Wish list for Singapore Budget 2025

Ernst & Young Solutions LLP (EY) today released its wish list for Singapore Budget 2025.

The proposed measures, focused on supporting Singapore and Singaporeans navigate present and upcoming challenges while marking the nation’s 60 years of independence. The proposed measures cover the following key themes:

• Supporting the whole-of-nation advancement in research, innovation and digital economy

• Maintaining a relevant Singapore tax system 

• Providing continuing assurance to workers, families and individuals

Mr. Liew Nam Soon, EY Asean Regional Managing Partner and Singapore Managing Partner at Ernst & Young Solutions LLP, says: 
“This SG60 Budget is an opportunity to reflect on the responsibility shouldered by the public and private sectors and people in collectively positioning for the next lap of sustainable, inclusive growth. Initiatives that support and enable individuals, families and enterprises across different stages of growth and development will be welcome; importantly, active participation of individuals and collaboration among enterprises will be vital to not just achieve but amplify the impact of these initiatives.”

Ms. Soh Pui Ming, Singapore Head of Tax, Ernst & Young Solutions LLP, says: 
“Singapore will be celebrating SG60 in 2025. As the nation embarks on the next chapter of the Singapore Story, it is imperative that the country’s tax measures stay relevant to support Singaporeans and businesses to navigate the challenges from geopolitical uncertainties, technological disruptions and climate change.”  

Supporting the whole-of-nation advancement in research, innovation and digital economy

IP commercialisation 

The Singapore Intellectual Property Strategy 2030 (SIPS 2030) was launched in April 2021, which is a national roadmap that aims to elevate Singapore’s standing as a leader in intangible assets (IA) and intellectual property (IP) expertise and services. 

Mr. Andre Toh, EY Asean and Asia-Pacific Valuation, Modeling & Economics Leader, says: 
“A common challenge that businesses face is unlocking the value of IA or IP via the raising of capital. An easily measurable indicator of business success is the amount of funding that can be raised against IA and IP. Having an active marketplace for fund raising against IA and IP can create a vibrant ecosystem aligned to the objectives of SIPS 2030. We suggest a relaunch of the IP financing scheme, together with a study to be undertaken to understand the challenges faced in the first iteration of the scheme in 2014.” 

Accelerating the pace towards a Smart Nation

According to the Infocomm Media Development Authority, Singapore’s digital economy contributed 17.7% to the country’s gross domestic product (GDP) in 2023, overtaking the finance and insurance sectors. As part of the Smart Nation ambition, the government has provided support to help companies transition to the digital economy. 

Mr. Benjamin Chiang, EY Asean Government & Public Sector Leader, says: 
“Many companies do not have adequate capabilities and resources to address cybersecurity associated with digitalisation. We hope that the government will provide increased support to help companies uplift cybersecurity as a core component of their digital strategy, so that these companies can protect their assets, maintain customer trust, and ensure long-term success in an increasingly digital world.” 

Artificial intelligence

Artificial intelligence (AI) enables advancements that transform industries and improve lives. 

Support for employers on workforce transformation and AI

Mr. Manik Bhandari, EY Asean AI and Data Leader, says: 
“The government may wish to consider AI Adoption Incentives. Currently, SMEs can access the Microsoft Copilot for SMEs programme, which supports SMEs in the adoption of GenAI. However, enhanced subsidies and a wider suite of GenAI tools can be made available to SMEs to give added motivation to invest in AI technologies. These incentives will lower the barriers to entry for businesses, enabling them to leverage AI to enhance productivity and innovation.” 

He adds: “In Budget 2024, it was announced that S$1 billion would be committed to AI over the next five years into AI compute, talent, and industry development. Since then, a Sectoral AI Centre of Excellence for manufacturing was launched in September 2024. More such sector-specific hubs that focus on innovation can create a collaborative environment for SMEs and other ecosystem players from the same industry to pool together knowledge, capabilities and resources to advance their progression in AI or even create new solutions beyond the existing ones in the sandbox. Through this, the pace of AI innovation can be accelerated and new economic opportunities created.”

Support for individuals on upskilling and AI adoption

In addition to supporting businesses, individuals must be given the opportunities to upskill and acquire practical AI skills. The team proposes SkillsFuture Credit top ups, micro-credentials and modular courses, AI literacy programs and Workplace AI integration training. 

• SkillsFuture Credit top-up and programmes 
  Mr. Samir Bedi, EY Asean People Consulting Leader, says:  
  “Providing additional top-ups to the SkillsFuture Credit for Singaporeans, with targeted top-ups for mid-career individuals and those in vulnerable job sectors, will allow more people to access training and development opportunities. This helps individuals to continually upgrade their skills and remain competitive in the job market. Additionally, the government may wish to expand the availability of micro-credentials and modular courses. These bite-sized learning options will allow individuals to acquire specific skills and knowledge in a flexible and accessible manner, making it easier for people to upskill at their own pace.”

• AI literacy programmes 
  Mr. Goh Jia Yong, Partner, People Consulting, Ernst & Young Advisory Pte. Ltd., says: 
  “Launching AI literacy programs aimed at demystifying AI and GenAI technologies will help workers understand their applications and potential impact on their jobs. By increasing AI literacy, we can reduce fear and resistance to new technologies, fostering a culture of innovation and continuous improvement.”

• Workplace AI integration training 
  Mr. Goh Jia Yong, Partner, People Consulting, Ernst & Young Advisory Pte. Ltd., says: 
  “Offering specialised training programs to help workers integrate AI and GenAI tools into their daily tasks will improve efficiency and productivity. These programs will provide practical guidance on how to leverage AI technologies to enhance job performance and achieve better outcomes.”

Maintaining a relevant Singapore tax system 

Option to convert existing research and development (R&D) tax deductions to refundable tax credits

R&D efforts become increasingly important in the new world, under the current R&D regime, for taxpayers conducting qualifying R&D activities in Singapore, there is an additional 300% tax deduction up to S$400,000 on qualifying R&D expenditure, and an additional 150% R&D deduction on the balance of qualifying R&D expenditure in excess of the S$400,000 annual cap. Currently, companies cannot convert the R&D tax deduction into refundable tax credit nor cash. Allowing the option to convert R&D tax deduction to cash could help cash flow for businesses, especially SMEs. In addition, the refundable tax credit feature could help larger organisations better manage the effective tax rate as Singapore implements the 15% domestic top-up tax from 1 January 2025. 

Mr. Johanes Candra, Partner, Business Incentives Advisory, Ernst & Young Solutions LLP, says: 
“We suggest an enhancement to the current R&D regime to allow taxpayers to opt for qualifying R&D deduction to be convertible to a qualifying refundable tax credit. This helps to preserve the intent to support and incentivise taxpayers effectively to continue to boost R&D and innovation in Singapore. Jurisdictions like Belgium, Ireland and the UK have similar schemes.”

Extend the enhanced R&D deduction for overseas R&D activities  

To push the frontiers of innovation across the entire economy, the Singapore government has committed to invest heavily in R&D. Enhanced R&D tax deductions are also granted to encourage pervasive R&D in Singapore. 

Multiple R&D centres (Singapore and overseas) carry out R&D activities collaboratively. This is due to various business and commercial factors such as availability of R&D talents overseas (e.g., for intensive wafer fabrication), the need for speed to market, etc. 

Currently, Singapore’s enhanced R&D tax deduction is limited only to R&D expenditure incurred in Singapore. 

Ms. Tracy Tham, Partner, Business Incentives Advisory, Ernst & Young Solutions LLP, says:  
“We suggest to extend the enhanced R&D deduction to overseas R&D expenditure. We believe that enhanced deduction for a portion of qualifying R&D costs incurred overseas, up to a cap (say, 10% to 15% on the R&D costs incurred overseas), can make the existing R&D regime more holistic, recognising the R&D collaboration efforts in Singapore and overseas.

New Zealand’s expanded R&D regime provides enhanced claims through a 15% tax credit on qualifying overseas R&D activities. To prevent abuse, relevant safeguards such as limiting the claim to 10% of the total eligible claims and ensuring a nexus between the overseas activities with the Singapore R&D activities, are in place." 

Further, to ensure that the suggested enhancement contributes to Singapore’s R&D ecosystem, this enhancement can be limited to R&D that is associated with IP residing with Singapore taxpayers, i.e., Singapore taxpayers must have the economic ownership of the resulting IP. With this enhancement, Singapore taxpayers that may need to seek R&D support outside of Singapore will not be disadvantaged.  
 
Enhance existing group relief system for more flexibility

The Economic Review Committee (ERC) introduced the group relief system (GRS) to recognise how group companies are economically structured. Since the introduction of the GRS over 20 years ago, group companies have evolved with more complex structures. 

Mr. Chai Wai Fook, Partner, Tax Services, Ernst & Young Solutions LLP, says: 
“It is timely to refresh the GRS to preserve the fundamental spirit set out with the introduction of the system. We suggest enhancing the GRS to look beyond these intermediate holding entities. If the transferor and transferee are Singapore tax resident companies and are both ultimately held by a Singapore tax resident holding company, group relief should be available. Anti-avoidance provisions can be put in place to ensure that the holding structures are not artificial and temporary arrangements.”

Enhance existing merger and acquisition (M&A) scheme

The M&A scheme encourages Singapore companies to grow and expand through strategic acquisitions. Currently, M&A allowances and DTD on transaction costs cannot be transferred to other Singapore group companies.

To enhance its relevance and benefits to Singapore companies, we suggest allowing the M&A allowance to be transferable under the group relief system. 

Ms. Sandie Wun, Partner, International Tax and Transaction Services, Ernst & Young Solutions LLP, says: 
“Given that strategic acquisitions are integral to a group’s growth strategy, tax benefits arising from such acquisitions, such as the M&A allowance on qualifying transaction costs should be shared at the Singapore group level. As such, we suggest that M&A allowance to be allowed for transfer under group relief scheme. To prevent abuse, this transfer can be limited to group companies that are 100% owned, or group companies conducting the same business.”

Include insurance policies as designated investments for funds tax incentive schemes

The current list of designated investments (DI) for the schemes 13D, 13O and 13U includes a broad range of financial products, except insurance policies.

Mr. Desmond Teo, Asean EY Private Tax Leader, says:   
“Single family offices (SFOs) play an increasingly vital role in Singapore’s financial sector. SFOs in Singapore leverage insurance policies as an important component of wealth planning, giving protection to safeguard family wealth from unexpected events. Including insurance policies as part of designated investments can stimulate investments managed from Singapore, increasing the demand for insurance products, and boosting the broader financial sector.”

Sector focus: Real estate

Newer and different forms of space usage arrangements have emerged in the real estate space and S-REITS have since expanded into areas such as provision of colocation services and co-working space. These arrangements entail the provision of ancillary services such as provision of storage and networking assets, usage of common spaces and facilities (e.g., fax, IT, printing and photocopying, reception services, cleaning and maintenance).  

In addition, S-REITs are stepping up and engaging in various forms of ESG-related initiatives, such as the installation of solar panels on rooftops, which may give rise to ancillary income from sale of solar energy generated from such solar panels.

The above income streams are currently not considered income (nor ancillary income) from the management and holding of immovable properties for the S-REITS and do not qualify for tax transparency treatment. 

Ms. Toh Ai Tee, Partner, Tax Services, Ernst & Young Solutions LLP, says: 
“To reflect the changing real estate landscape, we suggest that the above income streams be viewed holistically as part and parcel of the S-REITS’ business of management and holding of immovable properties and be accorded the tax transparency treatment.”

Providing continuing assurance to workers, families and individuals 

Transforming the Singapore workforce

As we look towards Budget 2025, it is imperative that we address the evolving needs of our workforce and economy. The economic challenges of 2024 have highlighted the need for increased support for vulnerable and low-wage workers. To address these challenges, the team proposes the following measures:

• Enhancement to Senior Employment Support 
  Mr. Samir Bedi, EY Asean People Consulting Leader, says: 
  “Expanding initiatives to support older workers, including wage subsidies for employers who hire senior employees and tailored training programs, will help them adapt to new job roles. This support will help older workers to continue contributing to the economy and maintain their financial independence.”

• Enhancement to SkillsFuture Jobseeker Support Scheme  
  The SkillsFuture Jobseeker Support Scheme, announced in Aug 2024 and commencing in Apr 2025, will provide much anticipated financial and job-seeking support for lower- and middle-income worker. While we look forward to the commencement of the scheme, which covers those earning up to S$5,000 a month, we hope it can be expanded to cover higher wage groups of S$5,000 to S$8,000. 

Mr. Samir Bedi, EY Asean People Consulting Leader, says: 
“Extending the Jobseeker Support scheme to cover the mid-level workers will help as the recent retrenchment exercises observed in Singapore have tended to impact Professionals, Managers, Executives and Technicians (PMETs) more.”

Supporting companies in adopting fair employment practices

With the upcoming Workplace Fairness Legislation, it is important to support companies in adopting fair employment practices. The following measures aim to promote fairness and inclusivity in the workplace:

• Workplace Fairness Legislation Compliance Fund 
  Mr. Goh Jia Yong, Partner, People Consulting, Ernst & Young Advisory Pte. Ltd., says: 
  “Establishing a fund to assist companies in complying with the upcoming Workplace Fairness Legislation will cover costs related to training, policy development, and implementation. This will help businesses to meet the new requirements without undue financial burden.”

Encourage skill exchange

To sustain and enhance Singapore’s position as an international hub for top talent while maintaining a business-friendly environment for companies, we recommend the following:

Work Pass Exempt (WPE) activities

Mr. Panneer Selvam, EY Asean People Advisory Services Tax Leader, says: 
“For continued relevance and Singapore to maintain its competitiveness as a global business hub, it is timely that the government revisits the WPE list of activities. This will facilitate the carrying out of restricted short-term work activities where the administrative burden of obtaining a work pass may not be necessary. Updates to the WPE list may include attending and participating in board meetings as a foreign director appointed by a Singapore company; and providing on-the-job or practical training as a trainer or facilitator with the intent to upskill and reskill the local work force.”  

Postpone increase in S Pass levy

Mr. Panneer Selvam, EY Asean People Advisory Services Tax Leader, says:  
“The monthly Tier 1 S Pass levy is currently at S$550 and is slated to increase to S$650 from 1 September 2025. To help employers manage rapidly rising business expenses, we suggest that the increase in the Tier 1 S Pass levy be deferred for an additional year. 

Introduce greater flexibility to the 1-month Employment Pass (EP) or S Pass

It is common for short-term foreign employees to provide on-the-job training to local employees. It is also common for international employers to undertake work exchange programs with overseas employees having to work in Singapore for short bouts of duration, typically no longer than 2 months at a stretch. Currently, employers may apply for an EP or S Pass for a duration of 1 month without advertising for the role under the Fair Consideration Framework or for EP holders, being subject to the COMPASS framework. 

Mr. Panneer Selvam, EY Asean People Advisory Services Tax Leader, says: 
“We suggest extending the mandatory 14-day job-advertising exemption under the FCF for short-term work pass holders working in Singapore for up to two months. As well, the COMPASS framework exemption should be extended to short-term EP holders requesting for a pass for up to two months. This will accord employers more flexibility to manage their interim manpower needs or transfer skills adequately.”

Tax relief for home office expense 

Considering the changing dynamics of flexible work environments and the introduction of the Tripartite Guidelines on Flexible Work Arrangement Requests, it may be timely for employees to receive a tax deduction for employment-related expenses incurred to enable work-from-home setups.

Ms. Kerrie Chang, Partner, People Advisory Services Tax, Ernst & Young Solutions LLP, says:  
“We believe that it is timely to consider allowing tax relief for home office setup costs. To safeguard against potential abuse of this tax benefit, a cap can be imposed.”  

 

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