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February 19, 2026
Introduction
The Singapore Budget 2026,
presented on 12 February 2026 by Prime Minister and Minister for Finance
Lawrence Wong, is not a dramatic fiscal overhaul. Instead, it is a calibrated
refinement of Singapore’s long-standing economic model built on tax certainty,
regulatory clarity, and pro-enterprise policies.
With its competitive 17% corporate
tax rate and extensive tax treaty network, Singapore has consistently
positioned itself as a gateway between Asia and the world. Singapore Budget 2026 only
strengthens this foundation.
Instead of radical structural changes, the Government has expanded targeted incentives to mitigate cost pressures, accelerate innovation particularly in AI, enhance internationalisation, and reinforce Singapore’s status as a global financial centre. The result is a Budget that consolidates competitiveness while preparing businesses for a productivity-driven and globally integrated future.
1. Corporate Income Tax
Rebate
Prior to Budget 2026, a 50%
Corporate Income Tax (CIT) rebate was provided for Year of Assessment (YA)
2025. Under Budget 2026, the Government has introduced a 40% CIT rebate for YA
2026. This rebate provides a minimum benefit of $1,500 for companies that have
employed at least one local employee with CPF contributions, and the total
benefit is capped at $30,000 per company.
For example, if XYZ Pte. Ltd. has a
tax liability of S$20,000 for YA 2026, it would qualify for a 40% rebate
amounting to S$8,000. Provided it satisfies the local employment condition, the
rebate reduces the tax payable directly. This improves immediate cash flow and
lowers the effective tax burden.
This measure provides targeted cost relief while reinforcing domestic employment, as eligibility is tied to hiring at least one local employee. For profitable businesses, the rebate improves immediate cash flow and reduces the effective tax burden. For expanding or restructuring groups, the timing of profits, workforce structure, and intercompany arrangements become more relevant.
2. Enterprise Innovation
Scheme (EIS)
Under the Enterprise Innovation Scheme (EIS), businesses are
already eligible for a 400% tax deduction on qualifying activities such as
R&D in Singapore, IP registration and acquisition, approved training, and
innovation projects with recognised partners.
Budget 2026 adds qualifying AI
expenditure as a new activity under EIS. Businesses may now claim a 400% tax
deduction on up to S$50,000 of qualifying AI expenditure per YA. However,
unlike other EIS categories, AI expenditure will not be eligible for conversion
into a cash payout.
In essence, this is a clear message to businesses that if you are implementing AI in your business, whether it is through automation, data analytics, optimization software, or digital transformation projects, the tax system is set up to support overall tax efficiency and align innovation strategy with tax benefits.
3. Enhancements to
Internationalisation Support
The Market Readiness Assistance
(MRA) grant is a government initiative that assists Singapore companies in
mitigating expenses associated with the expansion of their market presence in
foreign countries.
As of 1st April 2026, the MRA grant
will provide support for up to 70% of eligible expenses (compared to 50%
previously), and the $100,000 support per company per market will be extended
until 31st March 2029. Starting 2026, companies will also be able to receive
support for strengthening their presence in existing markets, in addition to
entering new markets.
Singapore is generally reducing both cost and financial barriers for overseas expansion.
4. Double Tax Deduction for
Internationalisation (DTDi)
Under the previous regime,
companies were eligible for a tax deduction of up to 200% of eligible
internationalization expenses, but the automatic tax deduction was limited to
$150,000 for each YA, and most of the activities were subject to prior approval.
However, with Budget 2026, the
automatic tax deduction limit has been substantially raised to $400,000 for
each YA, and more activities are removed from the prior approval requirement.
This is effective from YA 2027, and it will certainly ease the process for
companies that are keen to grow internationally.
This is a clear message that Singapore would like its companies to grow globally, with fewer obstacles and more support. If you are considering entering new markets abroad, conducting feasibility studies, franchising, or growing globally, doing so through a Singapore company will now be even more tax-efficient with your business expansion.
5. Workforce Costs
One of the most obvious commercial
messages in Budget 2026 is in relation to recruitment. It will become more
costly to recruit foreign talent, while further support is being offered to
enhance the local talent pool.
From January 2027:
While hiring costs will rise, the
Progressive Wage Credit Scheme (PWCS) co-funding rate increases from 20% to 30%
this year to ease transition.
The direction is unmistakable: automation, skills development, and productivity are to replace labour-cost competitiveness as Singapore’s growth engine.
6. Extension of Withholding
Tax Exemptions
The general withholding tax rate on
interest paid to non-residents remains 15%, but exemptions for qualifying
cross-border financial transactions were due to expire after 31 December 2026.
Budget 2026 extends these
exemptions until 31 December 2031.
For financial institutions and treasury centres, this ensures continued efficiency in cross-border financing, derivatives, securities lending, and swap arrangements. It eliminates tax leakage and reinforces Singapore’s position as a regional treasury hub.
7. Financial Sector Stability
A number of key incentive programs
like, The Finance and Treasury Centre (FTC) incentive, which encourages
multinational groups to establish the regional or global “internal bank” in
Singapore by offering a lower tax rate on treasury and financing income.
Likewise, the Global Trader Programme (GTP) provides international trading
firms with concessionary tax rates to establish Singapore as their main base
for global commodity trading operations, were scheduled to expire in 2026.
However, under Budget 2026, these incentives have been extended until 31
December 2031, giving businesses an additional five years of policy stability
and reiterating Singapore’s commitment to being a leading financial and trading
center.
The extension of these key incentives until 31 December 2031 supports Singapore’s role as a stable financial and trading center. It significantly alleviates structural risks. With the additional five years of policy stability, now is a more secure time to make plans for the future if you are thinking of centralizing your treasury operations, starting trading operations, or structuring cross-border financing arrangements.
8. Extension of
Not-for-Profit Organisation Tax Incentive
The Not-for-Profit Organisation Tax
Incentive, which grants tax exemption on income earned by eligible
not-for-profit organisations, was set to expire after 31 December 2027.
However, Budget 2026 has extended the scheme to 31 December 2032, offering an additional
five years of certainty.
This is a continued affirmation of Singapore’s commitment to providing a stable and supportive environment for philanthropic and non-profit activities. For charities, foundations, and mission-driven organisations looking to set up in Singapore, this is a positive development that improves long-term planning confidence and stability.
9. Tax Deduction for CPF-Top
Ups by Platform Operators
Under the former system, only
traditional employers were eligible to make tax deductions for CPF cash top-ups
contributed under the Voluntary Contributions to MediSave Account (VC-MA)
scheme on behalf of their employees. Platform operators were not accorded the
same tax treatment for contributions made to their platform workers.
However, from YA 2027 onwards (applicable to CPF contributions made from 1 January 2026), platform operators will be eligible to make tax deductions for such contributions. This is in line with Singapore’s understanding of the changing nature of the workforce and the need for the gig economy to be treated fairly in relation to traditional employment arrangements.
10. Extension of Enhanced Tax
Deduction for Charitable Giving
The enhanced 250% tax deduction for
qualifying donations to Institutions of a Public Character (IPCs) has been
extended until 31 December 2029.
This continues to integrate fiscal
policy with social responsibility. For businesses, family offices, and
high-net-worth individuals, philanthropy remains a structured tool for both
social impact and tax efficiency.
When strategically aligned with estate planning, succession planning, and governance frameworks, charitable giving becomes both impactful and financially efficient.
11. Corporate Volunteer
Scheme (CVS) Extended
Under the Corporate Volunteer
Scheme (CVS), companies that are carrying on trade in Singapore are eligible
for a tax deduction of 250% of qualifying expenses incurred when their
employees volunteer at, provide services to, or are seconded to Institutions of
a Public Character (IPCs). The tax deduction is currently capped at $250,000
per business per Year of Assessment and $100,000 per IPC per Calendar Year.
The scheme will expire after 31 December 2026. However, Budget 2026 has since extended the tax deduction for qualifying expenses incurred from 1 January 2027 to 31 December 2029. This is in support of structured corporate volunteering and community engagement in Singapore.
12. Indirect Policy Measures
Budget 2026 also includes measures
aimed at shaping social and environmental outcomes.
PARF rebates for cars have been
reduced, reflecting transport policy recalibration amid growing adoption of
electric and hybrid vehicles.
Tobacco excise duties have
increased by 20% from 12 February 2026. Duties on cigarettes rise from S$491
per kilogram (49.1 cents per stick) to S$589 per kilogram (58.9 cents per
stick), with similar increases across other tobacco products.
These are behavioural measures designed to encourage sustainability and public health rather than revenue-driven tax shifts.
Conclusion
Singapore’s value proposition has
never rested solely on low tax rates. It has been built on structured
competitiveness and long-term policy certainty.
Budget 2026 reinforces that
philosophy. The framework only refines it and doesn’t want to disrupt. It
enhances innovation incentives, lowers barriers to internationalisation,
strengthens financial sector stability, and shifts economic focus toward
productivity.
However, the true advantage lies in how businesses strategically leverage these measures.
Water & Shark Helps You
Leverage Singapore Budget 2026
At Water and Shark, we help
businesses, investors, and family offices unlock the measurable impact of
policy changes such as the Singapore Budget 2026. Whether it is structuring
group arrangements to maximize new tax incentives or , we offer comprehensive
end-to-end advisory services to meet your business goals.
Our integrated approach of legal, tax, regulatory, and financial knowledge ensures that your Singapore operations are not only tax-efficient but also commercially resilient and aligned with the latest global best practices. In today’s rapidly changing international landscape, we help you go from understanding the Budget to leveraging it.
Key Takeaways
Frequently Asked Questions -
FAQs
1. Does Budget 2026 change
Singapore’s corporate tax rate?
No. The 17% corporate tax rate remains unchanged and the focus has been on targeted refinements.
2. Who benefits from the 40% Corporate Income Tax rebate?
This rebate provides a minimum
benefit of $1,500 for companies that have employed at least one local employee
with CPF contributions, and the total benefit is capped at $30,000 per company.
3. How does the AI
enhancement under EIS help businesses?
Companies investing in AI can claim
a 400% tax deduction. As a result, it lowers the cost of digital
transformation.
4. Is Singapore still
attractive for international expansion?
Yes. With enhanced DTDi limits and
stronger MRA support, companies can expand more efficiently.
5. What should businesses do
after Budget 2026?
Review tax structures, workforce
plans, and expansion strategies to ensure incentives are used strategically
rather than reactively.
