On 6 October 2026, the Finance (Income Taxes) Bill 2026 (“Bill“) was passed in Parliament. The Bill sets out three categories of amendments to:
- implement tax measures announced in Budget 2026 to help businesses cope with costs pressures and invest in artificial intelligence (“AI“);
- comply with the latest Global Anti-Base Erosion (“GloBE“) Model Rules (Pillar Two) (“Pillar Two Rules“) by implementing the Side-by-Side package; and
- simplify tax filing for taxpayers.
The passing of the Bill was preceded by a June 2026 public consultation by the Ministry of Finance (“MOF“) on the draft Bill. MOF published its summary of responses on 2 September 2026.
Budget 2026 Tax Measures
The Bill implements various amendments from Budget 2026, including:
- Tax rebate for active companies: Active companies employing at least one local employee in 2025 will receive a 50% tax rebate with a S$2,000 cash grant. The total benefit will be capped at S$40,000. This was initially announced in Budget 2026 as a 40% tax rebate, with a S$1,500 cash grant and a benefit cap of S$30,000. Following the conflict in the Strait of Hormuz, the Government announced that this assistance would be boosted to the current level.
- Enhancement to the Enterprise Innovation Scheme: Businesses will be able to claim an enhanced tax deduction of 400% on up to $50,000 of qualifying AI expenditure for the 2027 and 2028 years of assessment (“YAs“). Following feedback from the public consultation, businesses will be allowed to rely on vendors’ breakdown of AI and non-AI expenditure. Where such breakdown is unavailable, businesses should make a reasonable estimate of the portion attributable to AI expenditure.
- Enhancement to the Double Tax Deduction for Internationalisation Scheme: The cap for claims without prior approval will increase from S$150,000 to S$400,000 per YA. The expanded scope will cover overseas market development and investment study trips, as well as specified feasibility, licensing, market survey, business development and brochure costs.
- Extension and enhancement of the Global Trader Programme: The Global Trader Programme will be extended until 31 December 2031, with an expanded list of qualifying commodities.
- Extension and enhancement of the Finance and Treasury Centre incentive: The incentive will be extended until 31 December 2031, with an expanded scope of the withholding tax exemption.
Pillar Two Rules
The Bill will amend the Multinational Enterprise (Minimum Tax) Act 2024 to implement the Side-by-Side package, which exempts US multinational enterprises (“MNEs“) from certain Pillar Two rules. It will therefore exempt US MNEs from Singapore’s Multinational Enterprise Top-up Tax. The Domestic Top-up Tax will continue to apply to all multinational enterprises in Singapore, including those from the US.
The Bill also updates Singapore’s laws to align with international rules, such as by allowing the exchange of GloBE information returns (“GIRs“) with other jurisdictions under Pillar Two. This will allow MNEs to file GIRs in only one jurisdiction.
Following feedback from the public consultation, MOF will introduce a transitional period of administrative leniency for inadvertent non-compliance for Financial Years 2025 to 2027 where a MNE group can demonstrate that it has taken reasonable measures to comply with GIR filing requirements.
Simplifying Tax Administration
To simplify tax filing and ease compliance, the Bill introduces a 20% broad-based Fixed Expense Deduction Ratio (“FEDR“) for self-employed persons and individual sole proprietors with revenue of up to $50,000 for income not already covered by the existing industry-specific FEDRs. This avoids the onerous task of compiling and calculating actual business expenses. However, self-employed persons may still choose to claim their actual business expenses should they so prefer.
Second, all companies will be required to use the e-service by the Inland Revenue Authority of Singapore (“IRAS“) for the filing of objections or revisions from 1 July 2027. IRAS will address practical limitations of its e-service, such as file size restrictions and limited word counts. IRAS will also continue to accept submissions through other modes in certain exceptional circumstances where mandatory use of the e-service may not be feasible or appropriate. Examples include system outages or objections/revisions involving multiple YAs on identical issues.
Click on the following links for more information:
- Full text of the Bill (available on the Singapore Statutes Online website at sso.agc.gov.sg)
Available on the MOF website at www.mof.gov.sg:
- Second Reading Opening Speech on the Finance (Income Taxes) Bill – 2M Jeffrey Siow
- Summary of Responses to Public Consultation on the Proposed Finance (Income Taxes) Bill 2026
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