Singapore’s 2025 Budget statement is a major turning point in the country's fiscal policy, it is a combination of immediate support for businesses and innovations to create the right conditions for investment and reinforcement of its position as the leading financial center in Asia. The changes in the corporate tax incentives as well as the sector-specific benefits will target the specific sectors of the economy in an effective way to support the firms in every sector.
Our guide unpacks major tax changes, offering tips and actionable insights to help Singapore companies adapt and thrive in today’s economic climate.
In a climate of global economic unpredictability and fluctuating tax structures, Budget 2025 is placing emphasis on long-term competitiveness while also dealing with immediate challenges.The government has doubled down on its commitment to innovation, internationalization, and inclusivity by introducing measures that benefit small and medium enterprises (SMEs), multinational corporations, and niche sectors like Real Estate Investment Trusts (REITs).
Central themes include local employment tax relief, increased deductions for collaborative innovation, and lower rates to attract financial sector activity. By extending popular schemes such as the Double Tax Deduction for Internationalisation (DTDI) and the introduction of new incentives for equity-based compensation, Singapore is making a preemptive move to the future of its economy.
One of the most impactful measures is the 50% Corporate Income Tax (CIT) Rebate for the Year of Assessment (YA) 2025 which is capped at SGD 40,000. This rebate is paired with a SGD 2,000 cash payout for companies that employed at least one local worker in 2024. However, the combined benefit from both cannot exceed the SGD 40,000 cap.
The rebate offers help for SMEs struggling with inflation and rising operational costs. Take for example a company whose taxable income amounts to SGD 80,000. If they are also eligible for the CIT Rebate Cash Grant, their tax obligation will be equal to SGD 40,000 (half their amount payable) less the SGD 2,000 cash grant. The cash payout further incentivizes local hiring, aligning fiscal policy with broader workforce development goals. Businesses should review their 2024 payroll records to confirm eligibility and consider reinvesting savings into technology upgrades or debt reduction to strengthen financial resilience.
Although the rebate applies to all companies in general, its effect is felt most strongly among SMEs that have a moderately taxable income. Large companies may feel that the cap of SGD 40,000 does not have any significant transformational impact but can still benefit from the cash payout by maintaining local employment. Companies should also monitor future budgets, as this rebate may signal a trend of specific-targeted, short-term relief measures.
Effective from YA 2026, businesses can claim tax deductions on payments made to holding companies or special purpose vehicles (SPVs) for issuing new shares under Employee Equity-Based Remuneration (EEBR) schemes.
Equity-based compensation is a pivotal tool for talent acquisition, especially for start-ups and information technology companies competing in global job markets. By allowing deductions on these payments, Singapore reduces the effective cost of offering stock options or restricted shares, making it easier to attract top-tier talent. This change also likens Singapore to jurisdictions like the United States, where the use of equity as a compensation tool is a tax-effective means for employee retention.
SPVs are being utilized to not only facilitate the structuring of equity plans but also protect against the financial risks involved. For instance, a tech startup could establish an SPV which will entitle employees to stock ownership without the parent company being affected by the stock volatility. Tax professionals advise firms to take a close look at their current equity structures first and find ways to raise deductions in compliance with the new rules, especially for the companies planning to go public (IPOs) or form mergers.
Starting 19 February 2025, businesses engaged in approved Cost-Sharing Agreements (CSAs) for innovation projects can deduct 100% of payments made to their partners under these arrangements.
Companies can use CSAs to pool their resources for R&D, technology development, or market expansion. For example, a fintech firm partnering with a traditional bank to develop blockchain solutions would be able to deduct the total shared costs, which in turn, would effectively reduce the financial burden of innovation. This measure is particularly advantageous for industries like biotech and clean energy, where research and development costs are steep and collaboration is essential.
Businesses can partner with universities, research institutions, or cross-industry peers to make the most out of this incentive. The key is to formalize agreements under the Inland Revenue Authority of Singapore’s (IRAS) guidelines to ensure eligibility. By lowering the barrier to innovation, this deduction encourages risk-taking and speeds up the commercialization of new technologies.
The extension of the M&A tax allowance scheme to 31 December 2030 allows businesses to claim a 25% tax allowance on acquisition costs (capped at SGD 10 million), provided they meet eligibility conditions as outlined by IRAS guidelines. For example, a Singaporean logistics firm acquiring a regional competitor could offset integration costs—such as legal fees or due diligence—against taxable income. This not only lowers the net cost of expansion but also encourages consolidation in fragmented industries like e-commerce or renewable energy.
The DTDI scheme, extended to 31 December 2030, covers expenses related to global expansion, including overseas marketing, trade fair participation, and feasibility studies.
Businesses can layer DTDI with grants like the Enterprise Development Grant (EDG) to offset up to 80% of qualifying costs. For example, a food and beverage company exploring entry into Middle Eastern markets could deduct expenses for market surveys and distributor negotiations, significantly reducing upfront risks.
Effective 1 January 2026, enhancements to Section 13W of the Income Tax Act 1947 (ITA) include:
The Inland Revenue Authority of Singapore (IRAS) will provide more details on these changes by the 3rd quarter of this year.
The LIA scheme has been extended until 31 December 2030, ensuring businesses continue to enjoy the initial 25% allowance and annual 5% allowance on qualifying capital expenditures over 15 years. This move signals the government’s commitment to optimizing industrial land use and incentivizing space-efficient developments.
Effective 1 January 2026, the shareholding requirement to be considered “related” will drop from at least 75% to more than 50%. This more flexible standard eases compliance for businesses with diverse ownership structures, broadening access to the scheme’s tax benefits.
The existing incentive for qualifying project debt securities (QPDS) will lapse after 31 December 2025, meaning no new QPDS issues can benefit under the current tax exemption scheme. However, any QPDS issued before the deadline will continue to enjoy their existing tax benefits for the remaining duration of those securities.
To keep Singapore attractive for financing large-scale international projects, the tax incentive for foreign-sourced income from qualifying infrastructure projects has been extended until 31 December 2030. This helps Singapore-based sponsors maintain a competitive edge when structuring and funding global ventures.
Singapore’s IBD schemes, including the Captive Insurance (IBD-CI) and Insurance Broking Business (IBD-IBB) sub-schemes, are extended until 31 December 2030. These schemes offer a concessionary tax rate of 10% on qualifying income and support the growth of the local insurance and reinsurance industry.
From 19 February 2025, an additional 15% tax rate tier will be introduced to keep the IBD framework competitive amid evolving global standards. The Monetary Authority of Singapore (MAS) will release further details, ensuring insurers and brokers can align their strategies with these enhancements.
Effective 19 February 2025, a 15% concessionary tax rate (CTR) will apply to qualifying income under four key financial sector schemes:
The current rates stand at 10% for the FSI-HQ scheme and 13.5% for the FSI-ST and FSI-TC schemes. This enhanced CTR tier for specific financial activities ensures Singapore’s tax incentives remain relevant and competitive as a more attractive option for fund managers, multinational headquarters, and trustee services.
For example: a hedge fund that sets up its Asia-Pacific HQ in Singapore could save millions each year and spend it on hiring new talented people or technology upgrades. The new concessionary tax rate also aligns with global trends, as nations battle to attract financial services that are relocating post-Brexit.
While the short-term advantage is clear, businesses must navigate stringent eligibility criteria, such as hiring a minimum number of locals or having a significant number of business activities that are carried out in local currency. Proactive engagement with tax advisors can help companies plan better and structure operations in compliance with IRAS requirements.
Singapore’s stock market has faced headwinds in recent years, with only 7 IPOs in 2023. To reverse this trend, the Budget introduces three key measures:
The incentives proposed by the Equities Market Review Group, aim to increase investor interest in Singapore and further strengthen the local equities market. Moreover, Budget 2025 positions Singapore to leverage global trends such as sustainability and digital transformation while enhancing the diversification of its capital markets. Tech startups other than the healthcare and green energy sectors may find IPOs more financially acceptable with less tax burdens. Fund managers focusing on ESG (Environmental, Social, Governance) investments could take advantage of these exemptions to create their own Singapore-centric funds and attract global capital.
From 1 July 2025, S-REITs can include income from co-location and co-working spaces in their taxable income calculations—a nod to the growing demand for flexible workspaces.
REITs with exposure to commercial properties, can diversify revenue streams by leasing space to co-working providers. This change also aligns with post-pandemic trends, where hybrid work models drive demand for adaptable office solutions.
From 19 February 2025, Singapore-listed REITs (“S-REITs”) can treat rental and ancillary income received in Singapore from overseas properties as qualifying foreign-sourced income, subject to conditions. This provides S-REITs with broader avenues for revenue optimization when investing in overseas assets.
Previously, only Singapore-incorporated subsidiaries were eligible for certain tax concessions. Under the new rules, these subsidiaries can now be incorporated elsewhere (while remaining Singapore tax-resident) and still qualify, offering more streamlined corporate structures for cross-border deals.
S-REITs can now receive funds from sub-trusts or subsidiaries via shareholder loan repayments or return of capital and still qualify for foreign-sourced income exemptions. This clarification helps trustees optimize cash flow and reduce administrative complexities.
Under the updated guidelines, Singapore sub-trusts may deduct operational expenses before remitting the remaining income to the main S-REIT. The greater flexibility in expense treatment potentially boosts net distributions to unitholders.
Tax transparency for distributions that S-REIT exchange-traded funds (S-REIT ETFs) receive from S-REITs will continue beyond the original expiry date of 31 December 2025.
Qualifying non-tax-resident non-individuals and funds will continue to benefit from a 10% final WHT on S-REIT ETF distributions until 31 December 2030. This extension supports Singapore’s attractiveness as a global REIT and ETF hub, fostering consistent investor interest.
More on the new tax treatment for these changes will be announced by the Monetary Authority of Singapore (MAS) by the 2nd quarter of this year.
Remission Scope
S-REITs and Singapore-listed Registered Business Trusts (RBTs) in the infrastructure, ship leasing, and aircraft leasing sectors continue to enjoy GST remission on specified business expenses. This remission, now extended through 31 December 2030, reduces operating costs and helps maintain competitive yields for unitholders.
Operational Benefits
Similar to the earlier extension of S-REIT income tax concessions, the GST remission extension strengthens Singapore’s status as a leading REIT market by lowering tax friction and enhancing potential investor returns.
The Singapore Budget 2025 offers a multifaceted toolkit for businesses to reduce costs, attract talent, and expand globally. Key takeaways include:
Businesses should conduct a thorough review of their operational and financial strategies to align with these changes. Partnering with experts like ATHR Corporate Services ensures compliance and maximizes benefits, positioning your company at the forefront of Singapore’s economic vision.
As a leading corporate service provider in Singapore with over 40 years of experience in the industry, our team offers comprehensive incorporation, accounting, payroll management, corporate advisory and secretarial services to help your business navigate regulatory requirements and maximise available incentives. Reach out to our team today to discover how we can help you fully leverage the opportunities presented by Budget 2025.
