Executive summary

On 12 February 2026, Singapore delivered Budget 2026, confirming that the Multinational Enterprise Top-up Tax and Domestic Top-up Tax will apply as planned for financial years beginning on or after 1 January 2025. The Budget also signals a refresh of the investment-promotion toolkit to maintain competitiveness under Base-Erosion and Profit Shifting (BEPS) 2.0 from the Organisation for Economic Co-operation and Development (OECD). The refresh is characterized by increased funding, a stronger focus on innovation, extensions of cornerstone incentive regimes and anticipated refinement or new incentive forms shaped by the Qualified Tax Incentive (QTI) concept under the OECD's Side-by-Side (SbS) package.

Budget 2026 developments

Moving toward Pillar Two-compatible support

Policy signal. Singapore is expected to adopt the SbS package, which introduces QTI and allows certain qualified expenditure- or production-based incentives to be treated as increased covered taxes (up to a substance-based cap), with effect from 1 January 2026. Authorities in Singapore have commenced a systematic review of existing incentives and related rules to determine where new Pillar Two-compatible structures may be appropriate.

Funding signal. Budget 2026 allocates S$37b¹ to the Research, Innovation and Enterprise (RIE) fund for research and development (R&D) and innovation activities from 2026 to 2030. Funding for the Ministry of Trade and Industry (MTI)² is expected to more than double, expanding the capabilities of key economic agencies such as the Economic Development Board (EDB)³ to attract high-value investments in strategic sectors.

Cornerstone regimes extended to 2031 — offering certainty while rules evolve

Singapore has extended key incentive regimes that support treasury, trading and operating footprints. The Finance & Treasury Centre (FTC) incentive and Global Trader Programme (GTP) are now extended to 31 December 2031, with enhancements including broader withholding tax exemption for interest-like borrowing costs under the FTC and the addition of Environmental Attribute Certificates under the GTP.

Beyond these extensions, Singapore's wider incentive suite, including the Development and Expansion Incentive, Intellectual Property Development Incentive, the R&D tax deduction regime, tax amortization for qualifying intellectual property and the Refundable Investment Credit, remains available. Singapore has historically maintained and periodically refined these schemes, and they are expected to continue as part of the incentive landscape while the broader review is underway.

Early enhancements to internationalization and innovation schemes — signaling broader refresh ahead

Budget 2026 introduces targeted, near-term enhancements to two statutory levers:

• Double tax deduction for internationalization. From Year of Assessment (YA) 2027, the cap for claims without prior approval increases from S$150,000 to S$400,000 per YA, and the scope of activities eligible for automatic claims expands to cover a wider range of overseas market development and feasibility-related activities.
• Enterprise innovation scheme. For YA 2027-YA 2028, a new qualifying activity for artificial intelligence (AI)-related expenditure provides a 400% deduction/allowance on up to S$50,000 per YA.

These incremental enhancements supporting near-term expansion and innovation activities illustrate how Singapore may adjust existing schemes ahead of a more comprehensive SbS/QTI-aligned refresh.

Corporate Income Tax (CIT) rebate

To help companies managing cost pressures, a CIT rebate of 40% of tax payable will be granted in YA 2026. Active companies that employed at least one local employee in calendar year 2025 will receive a minimum benefit of S$1,500 in the form of a CIT rebate cash grant. The total maximum benefits (i.e., sum of CIT rebate and CIT rebate cash grant) that a company may receive is S$30,000.

Implications for multinational groups

BEPS 2.0 Pillar Two compliance in Singapore is fast approaching. Multinational groups should continue preparing for filing obligations by strengthening data systems, improving data quality and ensuring documentation is robust and consistent.

In parallel, groups should monitor developments in Singapore's incentive framework, as forthcoming changes may influence investment, location and supply-chain decisions.

For groups considering reinvestment or new project proposals, early engagement with Singapore's economic agencies, supported by economic-impact modeling and scenario planning, can help align proposals with the evolving incentive framework and potentially improve outcomes.