Publish Date
Feb 13, 2026
Asia Tax Update
The world is entering a more contested and uncertain phase, as long‑standing assumptions about global stability, trade rules, and multilateral coordination weaken, even as technological change accelerates and demographic pressures intensify. In this environment, resilience is no longer passive; it is shaped by deliberate choices about openness, cohesion, and long‑term investment. Against this backdrop, Singapore’s Budget 2026 articulates a clear growth with assurance strategy treating economic competitiveness and social cohesion as mutually reinforcing foundations of long‑term success. As the first Budget of the new term, delivered as Singapore enters a post‑SG60 phase, it is explicitly positioned as the first step in refreshing national strategies and strengthening the social compact to secure Singapore’s future in a changing world.
A central pillar of this strategy is the strengthening of Singapore’s enterprise and capital markets ecosystem, alongside sustained investment in productivity and innovation. Recognising tighter global conditions for growth‑stage capital, particularly for deep tech and innovation‑led firms, the Budget deploys catalytic public capital to crowd in private investment across the full company lifecycle, while deepening public‑market pathways. This market‑building agenda is anchored by continued commitment under the RIE2030 plan, alongside a national AI push focused on diffusion and execution through sector‑specific AI Missions, a National AI Council, and measures to accelerate enterprise adoption and workforce readiness. Taken together, these moves signal a coherent effort to assemble an integrated chain; from frontier capability and R&D to enterprise transformation, to scaled firms and deeper capital markets, with the state acting as an enabler rather than a substitute for private capital.
At the same time, Budget 2026 reinforces the social assurance required for durable transformation. As the economy restructures, shaped by AI, demographic ageing, and persistent cost pressures, the Government has committed that workers will not navigate these changes alone. Targeted cost‑of‑living support, strengthened life‑stage measures for families and seniors, enhanced ComLink+ Progress Packages, long‑term care funding, and planned CPF contribution increases for senior workers together reflect a clear logic: economic upgrading must be matched by social legitimacy. Viewed through a long‑term lens, the Budget demonstrates a willingness to act early and coherently integrating growth, innovation, capital formation, and social assurance within a framework of fiscal prudence and balanced budgets to build confidence not just for the next cycle, but for decades ahead.
What matters now is how this strategic direction translates into concrete decisions for businesses and investors. The sections that follow examine selected tax and AI transformation measures covering what has changed, why it matters, who is impacted, and the immediate actions organisations can take to move early and decisively.
To support companies in managing their rising operating costs and maintain competitiveness, Budget 2026 announced a CIT rebate and a cash grant for Year of Assessment (YA) 2026, albeit at a reduced level compared with similar support extended for YA 2025.
The CIT rebate for YA 2026 will be based on 40% of tax payable. Active companies that employed at least one local employee in Calendar Year (CY) 2025 (referred to as the “local employee condition[1]”) will receive a minimum benefit of $1,500 in the form of a CIT Rebate Cash Grant. The total maximum benefit (i.e., sum of the CIT Rebate and the CIT Rebate Cash Grant) that a company can receive is $30,000. Eligible companies will automatically receive the benefits on and from the second quarter of CY 2026.
For example, if a company has tax payable of S$40,000 for YA 2026, it will receive a total CIT Rebate benefit of S$16,000 (i.e. 40% * S$40,000). However, if this company employs at least one local employee in CY 2025, it will receive a S$1,500 CIT Rebate Cash Grant, with the remaining S$14,500 as CIT Rebate.
The YA 2026 CIT rebate and cash grant provide useful near-term relief, particularly for Small and Medium Enterprises (SMEs) and mid-market businesses facing sustained cost pressures from wages, financing, technology investments, and compliance. The built-in minimum cash grant tied to local employment also reinforces the Government’s continued emphasis on workforce participation and domestic job support.
However, the lower support level compared to YA 2025 signals a clear policy direction i.e. Singapore is gradually moving away from broad-based, economy-wide relief toward more targeted, capability-building and productivity-linked support measures. This suggests that businesses should not anchor medium-term planning on recurring blanket rebates.
From a planning standpoint, companies should:
Businesses that reposition early toward productivity, technology, and value-creation investments are likely to benefit more going forward.
In line with the Government’s plan to drive the AI sector and support businesses in adopting AI, the EIS will be enhanced for YAs 2027 and 2028.
The qualifying expenditure cap is S$400,000 per YA (for each of items (a) to (d) above) and S$50,000 per YA (for item (e)). Businesses may opt to convert up to S$100,000 of total qualifying expenditure into a non-taxable cash payout in lieu of the tax deductions/ allowances, at a conversion rate of 20%.
AI has been recognised as a strategic enabler to address structural constraints and accelerate transformation, particularly across sectors such as manufacturing, logistics, healthcare, and professional services. Adding AI-related activities as a separate category of qualifying activity allows businesses to continue enjoying the enhanced deductions on expenditure incurred on other categories and supports businesses to engage a broad range of activities that supports the integration of AI within their operations. For manufacturing companies, the specific addition to partner institution presents an opportunity to collaborate with the broader industry partners to drive AI adoption. Further clarity from IRAS on the scope of qualifying AI expenditures is expected by mid-2026.
The decision to exclude AI expenditure from the cash payout conversion option is deliberate and tilts the incentive toward companies that have real taxable income and are seeking to invest in and adopt AI from a long‑term strategic rather than those seeking short‑term liquidity support. Loss-making or early-stage companies may not be able to realise the benefits immediately. It seems that the policy favours firms that are prepared to invest first and monetise later, reinforcing a more disciplined and sustainable AI investment mindset.
Compared to the $400,000 cap available for the other categories, the S$50,000 cap appears modest relative to the scale and cost of most AI transformation initiatives for large multinationals, but the quantum may be considered meaningful for SMEs that are looking to embark on AI transformation. However, it is interesting to note that the absence of cash payout conversion means that early‑stage or loss‑making firms may not benefit immediately, even if they are AI‑forward.
Companies should revisit their AI and broader business transformation roadmaps and assess whether qualifying projects can be accelerated. As AI implementation is a long-term journey requiring close coordination between finance, tax, and technology teams, tax considerations should be embedded into AI strategy decisions from the outset rather than addressed retrospectively.
The Government has introduced the following initiatives to support businesses in going global.
a. Enhancement to Double Tax Deduction for Internationalisation (DTDi) Scheme
To further support businesses in their internationalisation efforts, the DTDi scheme will be enhanced with effect from YA 2027.
In addition, the expenditure cap for the automatic deduction without prior approval will be increased from S$150,000 to S$400,000 per YA. Businesses can continue to apply to ESG or STB for expenses exceeding S$400,000 per YA or expenses incurred on overseas trade office and e-commerce campaigns.
ESG is expected to provide further details by the second quarter of 2026.
b. Enhanced Grant Support
To support businesses in internationalising and deepening their overseas presence, the Government has also enhanced various existing grant support schemes, including the Market Readiness Assistance (MRA) grant, the Business Adaptation Grant, the Global Innovation Alliance (GIA) schemes and the Enterprise Financing Scheme (EFS), to support market entry, business adaptation and overseas expansion.
Singapore Budget 2026 rolled out significant support for businesses to diversify globally and integrate regionally. Such expanded limits to claim double tax deduction on qualifying expenses incurred for overseas market expansion and providing enhanced grants are steps in the right direction.
The higher expenditure cap (with no prior approval) reduces the compliance efforts required by businesses and also enhances the practical effectiveness of the DTDi scheme, supporting businesses in multi-market expansion and higher-value upfront preparatory activities within a single year. More broadly, the enhancements reinforce Singapore’s position as a regional headquarters and decision‑making base for international growth. It would be interesting to see, when details are released by ESG, how the list of eligible expenses or conditions imposed will be expanded or refined.
While the scheme is now more enabling, businesses will still need to maintain robust documentation and carefully map eligible expenses to qualifying activities to fully capture the benefits and defend against any audit risk. These enhancements are particularly beneficial for businesses pursuing M&A or franchising-led expansion, and companies should coordinate early with their regional headquarters to optimise planning and execution.
The FTC incentive will be extended for five years, until 31 December 2031 and the existing withholding tax (WHT) exemption will be broadened beyond interest payments on loans used for qualifying activities and services to cover interest‑like borrowing costs.
The five-year FTC extension and broader WHT exemption scope reaffirm Singapore’s commitment as a leading treasury hub, reflecting a modernised view of evolving treasury instruments and funding structures.
It also acknowledges that treasury funding today is increasingly structured through hybrids, structured notes, guarantee fees, discount arrangements, and other yield-based instruments and not just plain-vanilla interest-bearing loans. Extending WHT exemptions to interest‑like borrowing costs better aligns with commercial reality and avoids unintended cost leakages for companies.
For businesses with FTC incentive, this provides opportunities for:
Groups with existing FTC structures should treat this extension as a trigger point to:
The GTP will be extended for five years until 31 December 2031 and the list of qualifying commodities will be expanded to include Environmental Attribute Certificates (EACs).
The five-year extension of the GTP and the inclusion of EACs as a qualifying commodity signify Singapore’s intention to encourage companies to partake in energy transition and environmental markets, beyond traditional physical commodities.
By bringing EACs within the GTP perimeter, Singapore is effectively recognising that environmental attributes are becoming a tradable asset class with pricing volatility, arbitrage dynamics, financing needs, and derivative overlays, which are characteristics consistent with established traded commodities.
For businesses with GTP incentive, this will provide opportunities for:
As more multinationals adopt mandatory and voluntary sustainability targets, EAC demand is becoming structural rather than opportunistic. GTP inclusion allows Singapore-based traders to intermediate this demand within a concessionary tax framework, improving margin economics and pricing competitiveness.
While not a direct tax change, Budget 2026 emphasises Singapore’s continued commitment to open trade flows and new partnerships. Agreements such as the EU-Singapore Digital Trade Agreement and upcoming trade pacts with New Zealand and emerging markets (Latin America, Africa, Middle East) reinforce Singapore’s stance.
Multinational companies, SMEs, and traders benefit from reduced friction in cross-border flows. Customs and indirect tax professionals should anticipate evolving compliance requirements tied to new agreements.
Opportunities: Enhanced market access, smoother customs processes, and potential tariff reductions under new FTAs.
Risks: Firms must adapt quickly to new rules of origin and digital trade standards.
The Singapore Government has reaffirmed its commitment to the implementation of the Top-up Tax under BEPS Pillar Two. The Top-up Tax is expected to increase Singapore’s corporate tax collections from FY2027 as the Pillar Two regime becomes fully operational.
The Government has also acknowledged intensified global competition for investment and signalled that Singapore will update and strengthen its investment promotion toolkit to remain attractive.
While no new technical amendments in relation to Pillar Two were announced, the Budget provides policy certainty that Singapore’s global minimum tax regime will proceed as enacted.
In-scope Multinational Enterprises (MNE) groups should ensure that Pillar Two governance, including data collection, entity scoping, safe harbour assessments, systems capabilities, and registration processes are operational ahead of the first reporting cycle. Although transfer pricing was not specifically addressed in the budget, it does impact effective tax rates and Pillar Two outcomes. MNE groups should review their current operating models and intragroup transactions to ensure transfer pricing policies remain coherent and well-supported.
Looking ahead, we expect Singapore’s investment promotion strategy to continue evolving to remain competitive and relevant in a Pillar Two environment. This is likely to include a greater focus on OECD-compliant Qualified Tax Incentives (QTI) and Qualified Refundable Investment Credits (QRTC). Particularly, as QTI leans more towards production activities and investments in tangible assets, it remains to be seen how Singapore will use its incentive toolkit to support asset-light, services-oriented industries.
To support Singapore’s role as an international financial centre, a number of targeted WHT exemptions for the financial sector, previously scheduled to lapse on 31 December 2026, have now been extended to 31 December 2031.
These exemptions operate as carve‑outs from the general Singapore WHT rules and are grounded in subsidiary legislation and administrative concessions issued from time to time. Namely, these are the suite of WHT exemptions which have been extended:
Further details are expected to be published by MAS by the second quarter of 2026.
Singapore’s financial sector remains a major pillar of the economy, accounting for approximately 14% of Gross Domestic Product in 2025. The decision to extend the key financial‑sector WHT exemptions to 31 December 2031, reflects the MAS’ responsiveness to sustained industry engagement and feedback on the importance of policy certainty for cross‑border financial activities.
By addressing the previously looming sunset, the extension removes a material source of uncertainty for banks and financial institutions involved in funding, derivatives, securities financing and swap activities. This outcome supports market confidence and reinforces Singapore’s position as a stable and competitive international financial hub.
The EQDP was introduced in February 2025 following the recommendations of the Equities Market Review Group (EMRG), with the objective of strengthening Singapore’s local fund management industry and broadening investor participation in Singapore‑listed equities. To date, the MAS has allocated S$3.95 billion under the programme across nine appointed asset managers. The EQDP continues to garner strong market interest, supported by a robust and ongoing pipeline of applications from asset managers. At Budget 2026, the Government announced a further S$1.5 billion top‑up to the EQDP, funded through the Financial Sector Development Fund (FSDF) administered by MAS to promote Singapore as a financial sector.
The EMRG was set up in August 2024 to study ways to strengthen the local stock market through extensive consultations with industry stakeholders. The cornerstone initiative arising from the EMRG’s recommendations is the EQDP. The EQDP is complemented by targeted fund management tax incentives announced in Budget 2025 designed to make Singapore equity strategies commercially attractive. These notably include a 20% (for primary listings) or 10% (for secondary listings with new shares issued) rebate on Singapore corporate income tax payable for five years from the month of successful approved listing on the Singapore Exchange, as well as an enhanced five percent concessionary tax rate for new fund manager listings. Together, the EQDP, its Budget 2026 expansion, and the related fund management tax incentives form a coordinated policy framework: public capital deployment to catalyse liquidity, combined with tax measures to support long‑term commercial sustainability. Fund managers with Singapore equity strategies, or plans to list or expand in Singapore, should assess their eligibility under these incentives and consider how they align with their medium‑term growth and structuring plans.
In Budget 2026, several measures were introduced to further promote a “We-First” society:
The Budget 2026 enhancements to Singapore’s philanthropic tax framework signal a clear policy intent: to institutionalise giving, professionalise the social sector, and embed corporate and family philanthropy into long-term national development – not just episodic goodwill. These extensions move Singapore’s regime from encouraging generosity to enabling strategic philanthropy.
The multi-year extensions of the NPO incentive, enhanced donation deductions, and the Corporate Volunteer Scheme collectively provide planning certainty and structural support for both donors and social organisations.
We are seeing a steady rise in:
Proper structuring of legal, tax, governance and operating models is now as important in philanthropy as it is in investment vehicles.
Singapore’s 2026 Budget takes a strong position on AI, with tax incentives making it clear that the state wants businesses to adopt AI at scale in a manner that is trusted and governed with clarity on the outcomes.
This presents an opportunity for Tax Teams, but it comes with strings attached.
Singapore will encourage AI adoption through the EIS: a 400% deduction for qualifying AI spend, capped at S$50,000 for YAs 2027 and 2028. It also carves out a critical role for Government, including a National AI Council chaired by the Prime Minister to manage development and deployment. The message is that businesses can adopt AI with government endorsement – provided they meet expectations around governance, accountability and responsible use.
The A&M view is straightforward: Tax must own this moment.
This Budget provides the opportunity to rehome AI from traditional Finance and IT roots to a Tax-led agenda. Finance/IT efficiencies have largely been explored, but it is in Tax, where human judgement is front and centre, that the greatest benefits are yet to be realised.
There are three implications for Tax Teams:
1. Transformation Budgets Are Available – Seize Them
Tax teams must lead AI change, not be the little sibling of Finance Transformation. With R&D and AI expenditure explicitly incentivised, there has never been a better time to secure transformation funding. The Budget highlights accountancy as an area where AI can add value, but tax processes would have been just as relevant. Few other functions offer a better reflection of professionals moving up the value chain, spending more time on advisory and complex analysis where expertise and trust matter most. Tax Teams must make their case for change. To be effective this case must consider the holistic impact of AI on technology, people and processes, consider including claims under new incentives or capital allowances where appropriate.
2. The Way We Are Scrutinised Will Change
The Budget indicates Government will use its regulatory powers to drive businesses from probabilistic AI to deterministic, auditable solutions. It is no coincidence that we have seen the MAS float ideas of model governance, documentation and controls for Financial Institutions – we should expect similar guidance to follow for the rest of us. Clearly, the government wishes to reduce audit friction and position Singapore-based operations for global certainty mechanisms. The coordinated public-sector push also aligns with regional momentum, where tax authorities intend to utilize AI to perform more investigative tax audits. The way we are scrutinised is about to change, and Tax Teams must be ready for it.
3. We Will Take Care of Our Own
The Budget makes clear that AI must not displace its Singapore workforce. Any AI business case must focus not on reducing headcount but upskilling and redeploying local workers to provide value to the business elsewhere. The goal is a Singapore hub of high-expertise professionals empowered to use AI responsibly. Tax Functions must consider what this means for their entry-level recruitment and what learning critical judgement on the job will look like in this new world.
Our Call to Action: Get in front of your board now. Build a concise Tax business case tied to the Budget incentives, define KPIs aligned with regulation, and deploy AI with eyes open. Tax Teams must maximise this opportunity while meeting the bar the Government has set.
Budget 2026 is, at its core, a statement about building confidence in a more contested world through disciplined choices that keep Singapore open and competitive, while strengthening assurance so that transformation remains durable. It aligns capital formation, innovation and AI diffusion, and social support behind a single organising principle of inclusive growth. The implication for business is straightforward; this next phase will reward execution over intention and those who move early, sequence well, and institutionalise capability will compound advantage.
Over the next 12–24 months, the differentiator will be governance. Boards and management teams will need to treat tax and AI not as parallel workstreams, but as enterprise disciplines integrated into capital allocation, operating model design, and risk management. Tax, in particular, will increasingly function as both a signal of policy direction and a licence to operate test as stronger documentation, cleaner data, and tighter alignment between positions taken and real operating substance will matter more as scrutiny rises. In the same way, AI adoption at scale will demand clear accountability, controls, and auditability so transformation is not only fast, but trusted and defensible.
The call to action is simple: align leadership now, set clear outcomes, hardwire governance, and execute with discipline so today’s investments translate into long-term resilience and confidence.
[1]A company is considered to have met the local employee condition if, in CY 2025, it has made CPF contributions for least one local (i.e., Singapore Citizen or Permanent Resident) employee, excluding shareholders who are also directors of the company.
