Budget 2025 expected to bring tax rebates, no ‘significant’ tax hikes

SINGAPORE is unlikely to see “significant” tax hikes in Budget 2025, following tweaks in the last two years, observers told The Business Times. While rates may not be lowered either, rebates could be on the way.

“We do not expect significant tax hikes this year, as various adjustments in tax rates have already been effected to the Singapore tax system over the past years,” said See Wei Hwa, property tax and dispute resolution partner at KPMG in Singapore.

Changes since 2022 have spanned “all major tax types”, he added, including property tax, stamp duty, goods and services tax, personal income tax, casino tax, and carbon tax.

The corporate tax question

Simon Poh, associate professor for accounting at the National University of Singapore Business School, does not expect significant tax hikes nor rate reductions in Budget 2025.

The corporate income tax rate of 17 per cent, for instance, “is likely to remain unchanged” as there is “little scope” for it to come down further.

Singapore’s rate is already among the lowest globally, he noted. Furthermore, the Republic is implementing Pillar Two of the Base Erosion and Profit Shifting (BEPS) 2.0 framework, which imposes a global minimum tax rate of 15 per cent on multinational enterprises (MNEs).

As large MNEs are thus expected to face higher tax bills, Singapore is unlikely to raise corporate tax rates further, added See.

Ajay Kumar Sanganeria, partner and head of tax at KPMG in Singapore, noted that BEPS 2.0 means that tax incentives, traditionally used to attract investment, will become less effective.

To encourage MNCs to continue anchoring “highly profitable” businesses in Singapore, Budget 2025 could introduce a production tax credit, he suggested.

One complication is US President Donald Trump’s promise of cutting US corporate taxes for manufacturers, which makes it more attractive for them to be there.

As the United States is unlikely to commit to Pillar Two, some MNEs might choose to relocate there, said Prof Poh. But he does not expect Singapore to be “adversely affected”.

Even without additional tax incentives, the Republic will continue attracting and retaining global companies for reasons such as its strategic location, political stability, pro-business environment, talent pool and so on, he said.

Chester Wee, EY Asean international tax and transaction services leader, noted that US MNEs are also shielded from paying top-up taxes for the first two years after Pillar Two rules kick in.

If this shield is extended, it would “unlevel” the playing field and disadvantage jurisdictions such as Singapore, he said.

“For now, Singapore would have to play within the rules, which include focusing on expenditure-based incentives,” he added. Budget 2025 might thus introduce incentives to encourage investments in “targeted areas that matter”.

Personal income tax

Meanwhile, personal income tax rates are unlikely to be adjusted as the latest hikes took effect only last year, said observers.

PwC Singapore tax partner Lennon Lee expects the government to give time for changes to “stabilise”, to better assess their impact.

Besides, although raising income tax rates for greater progressiveness is a “laudable objective” and would boost revenue, it could hurt economic competitiveness, he added. “The Singapore government is keenly aware that tax competition remains real and global talent is constantly being wooed by our economic competitors.”

Prof Poh noted that Singapore’s personal income tax top rate of 24 per cent is already higher than Hong Kong’s 17 per cent top rate, and close to Asia’s average of 28 per cent. A reduction is not on the cards, given the growing government expenditure, he said.

Property and car taxes

Similarly, property and car taxes are in a “stabilisation period”, with the effectiveness of recent hikes to be reviewed before further moves, said KPMG’s See.

As for direct wealth taxes, Singapore has long avoided this option in favour of asset-based taxes, noted Loh Eng Kiat, business tax partner at Deloitte Singapore.

But he flagged the G20 group’s proposal, last year, of a global minimum tax of 2 per cent on billionaires’ wealth. Should this gain traction with major economies, “it could introduce a new multilateral perspective” on wealth taxes, he said.

As for car taxes, duties on petrol and diesel may rise, given the push for electric vehicles (EVs), said Wong Meng Yew, tax and legal sustainability and climate leader at Deloitte South-east Asia. But he does not expect changes for “duties for vehicles, ARF (additional registration fee) rates, or rates and rebates related to the Vehicle Emission Schemes”.

In contrast, Prof Poh sees possible further hikes in ARF rates for luxury vehicles, alongside car tax rebates for EV owners.

More rebates on the way

While tax rates may not come down, observers expect more rebates for corporate income and personal income taxes – particularly given Singapore’s stronger-than-expected economic performance last year, said PwC’s Lee.

Budget 2024 saw rebates of 50 per cent for both corporate income tax and personal income tax, capped at S$40,000 and S$200 respectively.

For the year of assessment 2025, a corporate income tax rebate of 50 per cent – capped at a higher threshold of S$60,000 – would help small and medium-sized enterprises (SMEs) amid an increasingly uncertain and challenging environment, added Lee.

But Prof Poh expects Prime Minister Lawrence Wong to exercise “more prudence” in Budget 2025. This could mean a similar 50 per cent corporate income tax rebate, but with a lower threshold of S$20,000 or S$30,000.

KPMG’s Sanganeria said: “While the pace of inflation has moderated, businesses in Singapore, especially SMEs, are still facing significant cost pressures.” Further corporate income tax rebates or cash grants would thus help, he said.

Beyond rebates, Budget 2025 could give SMEs tax incentives and reliefs to foster innovation, talent development and market expansion, suggested Chai Wai Fook, EY tax services partner.

Deloitte Singapore business tax leader Rohan Solapurkar noted that, to encourage companies to venture overseas, tax deduction programmes such as the Double Tax Deduction for Internationalisation scheme – set to lapse in December 2025 – may also be extended.

As for personal income tax, KPMG’s See expects a rebate of at least S$200, similar to Budget 2024.

But PwC’s Lee pointed out that lower-income households “may not benefit significantly”, as about half of Singapore’s workers do not pay personal income tax.

Sabrina Sia, global employer services leader at Deloitte Singapore and South-east Asia, agreed that tax rebates “would be good to have” but do not go far in helping the lower-income.

Instead, Lee and Sia expect broad-based cost-of-living support such as CDC vouchers.