Singapore’s FY2025 Budget Statement.

On 18 February 2025, Prime Minister and Minister for Finance Mr Lawrence Wong delivered Singapore’s FY2025 Budget Statement. Overall, the Budget is a welcoming statement, outlining Singapore's strategy and approach to the challenges of today's uncertain world while emphasizing its commitment to maintaining a vibrant financing ecosystem, competitive tax system, and continuing the support of enterprise growth through investment funds.

The Budget emphasises on three key areas: technology and innovation, infrastructure investments, enterprise ecosystem, and a worthwhile mention that a new S$ 1 billion Private Credit Growth Fund will also be introduced to provide more financing options for high-growth local enterprises. Budget 2025 specifically mentions investments in productivity in the Technology, Life Sciences and Semiconductor sectors as focus areas, in addition to emphasizing the importance of investments in Artificial Intelligence.

In order to ensure Singapore maintain a fair and competitive tax system, the Budget has implemented various tax initiatives such as a 50% Corporate Income Tax rebate for YA2025 (as well as the key highlights on tax changes shown below), as well as several tax-related recommendations which will be shared by the Equities Market Review Group in the coming days.

Below are the key take-away points of the Budget 2025:

• Singapore economy grew by 4.4%, with projected growth in 2025 at 1 to 3%

• Inflation continued to ease, with projected inflation to average between 1.5 to 2.5%

• Median income of resident workers rose by 3.4% above inflation • Commitment to continue to uphold below key fundamentals:

o Maintaining sound monetary and fiscal policies

o Harnessing market forces to drive efficiency and innovation

o Staying open to people and ideas to strengthen our capabilities

o And deepening our tripartite partnership as a cornerstone of economic stability

• Singapore is home to the world’s top tech companies, including new frontier areas such as artificial intelligence (or AI) and quantum computing

• Singapore is a key player in semiconductors, supplying more than 10% of chips and producing onefifth of semiconductor equipment worldwide

• Singapore produces more than 80% of the world’s DNA chips, which are essential to unlocking new frontiers in life sciences

• Singapore is a major producer of advanced medical devices, including cardiac implants and hearing aids, with eight of the world’s top 10 pharmaceutical companies having manufacturing operations in Singapore

Enterprise ecosystem As part of Singapore’s ambition to be the financial hub for leading enterprises and ventures to develop and grow, more support for scaling up, execution of growth plans to compete on the global stage will be provided:

• More support schemes for internationalisation, and for mergers and acquisitions • Launching of a Global Founder Programme by EDB to encourage global founders to anchor and grow more new ventures in Singapore.

Singapore has built up a vibrant financing ecosystem, backed by a growing network of angel investors, venture capitalists, and private equity firms, complemented by Government investment funds, such as 65 Equity Partners and Heliconia Capital, investing in promising companies:

• To help enterprises with longer growth trajectories, more funds will be deployed as “patient capital”, with longer investment horizons, to ensure that promising companies have the resources they need to thrive.

Global emergence of a private credit market offering innovative financing solutions to enterprises. However, such private credit funds focus mainly outside of Asia:

• Introducing a new S$ 1 billion Private Credit Growth Fund: o To provide more financing options for high-growth local enterprises.

Technology and Innovation

Although the Budget announces no changes on the Base Erosion and Profit Shifting (BEPS) 2.0 Pillar Two front, Singapore is committed to anchoring more high-quality investments by setting aside S$ 3 billion to maximise its competitive strength.

Infrastructure Investments

The Budget also announced investment of ~ S$ 1 billion to keep its R&D infrastructure at the cutting edge:

• For biotech sector, refreshing the public biosciences and medtech research infrastructure with stateof-the-art facilities, promoting collaboration within research community, and enable faster translation of research into commercial solutions

• In the semiconductor space, to develop a new national semiconductor R&D fabrication facility, providing industry-grade tools for researchers and industry partners to prototype and test new semiconductor innovations

The industries of the future – artificial intelligence, semiconductors, biopharmaceuticals – are highly energy intensive. To meet these growing energy needs while minimising carbon emissions at the same time, the Budget announced that expanding to clean energy is imperative:

• Additional S$ 5 billion top up to the Future Energy Fund1 (established in 2024)

Maintaining a Fair and Competitive Tax System

Operating Companies / Portfolio Companies

1. Extension of the Double Tax Deduction for Internationalisation (“DTDi”) scheme Businesses are allowed a tax deduction of 200% on qualifying market expansion and investment development expenses2 under the DTDi scheme, originally scheduled to lapse after 31 December 2025. To continue supporting businesses in their internationalisation efforts, the scheme will be extended till 31 December 2030. Further details will be provided by EnterpriseSG by 2Q 2025.

2. Extension of the Mergers and Acquisitions (“M&A”) scheme The M&A scheme allows a Singapore company making qualifying acquisition of the ordinary shares of another company to claim the below tax benefits, subject to conditions:

a) An M&A allowance (to be written down over five years) that is based on 25% of up to S$ 40 million of the value of all qualifying acquisitions per YA, and

b) 200% tax deduction on transaction costs incurred on qualifying acquisitions, subject to an expenditure cap of S$ 100,000 per YA The scheme is originally scheduled to lapse after 31 December 2025. To continue supporting companies to grow through M&A, the scheme will be extended till 31 December 2030.

3. Enhancement of Section 13W of the Income Tax Act 1947 (“ITA”) that provides upfront certainty of non-taxation of companies’ disposal gains

Section 13W of the ITA provides that gains derived from the disposal of ordinary shares by companies will not be taxed, if:

a) The divesting company maintains a minimum level of 20% shareholding in the investee company for a continuous period of at least 24 months prior to the disposal of any shares in the investee company (“shareholding threshold condition”), and

b) The shares are disposed between 1 June 2012 to 31 December 2027

In addition to the following enhancements, the sunset date under Section 13W will also be removed:

a) Expansion of the scope of eligible gains to include gains from the disposal of preference shares that are accounted for as equity by the investee company under the applicable accounting principles, and

b) Allowing the assessment of the shareholding threshold condition to be done on a group basis

These changes will take effect for disposal gains derived on or after 1 January 2026. IRAS will provide further details by 3Q 2025.

4. Introducing a tax deduction for payments made under an approved cost-sharing agreement (“CSA”)3 for innovation activities

Payments made under a CSA for innovation activities that do not meet the definition of “research and development” under Section 2 of the ITA are currently not deductible.

To support collaborative innovation activities, a 100% tax deduction for payments made by companies under an approved CSA for innovation activities will be introduced with effect from 19 February 2025. EDB will provide further details by 2Q 2025.

5. Introducing a tax deduction on payments to the holding company or a special purpose vehicle (“SPV”) for issuance of new shares of the holding company under employee equity-based remuneration (“EEBR”) schemes.

Companies are allowed tax deduction for treasury shares or previously issued shares of the company or the holding company that are transferred to employees under EEBR schemes. No tax deduction is allowed where new shares are issued to employees under EEBR schemes.

To ensure that Singapore’s tax regime remains relevant and competitive, companies will be allowed to claim a tax deduction on payments to the holding company or a SPV for the issuance of new shares of the holding company under EEBR schemes.

The deduction will be the lower of:

a) The amount paid by the company, and

b) The fair market value, or net asset value of the shares (if the fair market value is not readily available), at the time the shares are applied for the benefit of the employee less any amount payable by employees for the shares.

The changes will take effect from YA 2026. IRAS will provide further details by 3Q 2025

Fund related

6. Introducing tax incentives recommended by Equities Market Review Group

To encourage new listings in Singapore and increase investment demand for Singapore-listed equities, the following tax incentives will be introduced:

a) Listing Corporate Income Tax (“CIT”) Rebate for new corporate listings in Singapore

b) Enhanced Concessionary Tax Rate (“CTR”) of 5% for new fund manager listings in Singapore, and

c) Tax exemption on fund managers’ qualifying income arising from funds investing substantially in Singapore-listed equities

For more information, please refer to Annex C-2 of the Budget statement.

More information will be provided by the Government towards the second half of 2025. We look forward to further details and remain available to support you on any questions