Singapore's FY2026 Budget delivers a 40% corporate tax rebate capped at SGD 30,000, raises the internationalisation deduction cap to SGD 400,000, and offers a 400% deduction on AI spending up to SGD 50,000—while implementing the 15% global minimum tax from April 2027.
Singapore’s Prime Minister and Minister for Finance, Lawrence Wong, has delivered the FY2026 Budget Statement in Parliament on 12 February 2026, setting out a package of measures aimed at supporting businesses amid cost pressures while advancing fiscal sustainability and climate goals.
The Budget combines short-term corporate tax relief with longer-term structural reforms, including the implementation of the 15% global minimum tax under OECD Pillar 2. It also introduces targeted enhancements to innovation incentives, carbon pricing, financial sector tax exemptions and selected excise and vehicle duties, reflecting a calibrated approach to growth and competitiveness.
The key measures are outlined below:
Corporate taxation
To help businesses manage rising operating costs, a 40% corporate income tax rebate has been introduced for the Year of Assessment 2026. This measure is specifically designed to provide short-term relief for active companies that employed at least one local worker in the preceding year.
- Rebate thresholds: Each eligible company will receive a minimum benefit of SGD 1,500, with the total relief capped at SGD 30,000.
- Pillar 2: As of 01 April 2027, Singapore will formally implement the Top-up Tax under Pillar 2 of the BEPS (Base Erosion and Profit Shifting) initiative. This will ensure that large multinational enterprises operating locally pay an effective tax rate of 15%, aligning Singapore with international tax standards while boosting future revenue. Singapore will implement the Pillar 2 top-up tax, which is expected to increase corporate tax collections from FY2027 onward.
Carbon tax policy
Singapore has reaffirmed its commitment to achieving its climate targets, while adopting what it describes as a policy of “cautious calibration.” The carbon tax is set at SGD 45 per tonne for 2026 and 2027.
Tax deductions
Singapore is strengthening tax incentives to promote business internationalisation and technological advancement. The Double Tax Deduction for Internationalisation scheme will increase the automatic 200% deduction cap from SGD 150,000 to SGD 400,000, supporting companies expanding into overseas markets.
Vehicle tax adjustments
The Preferential Additional Registration Fee (PARF) rebate will be reduced by 45 points, with the cap lowered from SGD 60,000 to SGD 30,000. This applies to cars registered with Certificates of Entitlement from the next bidding exercise. The change reflects reduced need to incentivise early deregistration as electric vehicles become more common.
Tobacco duty increase
A 20% increase in tobacco excise duty across all tobacco products takes effect immediately to discourage consumption.
Enterprise innovation scheme (EIS) expansion
Enterprise Innovation Scheme (EIS) will be expanded to include AI expenditures as a qualifying activity for tax deductions in 2027 and 2028. Under the Enterprise Innovation Scheme, businesses may claim a 400% tax deduction on AI-related expenditures, capped at SGD 50,000 per Year of Assessment, for YA 2027 and YA 2028.
Financial sector withholding tax exemptions extended
Multiple withholding tax exemptions for the financial sector will be extended to 31 December 2031. These include exemptions for Section 12(6) payments by specified entities, structured product payments by financial institutions, over-the-counter financial derivatives payments, cross-currency swap transactions, interest on margin deposits under derivatives contracts, securities lending or repurchase agreement payments, and interest rate or currency swap transactions by the Monetary Authority of Singapore (MAS).
Finance and treasury centre incentive enhanced
The FTC incentive, offering concessionary tax rates of 8% or 10% on qualifying income, will be extended to 31 December 2031. The scope of the withholding tax exemption expands to include interest-like borrowing costs that are subject to withholding tax for payments made on or after 13 February 2026.
