Parliament Passes Finance (Income Taxes) Bill to Implement Budget 2025 Changes, Effect GloBE Rules

Introduction

On 6 November 2025, the Parliament of Singapore passed the Finance (Income Taxes) Bill 2025 (“Bill“). The Bill covers amendments to the:

1. Income Tax Act 1947 (“ITA”) to effect tax measures announced in the 2025 Budget Statement as well as changes arising from the Ministry of Finance’s (“MOF“) periodic review of Singapore’s income tax system; and

2. Multinational Enterprise (Minimum Tax) Act 2024 (“MMTA”) to give effect to provisions of the Pillar Two Global Anti-Base Erosion Model Rules (“GloBE Rules“), as well as various guidance on the same. This includes the document entitled “Tax Challenges Arising from the Digitalisation of the Economy – Administrative Guidance on the Global Anti-Base Erosion Model Rules (Pillar 2), June 2024)” (“Administrative Guidance“) published by the Organisation for Economic Co-operation and Development (“OECD“).

The Bill follows from a public consultation on its draft version held from 18 June to 11 July 2025. MOF published its summary of responses to the public consultation on 9 October 2025.

In this Update, we review key amendments in the Bill and highlight feedback arising from the public consultation that was accepted by MOF.

Amendments to the ITA

Budget 2025 Changes

The Bill introduces various amendments to the ITA to implement tax measures announced in the 2025 Budget Statement, with salient amendments including:

1. Enhancement of section 13W of the ITA (clauses 10, 27, 49 and 50 of the Bill): This provides upfront certainty of non-taxation of companies’ disposal gains. The sunset date will be removed and enhancements will be made to expand the scope of eligible gains and allow the assessment of the 20% shareholding threshold condition to be done on a group basis.

• • Pursuant to feedback received from the public consultation, MOF has provided further details on the new group basis of assessment, which is set out in the Inland Revenue Authority of Singapore’s (“IRAS“) e-Tax Guide titled “Certainty of Non-taxation of Companies’ Gains on Disposal of Equity Investments (Fourth Edition)“. Gains from the disposal of ordinary and/or preference shares (which are accounted as equity) are exempted from tax if the divesting company and any company in the same group legally and beneficially owned in aggregate at least 20% shareholding in the investee company and the disposed shares were continuously held for at least 24 months immediately prior to the date of disposal of such shares.
  • A suggested extension of the group basis of assessment to registered business trusts and variable capital companies will be studied by MOF, IRAS, and the Monetary Authority of Singapore (MAS).
  • MOF also clarified the applicable accounting principles or standards used in the definition of preference shares. Preference shares will be defined as preference shares accounted for as equity under the (i) applicable accounting principles adopted by the investee company; or (ii) International Financial Reporting Standards, if the investee company is not required to comply with any specific accounting standard in preparing its financial accounts.

2. Corporate income tax rebates (clauses 27, 43, and 49 of the Bill): There will be a 50% rebate for corporate income tax (“CIT“), with a minimum benefit of S$2,000 and capped at S$40,000.

3. Tax incentives recommended by the Equities Market Review Group (clauses 34 and 42 of the Bill): This includes a listing CIT rebate for new corporate listings in Singapore and an enhanced concessionary tax rate of 5% for new fund manager listings in Singapore.

4. Extension of three schemes to 31 December 2030 (clauses 12 and 15; 28; and 21 of the Bill): The extension applies to the Double Tax Deduction for Internationalisation (DTDi) scheme, the Mergers and Acquisitions (M&A) scheme, and the Land Intensification Allowance (LIA) scheme.

5. Tax deductions (clauses 17 and 20; 13, 18, 20, 22, 29, 49, and 51 of the Bill): Companies will be allowed to claim a tax deduction on payments to the holding company or a special purpose vehicle for the issuance of new shares of the holding company under employee equity-based remuneration (“EEBR“) schemes. Second, a 100% tax deduction for payments made by companies under an approved cost-sharing agreement for innovation activities will be introduced with effect from 19 February 2025.

6. Extensions of concessions for real estate investment trusts listed on the Singapore Exchange (“S-REITs”) (clauses 5, 32 and 40 of the Bill): The existing tax concessions for S-REITs will be extended till 31 December 2030, and the scope of specified income for the tax transparency treatment will be expanded. Further, the sunset date for the tax transparency concession will be removed and the final withholding tax of 10% for S-REIT Exchange-Traded Funds distributions received by qualifying non-tax-resident non-individuals and qualifying non-tax-resident funds will be extended till 31 December 2030.

7. Maritime Sector Incentives (clauses 2, 6, 7, 8, 35, 36, 37, and 39 of the Bill): An Approved Shipping Financing Arrangement will be introduced to provide withholding tax exemption relating to the purchase or construction of ships and containers. The Maritime Sector Incentive will be extended till 31 December 2031, and its qualifying scope will be updated.

For more details, please see our July 2025 Legal Update titled “MOF Conducts Consultation on Amendments to Tax Legislation to Implement GloBE Rules, 2025 Budget Statement” and our February 2025 Legal Update titled “Singapore Budget 2025: Onward Together for a Better Tomorrow“.

Changes Arising from Periodic Review

The below changes aim to better reflect policy objectives and improve tax administration. They include:

1. Transfer pricing (clauses 25 and 26 of the Bill): The amendments clarify how to identify the related parties of trusts and partnerships for transfer pricing purposes, and that transfer pricing requirements will not apply to non-commercial private trusts.

• • Pursuant to feedback from the public consultation, MOF will provide further clarification on how “control” is determined for trusts and partnerships for the purpose of establishing related parties.
  • IRAS’ Transfer Pricing Guidelines will also be updated to provide more information and illustrations regarding the application of transfer pricing rules and adjustments to related party transactions involving partnerships. IRAS will consult the industry, with the updated guidelines targeted for publication in 2Q 2026.

2. EEBR schemes (clauses 16 and 20 of the Bill): The tax deduction rules for the transfer of treasury shares of the company or the holding company to employees under EEBR schemes will be simplified with effect from YA 2026.

3. Crypto-Asset Reporting Framework (“CARF”) (clauses 47 and 48 of the Bill): This enables the implementation of the CARF, which is an internationally agreed standard for the automatic exchange of information on crypto-assets between partner jurisdictions for tax purposes.

4. Enterprise Innovation Scheme Cash Payout (“EIS CP”) (clause 30 of the Bill): The Bill expands the scope of items that EIS CP could be used to offset to include recovery of past EIS CP.

Amendments to the MMTA

By way of background, the MMTA was passed in October 2024 to implement the Domestic Top-up Tax (“DTT“) and the Multinational Enterprise Top-up Tax (“MTT“) under the Pillar Two rules. The rules require large MNEs to pay a minimum effective tax rate of 15%, wherever they operate. For more information on the MMTA, please see our October 2024 Legal Update titled “Implementation of BEPS 2.0: Passing of MNE Bill, Consultation on MNE Regulations“.

The Bill proposes amendments to clarify the definitions and rules in the MMTA and provide regulation-making powers required to operate the GloBE rules. The amendments seek to keep Singapore’s MNE tax regime in accordance with the GloBE rules, taking into account the recent Administrative Guidance. This will serve to relieve businesses from having to pay Pillar Two taxes elsewhere in respect of their Singapore operations, as well as provide certainty and ease compliance burdens. They include:

1. Securitisation entity (clauses 56, 67 and 69 of the Bill): The amendment will define a “securitisation entity” (“SE“) and “securitisation arrangement” to provide that an SE will not be jointly and severally liable for unpaid DTT and interest of the multinational enterprise (“MNE“) group.

• • In its summary of responses, MOF clarified that the MMTA includes SEs in the scope of DTT by default. However, the Bill will exclude an SE from joint and several liability of unpaid DTT and interest of the MNE group.
  • It will also exclude an SE from being appointed as either the designated local DTT filing entity or the designated local GloBE information return filing entity unless it is the only constituent entity located in Singapore.

2. Allocation of profits and taxes in group structures with flow-through entities (clauses 56, 57, 64 and 70 of the Bill): This will be amended to be in accordance with the recent clarifications in the Administrative Guidance on the GloBE rules.

3. Deduction of DTT (clauses 60 and 64 of the Bill): DTT imposed in respect of a stateless entity formed in Singapore will be allowed to be deducted for the purpose of determining the jurisdictional top-up amount under the MTT.

4. Clarification of definitions (clauses 56 and 70): The definitions of the terms “excluded equity gain or loss”, “excluded entity”, “multi-parent group” and “portfolio shareholding” will be clarified in accordance with the GloBE Rules.

• • Regarding the definition of “excluded equity gain or loss”, MOF noted in its summary of responses that it would make the corresponding amendment in the Multinational Enterprise (Minimum Tax) Regulations 2024.

5. Modifications to GloBE calculations for joint ventures (“JVs”) (clause 61 of the Bill): The amendments will remove the currently legislated need to replace the term “flow-through entity” with “standalone JV or entity of a JV group” in GloBE calculations when applied to a JV and JV subsidiaries.

6. Power to make regulations required to operate the GloBE Rules (clauses 56, 58, and 62 of the Bill): Such regulations include (i) the prescription of start and end dates for a foreign tax to be treated as a qualified domestic minimum top-up tax, qualified Income Inclusion Rule (IIR) or qualified Undertaxed Profits Rule (UTPR); (ii) the modification of the consolidated group revenue threshold test for an MNE group that is newly created from a demerger; and (iii) the prescription of how the DTT and other administrative provisions apply to a multi-parented group.

Further Developments

In the Second Reading Opening Speech on the Bill, Senior Minister of State of Finance Mr Jeffrey Siow flagged ongoing international developments, namely the reopening of negotiations on the parameters of Pillar Two regarding a “side-by-side” system that will exempt US-parented MNEs from specific Pillar Two rules. He noted that it is unclear what the final outcome of discussions at the OECD Inclusive Framework will be.

Nonetheless, Singapore will proceed with implementing Pillar Two taxes to avoid ceding tax revenue to other Pillar Two-implementing jurisdictions, while monitoring international developments with an eye to reviewing this approach.

Should you have any questions about this development, please feel free to approach our team set out on this page for further information.