To support businesses amid global uncertainty, the Government announced a 40% Corporate Income Tax rebate for Year of Assessment (YA) 2026, capped at SGD 30,000 per company, with a minimum benefit of SGD 1,500 for active companies employing at least one local employee.

Impact on Businesses

• Temporary reduction in Singapore corporate tax payable
• Impact on FY2026 effective tax rates
• Deferred tax and financial reporting considerations
• Interaction with global minimum tax modelling

Whilst this rebate provides short-term relief, it does not alter the structural impact of Pillar Two implementation.

Singapore confirmed it will proceed with the Top-Up Tax under Pillar Two of the OECD Base Erosion and Profit Shifting (BEPS) framework.

This raises the effective tax rate for large multinational enterprises to 15%, in line with the OECD global minimum tax standard. The Government expects higher corporate tax collections from FY2027 onwards.

Pillar Two applies to multinational groups with consolidated revenue of EUR 750 million or more and ensures a minimum 15% effective tax rate in each jurisdiction.

Singapore will introduce a Qualified Domestic Minimum Top-Up Tax (QDMTT) to collect any shortfall locally.

• Incentive regimes below 15% may trigger top-up tax.
• Jurisdictional ETR modelling under GloBE rules is essential.
• Substance-based carve-outs (payroll and tangible assets) become more relevant.
• Data systems must support new Pillar Two compliance requirements.

Importantly, Singapore’s headline corporate tax rate remains 17%. The shift is toward global alignment and substance-based competitiveness - not higher taxation.

Singapore Budget 2026 reinforces its ambition to be a global AI deployment hub.

Under the expanded Enterprise Innovation Scheme (EIS), AI-related expenditure will qualify for 400% tax deductions for YA 2027 and YA 2028, capped at SGD 50,000 per year.

• AI-enabled automation systems
• Machine learning tools
• Predictive analytics platforms
• AI-driven operational redesign

Transfer Pricing Considerations:

In a Pillar Two environment:

• Enhanced deductions may influence jurisdictional ETR calculations.
• AI-related intangibles must align with DEMPE functions.
• Intercompany service and IP structures should be reviewed.

AI transformation and transfer pricing governance must move together.

One subtle but important takeaway from Singapore Budget 2026 is what it does not do.

Singapore did not:

• Reduce its corporate tax rate
• Introduce aggressive low-tax regimes
• Compete through ultra-low effective tax outcomes

Instead, the focus is on:

• AI capability building
• Innovation incentives
• Enterprise transformation
• Real economic substance

In a global minimum tax environment, value creation - not tax rate arbitrage - drives competitiveness.

MNE groups should now assess:

• Are we within scope of OECD Pillar Two (EUR 750m threshold)?
• What is our projected jurisdictional effective tax rate under GloBE rules?
• Will our Singapore tax incentives trigger top-up tax?
• Are our transfer pricing policies aligned with operational substance?
• Do our finance systems support Pillar Two reporting?

Early modelling and restructuring may reduce future compliance and audit risk.

We support multinational groups with:

• Pillar Two impact assessment and QDMTT modelling
• Singapore global minimum tax simulation
• Incentive review under GloBE rules
• AI-related transfer pricing structuring
• DEMPE analysis for technology-driven businesses
• Transfer pricing documentation and audit defence