The revised guidance introduces a new Frequently Asked Questions (FAQ) section addressing whether SBC should be included in:

• the cost base when applying a cost‑plus mark‑up; and
• the service income derived from related‑party services.

IRAS identifies three distinct SBC scenarios:

• Incurred SBC – SBC is charged by related parties and recognised in the Singapore company’s financial statements
• Uncharged SBC – SBC is not charged and therefore not recognised in the Singapore company’s accounts
• Notional SBC – SBC is not charged but is recorded in the Singapore company’s financial accounts in accordance with applicable financial reporting standards

Before YA 2026, IRAS took a consistent position that SBC represented a cost of providing related‑party services. Accordingly:

• SBC was required to be included in the cost base when applying a mark‑up
• SBC was also required to be included in service income

This treatment applied across incurred, uncharged and notional SBC.

From YA 2026, IRAS maintains its technical position that SBC forms part of the cost of providing related‑party services. As a result:

• SBC continues to be included in the cost base for the purposes of applying a cost‑plus mark‑up

However, in recognition of practical implementation challenges, IRAS has introduced a revised approach to service income:

• Incurred SBC – remains included in service income
• Uncharged SBC – may be excluded from service income
• Notional SBC – may be excluded from service income

This represents a partial shift in approach, aligning technical principles with administrative practicality.

The impact of these changes can be illustrated using the following scenario:

• Cost of services: S$200,000
• SBC: S$10,000
• Mark‑up: 5%

Before YA 2026

Incurred SBC

• Cost base: S$210,000
• Service income: S$220,500

Uncharged and Notional SBC

• Excluded from cost base
• Service income: S$210,500

• Incurred SBC
  • Cost base: S$210,000
  • Service income: S$220,500
• Uncharged SBC
  • Included in cost base (where applicable)
  • Excluded from service income
• Notional SBC
  • Included in cost base (where applicable)
  • Excluded from service income

• Incurred SBC – deductible, subject to meeting qualifying conditions
• Uncharged SBC – not deductible
• Notional SBC – not deductible

• Before YA 2026
  • Incurred, uncharged and notional SBC were all included in service income and subject to tax
• From YA 2026
  • Incurred SBC remains taxable as part of service income
  • Uncharged and notional SBC may be excluded from service income and are not taxable