Deloitte Singapore’s recommendations for strengthening resilience, innovation, and sustainability in Budget 2025

SINGAPORE, 26 December 2024 – Deloitte Singapore (“Deloitte”) presents its key recommendations for Budget 2025, which focus on enhancing business resilience, adapting to global tax reforms, advancing research and development (R&D), and promoting sustainability.

As Singapore prepares to commemorate 60 years of independence, Budget 2025 is a significant opportunity for Singapore to shape a more vibrant business ecosystem and build a shared future together. Central to this is the need to refine its fiscal policies to address increasing global and domestic challenges, which include rising costs, global competition, uncertainty in the geopolitical environment, and the imperative to decarbonise. To this end, Deloitte suggests expanded support for innovation, along with more measures to manage inflation and incentivise sustainable practices.

“Singapore’s projected GDP growth of 1% to 3% in 2025 highlights a balanced outlook for the economy, weighing potential opportunities against global uncertainties and domestic pressures. Amidst this landscape, tax policies play a significant role in fostering economic stability as they empower businesses to adapt and innovate while supporting households facing cost of living pressures. Deloitte’s recommendations aim to enhance Singapore’s tax framework, positioning it as a cornerstone of stability and competitiveness while ensuring alignment with the nation’s long-term priorities for sustainable growth,” said Daniel HO (何仁奇), Tax & Legal Leader (税务与法务领导合伙人), Deloitte Singapore (德勤新加坡).

Strengthening business resilience through streamlining tax policies (page 6)

Singapore’s fiscal policy should evolve to support businesses in an increasingly complex global economy. Policies that provide clarity and flexibility could help companies stay resilient and responsive to change.

For example, easing restrictions on the disposal of shares in property-holding companies could provide businesses with greater flexibility to restructure their assets. Current rules, such as requiring proof of no property development for an extended period, could slow down strategic decisions and limit the ability of businesses to pivot quickly in response to market conditions. Simplifying these requirements can enable companies to streamline operations, redeploy capital more efficiently, and manage resources effectively during periods of economic uncertainty.

“Singapore should continue to fine-tune its tax policies to bolster resilience amid economic uncertainties. Key recommendations include clarifying and amending tax rules, such as the deductibility of costs for carbon offsets and conditions for tax allowances for mergers and acquisitions (M&A), which have been viewed as limiting for businesses.

A review of the exemption conditions under Section 13W of the Singapore Income Tax Act 1947 (ITA) is also proposed. The current requirement that investee companies must refrain from property development for 60 months before the disposal of shares can be overly restrictive, particularly when the immovable property serves as an operational asset rather than one that is being held for trading or resale. Updating these conditions would be helpful in providing tax certainty to businesses while ensuring compliance with global standards.

Additionally, Section 14N of the ITA, which provides tax deductions for renovation or refurbishment works, could be enhanced by increasing the cap from S$300,000 (set more than 10 years ago) to S$450,000. This adjustment would reflect rising costs and better support businesses in maintaining their premises.

Other recommendations include increasing the cap on medical expense deductions and addressing challenges in foreign tax credit rules for mark-to-market taxation, which would offer businesses much-needed clarity and flexibility,” said Rohan SOLAPURKAR, Business Tax Leader, (企业税务领导合伙人), Deloitte Singapore (德勤新加坡).

Adapting to Pillar Two: Multinational Enterprise (Minimum Tax) (Page 10)

2025 heralds Singapore’s implementation of the OECD’s Pillar Two Global Minimum Tax Rules. The introduction of the Income Inclusion Rule (IIR) and the Qualified Domestic Minimum Top-up Tax (QDMTT) in response to the Global Minimum Tax Rules demonstrates Singapore’s commitment to stay aligned with evolving global tax standards while preserving its competitive edge as a business hub. The introduction of the Multinational Enterprise (Minimum Tax) Act 2024 and its impending subsidiary legislation reaffirm Singapore’s proactive approach to provide as much clarity and certainty as possible to businesses operating within its jurisdiction.

Singapore’s tax ecosystem has been adjusted to be well-positioned to support MNEs in navigating the complexities of Pillar Two. Clear and consistent compliance guidelines and transitional reliefs play an important role in helping large MNE groups ease into this new era of tax governance. At the same time, fostering bilateral and multilateral collaborations remains critical to mitigate risks of double taxation and ensure smooth cross-border operations.

“As global tax policies continue to evolve, Singapore’s balanced approach to implementing the OECD Pillar Two Global Minimum Tax Rules will serve as a model for maintaining fiscal responsibility without compromising economic attractiveness. It is now a pivotal time where governments, businesses and advisors need to work collaboratively to shape the future of international tax.

To further support businesses in navigating the Minimum Tax framework, we propose introducing interest-free instalment options for the payments of Domestic Top-up Tax (DTT) and Multinational Top-up Tax (MTT). The DTT ensures that Singapore-based entities meet the global minimum effective tax rate of 15%, allowing Singapore to retain taxing rights on local profits. The MTT, on the other hand, addresses additional taxes owed when MNEs fall short of the minimum tax threshold in other jurisdictions that they operate in which have yet to introduce a QDMTT framework. Providing instalment options for these payments would help MNEs manage their cash flow during the transition,” said LIEW Li Mei (刘丽梅), International Tax Leader (国际税务领导合伙人), Deloitte Singapore (德勤新加坡).

Enhancing Singapore’s tax and incentive ecosystem for international competitiveness (Page 14)

With the implementation of the OECD’s Pillar Two Global Minimum Tax Rules and Singapore’s Refundable Investment Credit (RIC) scheme in 2025, Deloitte calls for greater clarity and support for businesses to adapt and plan their activities.

“The Refundable Investment Credit (RIC) scheme, introduced in Budget 2024, is a forward-looking initiative designed to support high-value economic activities that align with Singapore’s strategic priorities. To enhance its impact, Deloitte recommends expanding the RIC to include offshore and regional decarbonisation projects that are initiated from Singapore, in recognition of the interconnected nature of sustainability challenges and cross-border opportunities. This enhancement will strengthen Singapore’s ambitions to be a key player in global efforts to transit to a low-carbon future and serve as an acknowledgement that regional environmental efforts also contribute towards Singapore’s sustainability goals,” said Yvaine GAN (颜心怡), Global Investment & Innovation Incentives Leader (全球投资与创新激励领导合伙人), Deloitte Singapore (德勤新加坡).”

“Further enhancements, such as broadening qualifying cost categories to include cost-sharing agreements, intangible assets, and depreciation of existing assets, would provide businesses with greater flexibility to scale impactful projects. Increasing the support rate to up to 70% and allowing the RIC to be offset against other taxes payable in addition to corporate income tax, such as property tax, carbon tax, etc., would enhance its appeal. In addition, the RIC could be augmented by adding a volume-based component, where credits are linked to production volumes. This would help to ensure that the RIC is adaptable to diverse business models and position Singapore as a global hub for innovation and sustainability,” Yvaine added.

Advancing Singapore’s R&D tax framework amid global tax developments (Page 12)

LEE Tiong Heng (李忠兴), Global Investment & Innovation Incentives Leader (全球投资与创新激励领导合伙人), Deloitte Southeast Asia (德勤东南亚), said, “In the face of rapid technological advancements and evolving global dynamics, Singapore’s commitment to innovation is paramount. Budget 2025 should focus on enhancing R&D incentives, supporting digital transformation, and fostering a robust ecosystem for emerging technologies. By doing so, Singapore can continue to remain at the forefront of innovation, drive sustainable economic growth and maintain its competitive edge on the global stage.”

Goods and Services Tax (GST) (Page 20)

As Singapore continues to enhance its fiscal sustainability, recent changes to Goods and Services Tax (GST) and the push for digital transformation play a fundamental role in shaping the nation’s economic landscape. With the increase in GST rates in 2023 and 2024 and ongoing cost of living pressures, Deloitte recommends assessing the impact of the GST increase, expanding the e-invoicing mandate, and adjusting the GST registration threshold to foster an inclusive, digitally enabled tax ecosystem.

“Singapore’s push for e-invoicing adoption exemplifies how the country embraces digital transformation to enhance productivity and transparency. Targeted support for SMEs will ensure that they can fully leverage these advancements to make compliance more efficient and foster a digitally connected economy. To further support businesses in adapting to a dynamic economic environment, Deloitte recommends adjusting the GST registration threshold from S$1 million to S$750,000 and addressing inflationary pressures through enhanced compliance measures,” said Richard MACKENDER, Indirect Tax Leader (间接税务领导合伙人), Deloitte Singapore and Asia Pacific (德勤新加坡及亚太).

Empowering a sustainable Singapore: climate commitments and green innovations (Page 22)

In line with the Singapore Green Plan 2030, Deloitte’s recommendations focus on expanding the scope of existing support frameworks to promote energy efficiency, enhance sustainability reporting, and create viable pathways for carbon offsetting.

WONG Meng Yew (王明耀), Sustainability & Climate Tax Leader (可持续发展与气候变化税务领导合伙人), Deloitte Singapore (德勤新加坡), said, “Sustainability will be an important pillar of Budget 2025. Through expanded green financing and incentives for sustainable practices, the Budget will be an opportunity for Singapore to showcase its leadership in this area. Deloitte’s recommendations include extending the Energy Efficiency Grant and enhancing support for Scope 1 and Scope 2 reporting. Incentivising sustainable practices will not only enable companies to align themselves with environmental goals, but also unlock growth opportunities in emerging green sectors.”

Personal tax (Page 24)

To ensure Singapore’s tax system remains responsive to the evolving economic landscape, Deloitte recommends careful recalibrations to tax reliefs and incentives to promote economic growth and alleviate the financial burden for individuals and families.

Sabrina SIA (佘爱玲), Global Employer Services Leader (雇主人力资源全球服务领导合伙人), Deloitte Singapore and Southeast Asia (德勤新加坡及东南亚), shared, “Budget 2025 provides an opportunity to strengthen inclusivity and social equity through refinements to personal tax policies. Deloitte’s recommendations include introducing reliefs for caregivers of infants, children, and the elderly, broadening the scope of insurance relief, and recalibrating earned income relief to support-lower to middle income households. We believe that such measures amid inflationary pressures would highlight Singapore’s inclusive approach to navigating today’s economic and societal challenges.”

Immigration and talent strategy for a competitive workforce (Page 28)

As Singapore positions itself as a global hub for innovation and talent, immigration policies are paramount to foster a dynamic workforce that complements local capabilities while addressing skills gaps. Deloitte suggests changes to further enhance Singapore’s appeal to high-skilled talent and investors, while upskilling local professionals and supporting sustainable workforce growth.

“Striking a balance between talent attraction and social cohesion is central to Singapore’s approach to personal tax and immigration policies. Our proposals, such as expanding the scope of Dependant’s Pass employment eligibility, refining the work pass criteria to reduce administrative hurdles, and enhancing the flexibility of short-term work-arrangements to attract skilled professionals while fostering integration, may help ensure Singapore remains a top choice for global talent to live, work and thrive,” said Christina KARL, Immigration Leader (出入境签证服务领导合伙人), Deloitte Singapore and Global (德勤新加坡及全球).

Conclusion

Deloitte’s recommendations for Budget 2025 aim to empower Singapore to navigate global uncertainties, foster innovation, and champion sustainability. At the core of our proposals is a commitment to inclusive growth, resilience, and long-term competitiveness.

As Singapore is set to celebrate 60 years of independence, we are committed to help shape a resilient, more sustainable, and united future for generations to come.

More details on Deloitte Singapore’s recommendations for Budget 2025 can be found in our feedback report here.

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