Tax highlights from the Singapore 2025 Budget
The Singapore Budget 2025 statement was delivered on 18 February 2025 by Prime Minister and Minister for Finance, Mr. Lawrence Wong. In line with Singapore’s objectives of fostering economic growth and maintaining a competitive tax environment, several tax measures were introduced and enhanced. The key tax highlights of the 2025 Budget for multinational companies and the asset management industry in Singapore are set out below.
EXTENSION OF THE MERGERS & ACQUISITIONS (M&A) AND DOUBLE TAX DEDUCTION FOR INTERNATIONALIZATION (DTDi) SCHEMES
The Mergers & Acquisitions (M&A) Scheme will be extended until 31 December 2030, ensuring continued support for corporate restructuring and M&A deals. Additionally, Double Tax Deduction for Internationalization (DTDi) Scheme will be extended until 31 December 2030, helping businesses expand into overseas markets.
ENHANCEMENTS TO SECTION 13W OF THE INCOME TAX ACT
To improve the tax treatment of investments, the following changes to Section 13W of the Income Tax Act 1947 (ITA) will apply to disposal gains derived on or after 1 January 2026:
- Removal of the sunset clause, making the scheme permanent.
- Expansion of qualifying gains to include those from the disposal of preference shares accounted for as equity. Currently, it is limited to ordinary shares.
- Group-based assessment of shareholding threshold conditions.
The above enhancements are welcome, particularly the extension of qualifying gains to include preference shares. These offer greater flexibility in terms of capitalization and cash repatriation but were previously excluded from coverage under Section 13W ITA. With this enhancement, we believe taxpayers will be more likely to consider the use of preference shares in their structures.
TAX DEDUCTION FOR EMPLOYEE EQUITY-BASED REMUNERATION (EEBR) SCHEMES
In the Budget 2025, it was announced that a new tax deduction will be introduced for payments made to a holding company or special purpose vehicle (SPV) for the issuance of new shares under Employee Equity-Based Remuneration (EEBR) schemes, further aligning Singapore’s tax policies with global best practices. Currently, the deduction is only allowed for treasury shares or previously issued shares of the company or the holding company that are transferred to employees under EEBR schemes.
The deduction will be the lower of:
- The amount paid by the company; and
- The fair market value, or net asset value of the shares (if the fair market value is not readily available), at the time the shares are applied for the benefit of the employee,
less any amount payable by the employees for the shares.
The changes will take effect from Year of Assessment (YA) 2026.
TAX DEDUCTION FOR PAYMENTS IN COST-SHARING AGREEMENT FOR INNOVATION ACTIVITIES
Currently, payments made under a Cost Sharing Arrangement (CSA) are not tax deductible under Section 2 if they do not meet the definition of "research and development" expenditure under Section 14C ITA.
The 2025 Budget announced that from 19 February 2025 payments made by companies under an approved CSA for innovation activities will be allowed a 100% tax deduction. We expect further details to be released by Singapore's Economic Development Board (EDB) in Q2 2025.
INCENTIVES FOR PUBLIC LISTINGS AND SINGAPORE-LISTED EQUITIES
To enhance Singapore’s appeal as a listing destination and encourage investment in local equities, the Equities Market Review Group was established in August 2024 to propose measures for strengthening the development of the equities market. The Review Group submitted several tax-related recommendations to the Government, which has accepted them and will introduce the following three tax incentives:
- Listing CIT Rebate for Newly Listed Companies: To encourage companies to raise capital and expand their operations in Singapore, qualifying entities may apply for a Listing CIT Rebate of either 10% or 20%, subject to certain conditions.
- Enhanced Concessionary Tax Rate (CTR) of 5% for Fund Managers Listing in Singapore: To boost Singapore’s attractiveness to fund managers looking to scale their activities through public fundraising and expand their investment activities in Singapore, an enhanced CTR of 5% will be introduced under the Finance Section Initiative – Fund Management (FSI-FM) scheme for qualifying listed fund managers, subject to certain conditions.
- Tax Exemption on Qualifying Income of Fund Managers from Funds Investing Substantially in Singapore-Listed Equities: To support fund managers in launching and managing qualifying funds that invest primarily in Singapore-listed equities, a corporate tax exemption will be provided on income derived from such funds under the FSI-FM, subject to certain conditions.
The Review Group will share more details about its recommendations after Budget 2025. While these tax incentives are seen as a step toward positioning Singapore as a global listing hub, the market is of the opinion that further and additional non-tax measures would be much welcomed to address liquidity and market valuation issues.
ENHANCEMENT AND EXTENSION FOR SINGAPORE REITs (S-REITs) AND REIT ETFs
To further promote the listing of Singapore REITs (S-REITs) and maintain Singapore’s status as a global REIT hub, the income tax concession for S-REITs and REIT ETFs will be extended until 31 December 2030 and enhanced, providing long-term certainty for investors. Additionally, the GST remission for S-REITs has been extended for the same period to continue supporting the sector’s growth.
Regarding S-REITs, the following enhancement will be implemented:
- The scope of specified income for the tax transparency treatment will be expanded to include all co-location and co-working income derived from 1 July 2025; and
- Regarding the Foreign-Sourced Income Exemption for REITS the following refinements will be affective as from 19 February 2025:
- Qualifying foreign-sourced income will include rental and ancillary income received in Singapore.
- The requirement for wholly-owned companies of S-REITs to be incorporated in Singapore will be removed. However, these wholly-owned companies must still be Singapore tax residents.
- Repayment of shareholder loans and return of capital will now be recognized as qualifying modes of remittance for wholly-owned Singapore sub-trusts and wholly-owned Singapore tax resident companies to pass remitted income through to S-REITs.
- Singapore sub-trusts will be allowed to deduct other operational expenses against their income before passing the remaining amount to S-REITs.
UNCERTAINTY IN THE GLOBAL TAX ENVIRONMENT
In the Budget statement, Mr. Lawrence Wong addressed the ongoing geopolitical uncertainty surrounding global tax policy, particularly following the withdrawal of the US from the OECD-led global tax consensus (BEPS Pillar 2). The Prime Minister and Minister of Finance stated that Singapore will monitor developments, assess their options as global tax developments unfold, and adjust their policies where necessary.
WHAT'S NEXT
Further details on the announced tax measures are expected from the Inland Revenue Authority of Singapore (IRAS), EDB, and EnterpriseSG in Q2 and Q3 of 2025. Businesses should stay informed and closely monitor these updates to ensure compliance and optimization. The 2025 Budget underscores Singapore’s commitment to maintaining its competitiveness in the MNC and Asset Management sectors, while also striving to become a leading international hub for public listings.
To learn more, please contact Barbara Voskamp, Victor Sanlorien Cobo or Anne Klaassen.
