The Singapore Budget 2025, sharing a milestone with the nation’s 60th year of independence, introduces changes to support businesses, enhance competitiveness, and drive innovation.
New tax measures, particularly those focusing on growth and internationalization, strike a balance between providing businesses with essential financial relief and encouraging long-term strategic investments.
The combination of tax rebates, deductions, and extended support schemes ensure companies can manage short-term cost pressures while planning for sustainable local and overseas growth.
CIT Rebate
One of the most immediate benefits for businesses is the corporate income tax rebate, which aims to alleviate financial pressures for businesses grappling with rising operational and manpower costs.
Companies that are active and employed at least one local employee in calendar year 2024 will receive a S$2,000 ($1,490) cash grant. Eligible companies will receive a 50% reduction in their payable tax for assessment year 2025. The rebate, including the cash grant, is subject to an overall cap of S$40,000.
The support seems to primarily target small and medium-sized enterprises, given the amount of the rebate.
Deductions and Allowances
Given the labor recruitment challenges faced by Singapore businesses, the budget offers a tax benefit for employee equity-based remuneration, or EEBR, schemes. This aims to encourage businesses to offer stock-based compensation for attracting and retaining skilled talent, which is particularly beneficial for startups and high-growth companies.
Effective from assessment year 2026, a tax deduction will be allowed for payments to a holding company or a special purpose vehicle for new shares of the holding company issued under EEBR schemes.
The deduction will be based on the lower of the amount paid by the company, the fair market value, or the net asset value of the shares (if the fair market value isn’t readily available), minus any amount paid by employees.
The budget also expands tax deductions for research and development cost-sharing agreements. Currently, payments made under an R&D cost-sharing agreement must meet the definition of R&D under the Income Tax Act 1947 to qualify for a tax deduction.
To support broader innovation efforts, a 100% tax deduction will be introduced for payments companies make under an approved cost-sharing agreement for innovation activities, effective from Feb. 19.
This change is significant as it allows businesses to claim deductions for innovation activities that may not strictly qualify as R&D but still contribute to technological progress and industry advancements. Further details are expected to be released on what qualify as “innovation activities.”
The budget also has extended the Double Tax Deduction for Internationalization Scheme. This double tax deduction supports activities across key stages of a company’s overseas growth, such as market surveys, participation in overseas trade fairs, overseas advertising, e-commerce campaigns, business development and establishment of overseas trade offices.
This positions Singapore as an attractive location for companies expanding their goods and services into international markets.
The double tax deduction for internationalization will be extended to Dec. 31, 2030, allowing eligible businesses to continue claiming a 200% deduction on qualifying expenses for market expansion and investment development.
To encourage businesses to pursue strategic mergers and acquisitions as a means of growth and expansion, as well as support companies looking to streamline operations, achieve economies of scale, and enter new industries through acquisitions, the M&A scheme will be extended to Dec. 31, 2030.
This allows companies that make qualifying acquisitions of ordinary shares of other companies to claim an M&A allowance of up to S$10 million per assessment year, written down over five years, along with a 200% tax deduction for transaction costs, up to S$100,000 per assessment year.
Tax Incentives
A new listing corporate income tax rebate aims to encourage companies to raise public capital in Singapore. By providing substantial tax rebates, this incentive encourages eligible local businesses to list on the Singapore Exchange, expanding their access to capital for growth and enhancing Singapore’s attractiveness as a listing destination for international companies.
Qualifying entities, which include tax-resident companies and registered business trusts, may apply for a 10% or 20% corporate income tax rebate. Primary listings are eligible for a 20% rebate, while secondary listings with share issuance qualify for a 10% rebate.
The rebate is subject to a cap of S$6 million per assessment year for entities with a market capitalization of at least $1 billion, and S$3 million per assessment year for those with a market capitalization below S$1 billion.
To qualify, companies must secure a primary or secondary listing (with share issuance) on a Singapore exchange; remain listed for five years; and commit to incremental local business spending, fixed asset investments, and skilled employment growth by the end of the award tenure.
The rebate is granted for five years per qualifying entity on a non-renewable basis, and applications will be accepted until Dec. 31, 2027.
Share Disposal Gains
Gains that companies derive from the disposal of ordinary shares aren’t currently subject to tax if certain conditions are met. The divesting company must maintain a minimum shareholding of 20% in the investee company for a continuous period of at least 24 months prior to disposal, known as the shareholding threshold condition. The disposal also must take place between June 1, 2012 and Dec. 31, 2027.
To enhance tax certainty for businesses, the sunset date of Dec. 31, 2027 will be removed, ensuring that this exemption remains in place beyond the original deadline.
The scope also has been broadened to include preference shares, and the 20% shareholding threshold condition can now be assessed on a group basis, offering greater flexibility for corporate structures.
These enhancements reinforce Singapore’s position as an investment-friendly jurisdiction, encouraging continued investment and corporate restructuring within a predictable tax environment.
Unlocking Growth
The budget 2025 introduces a range of tax measures that create a conducive environment for businesses to invest, expand, and grow: Multinational enterprises should assess these initiatives to unlock growth opportunities and leverage Singapore’s role as a hub for regional expansion.
Multinationals should also carefully review the eligibility criteria for the tax incentives, which may require a certain level of economic presence, local incorporation, and tax residency in Singapore.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
Author Information
Sivakumar Saravan is senior partner and head of tax at Crowe Singapore.
Write for Us: Author Guidelines
