Singapore Budget 2026 Highlights: Key Changes for Businesses | Hub

The Singapore Budget 2026 introduced critical updates designed to alleviate immediate operational costs while heavily incentivizing AI adoption, international expansion, and sustainability.

For company directors, founders, and finance teams, navigating these updates is essential for minimizing tax liabilities and maximizing available government grants. Here are the concrete facts, figures, and policy changes you need to know to optimize your business strategy for 2026 and beyond.

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1. Immediate Corporate Tax Relief

To help businesses navigate rising operational costs, the government has introduced immediate, direct tax relief measures for the Year of Assessment (YA) 2026.

• 40% Corporate Income Tax (CIT) Rebate: Eligible companies will automatically receive a 40% rebate on their corporate income tax payable.
• S$1,500 Cash Grant: Active companies that employed at least one local worker in 2025 will receive a minimum cash grant of S$1,500.
• The Cap: The combined maximum benefit (CIT Rebate + Cash Grant) is capped at S$30,000 per company. Disbursements will begin automatically in Q2 2026.

2. Heavy Subsidies for AI Adoption

Budget 2026 shifts the technology focus directly onto Artificial Intelligence, making it significantly cheaper for businesses to integrate AI into their workflows.

• 400% Tax Deduction via EIS: The Enterprise Innovation Scheme (EIS) has been explicitly expanded. For YA 2027 and YA 2028, companies can claim a 400% tax deduction on qualifying AI expenditures, capped at S$50,000 per year.
• Expanded Productivity Solutions Grant (PSG): The PSG framework is being updated to co-fund a wider array of pre-approved, AI-enabled business solutions for SMEs.

3. Increased Support for International Expansion

With domestic growth facing natural limits, Budget 2026 aggressively rewards companies looking to expand overseas.

• Enhanced DTDi Cap: Starting in YA 2027, the automatic claim cap for the Double Tax Deduction for Internationalisation (DTDi) will increase to S$400,000 (companies still enjoy a 200% tax deduction on qualifying expenses).
• Wider Scope: The DTDi scope has been broadened to cover investment feasibility studies, master licensing, franchising, and overseas business development.
• Enterprise Financing Scheme: Effective April 1, 2026, loan limits will be raised to better support companies with trade and fixed-asset financing as they scale abroad.

4. Manpower and Salary Threshold Hikes

Businesses relying on foreign talent must budget for rising salary thresholds, which have been updated to ensure a level playing field for the local workforce.

• Employment Pass (EP): The minimum qualifying salary will rise from S$5,600 to S$6,000. For the Financial Services sector, it will jump from S$6,200 to S$6,600.
• S Pass: The minimum qualifying salary will increase from S$3,300 to S$3,600 (and from S$3,800 to S$4,000 for Financial Services).
• Timeline: These new salary levels apply to new applications starting January 1, 2027, and to renewals starting January 1, 2028.

5. Sustainability and Green Taxes

Singapore is cementing its position as a green hub, which introduces both new compliance costs and new tax incentive extensions.

• Carbon Tax Stays High: The carbon tax is officially locked in at S$45 per tonne for 2026 and 2027, the highest in Asia.
• Global Trader Programme (GTP) Extension: The GTP has been extended to December 31, 2031, with the list of qualifying commodities notably expanding to include Environmental Attribute Certificates.
• SAF Mandate: The aviation and logistics sectors must adapt to a new 1% mandated Sustainable Aviation Fuel (SAF) blending rule beginning in 2026.

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Frequently Asked Questions: Singapore Budget 2026

1. How do I claim the 40% Corporate Income Tax (CIT) rebate and the S$1,500 cash grant?

You do not need to submit a manual application for these benefits. The Inland Revenue Authority of Singapore (IRAS) will automatically compute and disburse the 40% CIT rebate and the S$1,500 cash grant (for active companies with at least one local employee in 2025) starting in the second quarter of 2026.

2. What qualifies for the 400% AI tax deduction under the Enterprise Innovation Scheme (EIS)?

For the Years of Assessment (YA) 2027 and 2028, businesses can claim a 400% tax deduction on qualifying Artificial Intelligence expenditures. This is capped at S$50,000 per year. While the exact list of pre-approved AI solutions will be detailed by IRAS by June 2026, this generally covers software, AI integration services, and related capability development.

3. When do the new Employment Pass (EP) and S Pass minimum qualifying salaries take effect?

The new salary thresholds (S$6,000 for EP and S$3,600 for S Pass, with higher tiers for Financial Services) will apply to all new applications starting January 1, 2027. If you are renewing existing passes, the new salary requirements will take effect one year later, on January 1, 2028.

4. How does Budget 2026 support companies expanding overseas?

The Budget heavily incentivizes global expansion by increasing the automatic claim cap for the Double Tax Deduction for Internationalisation (DTDi) to S$400,000 starting in YA 2027. Additionally, the Enterprise Financing Scheme will feature higher loan limits from April 1, 2026, to assist with trade and fixed-asset financing abroad.

5. Will the carbon tax increase affect my business’s operating costs this year?

The carbon tax is locked in at S$45 per tonne for 2026 and 2027. While this is not a new increase from the previously set trajectory, it remains the highest in Asia. Businesses, particularly those in manufacturing or logistics, should factor these sustained carbon costs into their long-term pricing and operational planning.

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