The 2026 Singapore Budget Statement was delivered by Lawrence Wong, Prime Minister and Minister for Finance, on 12 February 2026.
Five clear themes underpin the Budget:
- Building an AI-first economy and investing in frontier technologies
- Driving productivity and transformation, with near-term support for businesses (especially SMEs)
- Strengthening internationalisation and Singapore’s position as a global hub
- Providing cost-of-living and life-stage support
- Enhancing resilience through security and sustainability initiatives
Aligned with these themes, several tax measures are particularly relevant to foreign-owned SMEs operating in Singapore.
1. 40% Corporate Income Tax Rebate – Year Of Assessment 2026
The Corporate Income Tax (CIT) Rebate for YA 2026 mirrors the concession announced last year.
Singapore companies will receive a 40% rebate on final tax payable for YA 2026.
Where a company has little or no tax liability, eligible companies may receive a CIT Rebate Cash Grant of up to S$1,500.
Eligibility For The Cash Grant
To qualify, a company must:
- Be active; and
- Have employed at least one local employee during calendar year 2025
A “local employee” refers to a Singapore Citizen or Permanent Resident for whom CPF contributions were made.
Where a company qualifies for both the rebate and the cash grant, the combined benefit equals 40% of tax payable, capped at S$30,000 per company.
Example
ABC Pte Ltd
- Employed two Employment Pass holders in 2025
- YA 2026 tax payable: S$50,000
CIT Rebate: S$50,000 × 40% = S$20,000
ABC does not qualify for the cash grant (no local employees).
XYZ Pte Ltd
- Employed two local employees in 2025
- YA 2026 tax payable: S$50,000
Total Benefit: S$20,000, structured as:
- CIT Rebate: S$18,500
- CIT Rebate Cash Grant: S$1,500
The total remains capped at 40% of tax payable.
2. Double Tax Deduction For Internationalisation (DTDi)
Under the Double Tax Deduction for Internationalisation scheme, companies may claim a 200% tax deduction on qualifying expenditure incurred for overseas market expansion and investment development.
Budget 2026 increases the automatic expenditure cap from:
- S$150,000 → S$400,000 per year
This significantly enhances support for companies expanding regionally or globally.
In addition, the scope of expenses that can be claimed without prior approval has been expanded to cover all eligible overseas market development trips and overseas investment study trips.
Expenditure beyond S$400,000 will still require prior approval from Enterprise Singapore or the Singapore Tourism Board.
For foreign-owned SMEs using Singapore as a regional base, this is a meaningful enhancement.
3. Enhancements to the Enterprise Innovation Scheme (EIS)
The Enterprise Innovation Scheme allows companies to claim 400% tax deductions or allowances on qualifying expenditure including:
- Qualifying R&D conducted in Singapore
- Registration of intellectual property
- Acquisition and licensing of IP rights
Budget 2026 adds a new category:
Up to S$50,000 of qualifying AI-related expenditure for YA 2027 and YA 2028.
Key Points:
- The overall EIS expenditure cap remains S$400,000 per year
- Companies may convert up to S$100,000 of qualifying expenditure into a 20% cash payout
- However, this cash conversion option will not apply to AI-related expenditure
This signals a clear policy direction: encouraging AI capability building but maintaining fiscal discipline around cash support.
4. Extension Of 250% Tax Deduction For IPC Donations
The enhanced 250% tax deduction for donations made to Institutions of a Public Character (IPCs) was due to expire at the end of YA 2027.
Budget 2026 extends this incentive to 31 December 2029 (YA 2030).
This provides certainty for philanthropic planning and supports the broader social compact, particularly amid cost-of-living pressures.
What This Means For Foreign-Owned SMEs
From a tax perspective, Budget 2026 reinforces three strategic priorities:
- Immediate relief to offset operating costs
- Stronger incentives for regional expansion
- Clear alignment toward AI and innovation capability building
For foreign-owned SMEs using Singapore as a regional headquarters, the message is consistent:
Singapore continues to support companies that hire locally, expand internationally, and invest in innovation.
