payments under approved Cost-Sharing Agreements (CSA) for innovation activities will take effect from 19 February 2025.

 

• Comparison: In Budget 2024, companies could claim a partial tax deduction for eligible R&D expenses, including those incurred under CSAs. While the exact rate varied depending on the nature of the activity, it was typically less than 100%. The new policy introduces a 100% tax deduction for payments made under approved CSAs for innovation activities. This full deduction significantly reduces the after-tax cost of collaboration, making it more financially attractive for companies to engage in joint innovation projects.

• Commentary: The move from partial to full tax deduction demonstrates the government’s commitment to incentivizing collaborative innovation. By offering a 100% deduction, the government is signalling that collaboration—rather than isolated efforts—is key to driving breakthroughs in technology and addressing complex challenges like sustainability and digital transformation.

 

5. Section 13W of the Income Tax Act 1947:

 

The sunset date of 31 December 2027 regarding the non-taxation of disposal gains is removed, and the scope of eligible gains is expanded to include gains from the disposal of preference shares that are accounted for as equity by the investee company under applicable accounting standards. The shareholding threshold condition can now be done on a group basis. These changes will take effect for disposal gains derived on or after 1 January 2026.

 

• Comparison: In Budget 2024, Section 13W was set to expire in 2027, and the scope of eligible gains was narrower.

• Commentary: The removal of the sunset date and the expansion of eligible gains provide greater certainty for companies and encourage long-term investments. The group-based shareholding threshold is a welcome change, as it simplifies compliance for corporate groups.

 

6. Payments to Holding Companies or Special Purpose Vehicles (SPV) under Employee Equity-Based Remuneration (EEBR)

 

Taking effect from YA 2026, payments made to holding companies or SPVs for services related to the issuance of new shares under the EEBR will now be subject to stricter scrutiny. These costs will only be tax-deductible if they are: (i) directly attributable to the issuance process; (ii) incurred for legitimate business purposes; and (iii) properly documented with evidence of actual services provided.

 

• Comparison: The guidelines for tax deductibility under the EEBR were less stringent, with a focus on encouraging businesses to raise capital through bond and share issuances. The introduction of stricter documentation requirements in Budget 2025 reflects a shift toward ensuring compliance and preventing abuse of the scheme.

• Commentary: The clarification on tax deductibility for cost related to EEBR is part of Singapore’s broader effort to ensure that tax deductions are not misused for artificial profit-shifting or base erosion. By tightening the rules around EEBR-related payments, the government aims to maintain the integrity of its tax system while supporting genuine fundraising activities.

 

7. Tax Incentives for Project and Infrastructure Finance

 

The qualifying project debt securities (QPDS) scheme will lapse after 31 December 2025. Under the QPDS scheme, companies issuing debt securities for qualifying projects (e.g., infrastructure, industrial, or green projects) could benefit from tax incentives, such as tax exemptions on interest income for investors and reduced withholding tax rates on payments to non-resident investors. After this date, companies will no longer be able to access these incentives for new issuances, though existing issuances under the scheme may continue to enjoy the benefits until their respective maturity dates.

 

Project bond investors can continue to benefit from tax incentives for debt securities such as the Qualifying Debt Securities (QDS) scheme, provided the debt securities qualify as QDS and conditions of the scheme are met.

 

The tax exemption on qualifying foreign-sourced income from qualifying offshore infrastructure projects/assets received by approved Singapore Exchange-listed entities will be extended till 31 December 2030.

 

• Comparison: Unlike previous budgets, where the QPDS scheme was extended to support long-term capital-raising activities, Budget 2025 does not include an extension or replacement for the scheme. Compared to Budget 2024, which supported both the QPDS and QDS schemes, Budget 2025 represents a consolidation of efforts. It reflects a shift toward leveraging the QDS scheme as the primary mechanism for incentivizing debt securities.

• Commentary: The decision to allow the QPDS scheme to lapse after 31 December 2025 reflects a strategic recalibration by the Singapore government. While the scheme has played a crucial role in supporting capital-raising activities for qualifying projects, its discontinuation suggests that the government may be pivoting toward newer or more targeted initiatives that better align with current economic and sustainability priorities.

 

For businesses and investors, the continuation of the QDS scheme provides clarity and certainty, enabling them to plan their capital-raising activities effectively. However, the transition away from the QPDS scheme may require adjustments in strategy, particularly for companies that relied on its specific incentives.

 

8. Introduction of a New CTR Tier for the Financial Sector Incentive (FSI) scheme

 

A new concessionary CTR of 15% has been introduced, with effect from 19 February 2025, for qualifying entities under the following schemes:

 

• FSI-Standard Tier: For financial institutions engaged in standard financial activities such as banking, insurance, and capital markets

• FSI-Trustee Company: For trustee companies providing trust services to institutional and high-net-worth clients

• FSI Headquarters Services: For financial institutions operating as regional or global headquarters, providing strategic decision-making and coordination services

• Comparison: This new CTR tier aligns with global tax reforms, particularly the OECD’s Pillar Two framework.

• Commentary: The updates to the FSI-Standard Tier, FSI-Trustee Company, and FSI Headquarters Services schemes in Singapore Budget 2025 reflect the government’s commitment to maintaining Singapore’s status as a leading global financial hub. By introducing a 15% concessionary tax rate, the government ensures that Singapore remains competitive in attracting multinational enterprises, trustee companies, and financial headquarters.

 

9. Additionally note that the Corporate Income Tax (CIT) Rebate and CIT Rebate Cash Grantremain:

 

The 50% CIT rebate on tax payable continues for the Year of Assessment (YA) 2025, capped at S$40,000 per company.

The S$2,000 cash grant is extended to active companies that employed at least one local employee in the calendar year 2024 (to be disbursed from Q2 2025).

The enhanced CIT Rebate and cash grant are maintained, to help businesses continue to recover from the economic challenges of recent years. The cash grant, in particular, provides immediate liquidity support, which is crucial for SMEs.

 

Support for Key Industries

 

Budget 2025 reinforces Singapore’s position as a global hub for finance, insurance, shipping, and real estate:

1.Real Estate Investment Trusts (REITs):

The sunset date of 31 December 2025 for the tax transparency treatment in the hands of the trustee of S-REIT ETFs has been removed. Under this treatment, distributions received by S-REIT ETFs from S-REITs, paid out of the latter’s specified income, are treated as if they are directly received by the investors in the S-REIT ETFs. This ensures that investors are taxed based on their own tax status rather than at the ETF level.

The final withholding tax (“WHT”) rate of 10% for S-REIT ETFs distributions received by qualifying non-tax-resident non-individuals and qualifying non-tax-resident funds has been extended to 31 December 2030.

• Comparison: Compared to Budget 2024, which focused on short-term extensions, Budget 2025 takes a longer-term approach. This shift underscores the government’s recognition of the importance of providing stability and predictability to attract and retain global capital. The changes also align with Singapore’s broader goals of enhancing its position as a leading hub for real estate investments and financial innovation.
• Commentary: The removal of the sunset date for tax transparency treatment of S-REIT ETFs ensures that favourable tax treatment will remain in place indefinitely, encouraging long-term investments in S-REIT ETFs. The extension of the 10% WHT rate offers long-term stability, aligning with Singapore’s strategy to attract foreign capital by offering competitive tax incentives. It also ensures consistency with the broader tax framework for S-REITs, which already benefits from similar incentives.

 

2. Insurance Business Development (IBD):

 

The IBD and IBD-Captive Insurance (IBD-CI) schemes are extended until 31 December 2030, with a new concessionary tax rate (CTR) tier of 15% introduced for qualifying entities effective 19 February 2025. The reduced tax rate applies to income derived from qualifying activities, such as:

 

IBD: Strategic decision-making, intellectual property management, regional distribution, and other high-value functions

IBD-CI: Captive insurance activities, including risk management and underwriting services for related entities within the group

 

• Comparison: Previously, the CTR varied depending on specific activities. The new CTR of 15% under Budget 2025 aligns with OECD’s Pillar Two minimum corporate tax rate.
• Commentary: By extending the schemes until 2030 and introducing a 15% concessionary tax rate (aligning with global tax reforms), the government ensures that Singapore remains competitive in attracting multinational enterprises and captive insurers.

 

3. Shipping and Maritime Sector:

 

The Approved Shipping Financing Arrangement (ASFA) Award and Maritime Sector Incentive (MSI) have been extended until 31 December 2031, with expanded scope to include renewable energy activities.

 

The ASFA Award is introduced effective from 19 February 2025 to provide WHT exemption on the following:

 

• Interest and related payments made by approved entities to non-tax-resident lenders for qualifying financing arrangements entered into on or before 31 December 2031 to finance the purchase or construction of ships and containers; and

• Ship and container lease payments made to non-tax-resident lessors (excluding payments derived from operations through a permanent establishment in Singapore) under finance lease (“FL”) agreements.

 

The following qualifying scope has been updated and effective from 19 February 2025:

 

• Expand the scope of prescribed ship management services under MSI-Shipping Enterprise (Singapore Registry of Ships) (“MSI-SRS”), MSI-Approved International Shipping Enterprise (“MSI-AIS”), and MSI-Shipping-related Support Services (“MSI-SSS”) to include emission management services;

• Expand the scope of offshore renewable energy activities under MSI-SRS and MSI-AIS to cover subsea distribution of renewable energy generated onshore;

• Expand the scope of ships used for offshore renewal energy activities under MSI-Maritime Leasing (Ship) (“MSI-ML (Ship)”) to include ships that support subsea distribution of renewable energy generated onshore;

• Allow assets leased-in from third parties under FL treated as sale agreements to be recognised as qualifying assets under the MSI-ML (Ship) and MSI-ML (Container) awards; and

• Expand the scope of shipping-related support services under MSI-SSS to include maritime technology services.

• Comparison: While the core incentives remain intact, Budget 2025 introduces stricter compliance requirements for companies seeking to benefit from the AFSA and MSI schemes. Previously, the focus was primarily on expanding the scope of eligible activities and simplifying the application process.
• Commentary: The extension underscores Singapore’s commitment to maintaining its status as a global maritime hub. By providing ongoing tax incentives, the government aims to attract and retain shipping companies, ship managers, and other maritime service providers, thereby reinforcing Singapore’s competitiveness in the international maritime sector.

 

If your Singapore-based business requires further assistance in understanding how these changes may impact your operations, or if you need support with tax planning, compliance, or optimizing your business strategies, please get in touch:

 

Mr. Ross Y. Limjoco

Partner

Singapore, Philippines

Email: ross.limjoco@triide.com