Singapore: Budget 2025 — key tax updates

06 Mar 2025    2 minute read

In brief

The Singapore Budget 2025 ("Budget 2025") focuses on managing cost pressures, developing innovation capabilities for economic growth, transforming the workforce and building a sustainable city, to ensure that Singapore is equipped to navigate global uncertainties and heightened geopolitical tensions, as it steps into its 60th year of independence.

Singapore is cautiously observing the state of international tax developments and is open to making adjustments to domestic tax policies if necessary. In the meantime, Singapore is introducing various tax measures to maintain its attractiveness as a global business hub by boosting its economic competitiveness. These include deduction regimes for new share issuances under employee equity-based remuneration (EEBR) schemes and innovation activities under approved cost-sharing arrangements (CSAs), enhancements to Section 13W of the Income Tax Act 1947 (ITA), as well as tax incentives for capital markets, financial and maritime industries.

We highlight the key tax developments from Budget 2025 below.

Contents

Key takeaways

  • Having already implemented the Multinational Enterprise Top-Up Tax (MTT) and Domestic Top-Up Tax (DTT) under Pillar Two, Singapore will continue to monitor international developments to ensure it maintains a competitive domestic tax framework while adhering to international standards.
  • With effect from Year of Assessment (YA) 2026, a new tax deduction regime will be introduced for payments made to the relevant holding company or special purpose vehicle for the issuances of new shares under EEBR schemes.
  • Payments made by companies under approved CSAs for innovation activities can benefit from a 100% tax deduction with effect from 19 February 2025. This serves to broaden the scope of innovation activities to include those that were previously not considered to qualify as "research and development" activities under Section 2 of the ITA.
  • Enhancements to Section 13W will be made, such as the removal of its sunset date and expansion of its scope to cover gains from disposal of preference shares classified as equity. The assessment of the minimum 20% shareholding condition will be on a group basis.
  • A slew of incentives to boost Singapore's capital markets will be introduced, including a corporate income tax (CIT) rebate for new corporate listings, an enhancement of the concessionary tax rate (CTR) for new fund manager listings, and a tax exemption on the qualifying income of fund managers.
  • The government has also introduced various schemes providing support for businesses, including a CIT rebate for YA 2025, and the extension of the Double Tax Deduction for Internationalisation (DTDi), mergers and acquisitions (M&A), and Land Intensification Allowance (LIA) schemes.

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Contact Information
Allen Tan
Principal
Singapore
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allen.tan@bakermckenzie.com
Dawn Quek
Principal
Singapore
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dawn.quek@bakermckenzie.com
Shih Hui Lee
Principal (Tax Advisor)
Singapore
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shih.hui.lee@bakermckenzie.com
Jaclyn Ho
Principal (Tax Advisor)
Singapore
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jaclyn.ho@bakermckenzie.com
Jeremiah Soh
Local Principal
Singapore
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jeremiah.soh@bakermckenzie.com

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