Publish Date
Oct 15, 2026
Asia Tax Update
For businesses evaluating an investment in Singapore, the value of a tax incentive should ultimately be measured by the cash benefit retained, not simply the headline tax rate, deduction or allowance.
Pillar Two has made that assessment more complex. Under Pillar Two, a tax incentive may reduce Singapore corporate income tax while simultaneously increasing Top-up Tax exposure through its impact on the jurisdictional effective tax rate. This has understandably led some multinational groups to question whether pursuing certain incentives remains worthwhile.
The recent publication by the Inland Revenue Authority of Singapore (IRAS) of its list of Qualified Tax Incentives (QTIs) provides greater clarity and a timely opportunity for businesses to reassess their assumptions. The publication follows Singapore’s commitment to adopt the Substance-based Tax Incentive (SBTI) Safe Harbour as part of the OECD’s Side-by-Side package.
Under the SBTI Safe Harbour, qualifying incentives receive favourable treatment because the benefit may be treated as an increase to Covered Taxes, subject to the applicable substance cap. This can support the jurisdictional Global Anti-Base Erosion (GloBE) effective tax rate and reduce the extent to which the incentive benefit is offset through Top-up Tax.
For businesses, the significance is straightforward: incentives that may previously have been discounted under Pillar Two could retain more value than initially anticipated.
That said, inclusion on the QTI list does not automatically mean that the full domestic tax benefit will be preserved. The outcome will still depend on factors such as the qualifying component of the incentive, the applicable substance cap, utilisation levels and the group’s broader jurisdictional GloBE position.
Singapore appears to be among the first jurisdictions globally to publish a formal list of incentives qualifying for QTI treatment. This provides greater certainty for businesses assessing the interaction between domestic incentives and Pillar Two and may serve as a useful reference point for other jurisdictions considering similar guidance.
The published list comprises a number of key expenditure-based incentives, including:
Base and enhanced deductions for qualifying R&D activities
Additional tax allowance on qualifying capital expenditure used for approved productive equipment and qualifying projects
Tax allowance for qualifying capital expenditure on approved construction, renovation or extension of industrial buildings and structures
Base and enhanced deduction for qualifying overseas expansion and market-development activities
Base and enhanced deductions for eligible innovation, training, AI adoption and collaborative innovation activities
Tax allowances and transaction cost deductions that support business expansion, restructuring and acquisition activities
Base and/or enhanced deductions and allowances for qualifying IP protection, acquisition and licensing activities
Perhaps most notably, the list confirms that Singapore’s R&D deduction regime qualifies for QTI treatment. This provides greater certainty for businesses undertaking technology, innovation and capability-building activities in Singapore.
One notable omission from the published list is the Refundable Investment Credit (RIC). This may reflect Singapore’s positioning of RIC as a Qualified Refundable Tax Credit (QRTC) only rather than also a QTI which in case would allow for a total or partial QTI election, although the rationale has not been expressly stated. Businesses should therefore avoid drawing firm conclusions at this stage and continue to monitor developments in this area.
Given the strategic importance of RIC within Singapore’s incentive framework, further clarification in this area will be closely watched by taxpayers.
The QTI list focuses primarily on expenditure-based deductions and allowances. It does not change the need to assess traditional concessionary tax rate regimes and other incentive structures separately.
In practice, concessionary tax rate incentives may remain an important component of investment decisions, with QTIs providing an additional source of value rather than replacing existing incentive frameworks.
The publication provides an opportunity for businesses to revisit earlier assumptions regarding the value of Singapore incentives under Pillar Two. Key questions include:
Singapore’s QTI announcement is more than a technical Pillar Two update. It is a reminder that incentive value should no longer be assessed based solely on the headline benefit available under domestic tax rules, but on the amount ultimately retained after considering the broader Pillar Two framework.
As governments adapt their incentive regimes to remain competitive in a post-Pillar Two environment, businesses should take the opportunity to revisit existing assumptions, reassess investment economics and ensure that incentive opportunities are being modelled appropriately. Those that do so may find that certain incentives are worth more than originally anticipated.
A&M can assist businesses to:
