Wish list for Singapore Budget 2026

Ernst & Young Solutions LLP (EY) today released its wish list for Singapore Budget 2026. 

The proposed measures focus on supporting Singapore and Singaporeans to navigate present and future challenges amid global uncertainties and domestic priorities. The proposed measures cover the following key themes: 

• Accelerating broad-based artificial intelligence (AI) adoption and green transition 
• Maintaining a relevant Singapore tax system 
• Empowering workers and families 

Liew Nam Soon, EY Asia East Deputy Regional Managing Partner and Singapore Managing Partner at Ernst & Young Solutions LLP, says: 

“In the new world order where uncertainty is a norm, Singapore must strategically position itself for inclusive growth and compete to lead in an AI-driven economy. This means supporting enterprises to grow sustainably while continuing to invest in our workforce competitiveness and uplift our communities. In line with the Economic Strategy Review’s focus on technology and innovation, Budget 2026 is a pivotal moment to accelerate and scale enterprise AI readiness through enhanced targeted support for AI adoption, infrastructure investment, ecosystem partnership and workforce upskilling.” 

Amy Ang, Singapore Head of Tax, Ernst & Young Solutions LLP, says: 

“A core part of a country’s success rests on an effective tax system. As Singapore refines its policies, it must also ensure that its tax regime remains relevant and effective to support Singaporeans and businesses to navigate the challenges ahead.”   

Accelerating broad-based AI adoption and green transition  

Position Singapore as a trusted AI hub through coordinated national strategy in business, talent and infrastructure 

This proposal outlines a whole-of-nation strategy across three key domains – business enablement, talent development as well as infrastructure and digital readiness. By building sovereign capabilities, fostering a vibrant startup ecosystem, upskilling the national workforce and ensuring sustainable infrastructure growth, Singapore can accelerate its transformation into a trusted and competitive global AI hub.  

• Business enablement: Strengthen the AI business ecosystem and sovereign capabilities 

Manik Bhandari, EY Asean Data and Artificial Intelligence Leader, says: 

“It is hoped that the government can help to reinvigorate the startup ecosystem by focusing resources on fewer but larger investments in high-potential AI startups. This includes increasing funding and grants to help local ventures scale globally and attract international investors. Additionally, establishing a sovereign AI service that connects residents, businesses and government services would ensure ethical governance, data sovereignty and equitable access to AI capabilities for all Singaporeans, promoting a distinct national AI brand built on trust and reliability. Lastly, marketing and branding initiatives to promote Singapore as a trusted AI innovation hub would strengthen the national AI brand and promote globally scalable AI ventures.” 

• Talent development: Develop and reskill the national AI workforce 

Samir Bedi, EY Asean People Consulting Leader, says: 

“To address the talent gap and prepare Singaporeans for the AI-driven economy, the government may wish to consider establishing a comprehensive national AI workforce strategy to define Singapore's competitive position along the AI value chain and map pathways for local talent. Additionally, expanding SkillsFuture and education programmes with AI-focused modules and providing enhanced training subsidies for AI-related programs will help to enhance AI literacy among the workforce. This lowers the financial barrier for upskilling and ensures every Singaporean has access to meaningful AI training. Lastly, providing a National AI platform and services to all citizens, potentially through targeted ‘AI vouchers’ similar to the CDC vouchers will help Singaporeans access to essential AI tools or training, bridging the digital divide. 

For individuals in disrupted job roles, support their reskilling by providing additional SkillsFuture credits and targeted training for industries most affected by AI will help workers in transitioning to new roles and maintaining their relevance in the evolving job market. For effective tracking and credentialing AI competencies, a digital AI Skills Passport as a structured framework would enable companies to assess workforce readiness and identify skill gaps, while allowing individuals to showcase their skills and match with job opportunities.” 

• Infrastructure readiness: Ensure sustainable and ready digital infrastructure 

Manik Bhandari, EY Asean Data and Artificial Intelligence Leader, says: 

“To support the intensive demands of AI, we recommend exploring sustainable pathways for data centre capacity expansion, which includes strategic green energy allocations and regional cooperation. This ensures that digital infrastructure growth keeps pace with AI demands in an environmentally responsible manner. Additionally, building sovereign infrastructure for mission-critical AI applications, can help to ensure that AI tools and services are accessible and reliable, independent of foreign control. This is essential for reinforcing Singapore’s neutrality and security in an increasingly bifurcated global AI ecosystem.” 

• Providing targeted support for Singapore's green transition 

The shift towards low-carbon technologies and sustainable energy systems is critical to securing energy resilience, attracting green investments, and maintaining Singapore’s competitiveness as a global hub. We propose the following: 

• Targeted incentives to support first-of-a-kind green technologies  

Sanjeev Gupta, EY-Parthenon Asean and Singapore Energy Leader, says: 

“The green technologies can include small modular reactors or next-generation nuclear technologies to offer scalable, low-carbon baseload power; early-stage carbon capture, utilisation and storage projects and infrastructure; as well as alternative fuels such as bioenergy and green ammonia, which are critical for decarbonising aviation, shipping and heavy industries. We propose measures to incentivise R&D and pilot deployment in next-generation nuclear technologies; tax deduction or grants for early-stage carbon capture, utilisation and storage projects; as well as funding demonstration projects and demand-side incentives for bioenergy and green ammonia. These proposed targeted incentives will help to enhance operational efficiency, reduce carbon intensity and strengthen Singapore’s position as a smart energy hub.” 

• Promote sustainable supply chains and circular economy 

Supply chain emissions, which is a scope 3 emission, often dwarfs a company’s direct emissions, and disruptions can have cascading effects. However, suppliers may lack incentives or resources to invest in sustainability, and buyers may not have visibility into upstream impacts.   

Praveen Tekchandani, EY Asean Coleader and Singapore Leader, Climate Change and Sustainability Services and Partner, Ernst & Young LLP says: 

“Initiatives such as grants or tax incentives for sustainable procurement and circular economy initiatives; digital platforms for supply chain transparency and emissions tracking; and innovation funding for circular business models and technologies would be helpful. As well, it would be good to put together the minimum sustainability standards for key sectors, and industry clusters and associations should also look to pool resources and share best practices. These initiatives can help companies build resilient supply chains, reduce costs, while allowing them to enhance brand value and regulatory compliance.” 

Maintaining a relevant Singapore tax system 

Enhancing BEPS-compliant Qualified Refundable Tax Credit (QRTC) 

The introduction of the Refundable Investment Credit (RIC) in 2024 aligned Singapore’s tax incentive landscape with the OECD’s BEPS 2.0 Pillar Two framework. A form of QRTC, the RIC offers a globally compliant mechanism to attract high-value economic activities. To reinforce Singapore’s position as a competitive, innovation-driven economy, we propose the following refinements:  

• Expand support beyond capex-intensive and R&D driven businesses 

Singapore’s existing cash grant schemes are designed to support capital-intensive or innovation-led companies, particularly those undertaking substantial R&D activities. Businesses such as service-oriented and sustainability-focused companies that also contribute significantly to Singapore’s economy are inadvertently excluded.  

Johanes Candra, Partner, Business Incentives Advisory, Ernst & Young Solutions LLP says: 

“We recommend expanding the QRTC framework to support a broader range of business models. By doing so, Singapore can ensure that high-value economic activities beyond traditional R&D and capital expenditure are recognised and incentivised.”  

• Adopt a holistic evaluation methodology for QRTC quantum 

Currently, the QRTC quantum relies on traditional metrics such as capital expenditure, local business spending and headcount. However, these indicators do not fully capture the business substance or the diverse ways that companies contribute to Singapore’s economy. 

Tracy Tham, Partner, Business Incentives Advisory, Ernst & Young Solutions LLP says: 

“We recommend a more holistic and flexible evaluation methodology that considers additional parameters such as cost of goods sold, product or shipping volume (for logistics players), as well as level of profits and value of intellectual property brought into Singapore. These metrics better reflect the economic spin-offs generated by companies and allow for a more accurate assessment of their contributions. The evaluation criteria should be guided by the nature of each company’s business activities to ensure the awarded credit is commensurate with the scale and substance of its operations in Singapore.”   

Increasing the expenditure cap under Section 14N 

Section 14N of the Income Tax Act provides a tax deduction for qualifying renovation or refurbishment (R&R) expenses incurred on business premises. Currently, the scheme allows businesses to claim a deduction of up to S$300,000 over a fixed three-year period, or elect to claim the full amount in a single Year of Assessment (YA) from YA 2025 onwards.  

Chai Wai Fook, Partner, Tax Services, Ernst & Young Solutions LLP, says: 

“While this scheme has been enhanced in recent years to offer greater flexibility, the expenditure cap has remained unchanged at S$300,000 since YA 2013. Since then, the business landscape has evolved significantly, and the cap has not kept pace with rising costs and transformation needs. We recommend increasing the expenditure cap to S$500,000 per three-year period, as construction and renovation costs have increased substantially since the last revision and the current cap no longer reflects the realistic cost of R&R projects. Further, with increasing commercial rental rates, businesses may need to relocate more frequently to manage costs. Each move requires fresh R&R investment to make the new space functional and meet operational needs, branding, and customer experience standards. A higher cap will provide businesses with greater flexibility and financial support to adapt to changing market conditions.” 

Enhancing the existing merger and acquisition (M&A) scheme for more flexibility 

The M&A scheme encourages Singapore companies to grow and expand through strategic acquisitions. For Singapore-headquartered groups, especially locally listed group, it is common that the ultimate parent entity (i.e. the listed company) does not conduct active trade or business to protect the ultimate parent entity from possible trade disputes or lawsuits.  

Sandie Wun, Partner, International Tax and Transaction Services, Ernst & Young Solutions LLP, says: 

“For such groups expanding their footprints overseas, they usually carry out the acquisition of a foreign target via a newly incorporated Singapore entity directly owned by the ultimate parent entity, for risk management and other commercial reasons. Such entity currently does not satisfy the conditions for M&A allowance due to the requirement that, among others, the acquiring company (i.e. ultimate parent entity) must carry on a trade or business in Singapore on the date of share acquisition. In addition, the group may not want the main operating subsidiary as the acquiring vehicle for overseas investments for risk segregation purposes. As a result, many of the acquisitions cannot meet the required conditions under the M&A scheme. We hence suggest relaxing the above condition such that so long as the acquiring company has at least one wholly owned subsidiary which conducts trade or business in Singapore, the ‘trade or business’ requirement would be considered met.” 

Introducing an international expansion tax credit (IETC) 

To complement the existing Double Tax Deduction for Internationalisation scheme (DTDi), we propose introducing an IETC, a refundable tax credit of 20-30% on qualifying overseas market entry costs such as market research and feasibility studies, overseas marketing and branding, business development and partnership formation, and regulatory compliance and localisation efforts. 

Chai Wai Fook, Partner, Tax Services, Ernst & Young Solutions LLP, says: 

“While DTDi supports established firms through enhanced tax deductions, it may offer limited benefit to startups and SMEs that have little or no taxable income. The IETC addresses this gap by providing direct cash support, improving cash flow and enabling earlier and more confident international expansion. By reducing upfront costs and supporting firms at earlier stages of growth, the IETC empowers more Singapore-based companies to scale abroad, enhancing national economic resilience and global influence. Together, DTDi and IETC form a complementary, inclusive framework that supports internationalisation across all stages of business growth.” 

Sector focus: Maritime 

To strengthen Singapore's position as a premier international maritime centre, the Maritime Sector Incentive (MSI) scheme must adapt to the evolving international tax landscape, particularly the OECD's Pillar Two GloBE Rules, as well as the modern financing practices of the industry. By proactively aligning the MSI with global tax changes and modern financing structures, Singapore can ensure its tax policies remain competitive and supportive of the maritime and crewing industries.  

• Align the MSI with Pillar Two for ancillary income 

To reduce compliance complexity and enhance certainty for shipping multinational enterprises, it is important to clarify how the MSI interacts with the OECD’s Pillar Two rules, particularly in the treatment of ancillary income such as interest income.  

Cedric Tan, Partner, Tax Services, Ernst & Young Solutions LLP, says: 

“By explicitly aligning the MSI regime with Pillar Two exclusions, especially for Qualified Ancillary International Shipping Income, companies can be assured that interest income derived from international shipping activities is exempted under the MSI where appropriate. This helps prevent unintended top-up tax liabilities and eases regulatory burdens for shipping groups. As well, introducing a de minimis rule for interest income under the MSI would allow incidental interest income to be covered under the incentive, reflecting practical business realities, reduces administrative overhead, and reinforces the competitiveness of the MSI regime.” 

Sector focus: Financial services 

Singapore's standing as a leading financial hub is supported by a clear and competitive tax framework. Withholding tax (WHT) exemptions, set to expire on 31 December 2026, are fundamental to the stability and growth of key financial sectors.  

• Secure long-term certainty for banking and capital markets 

Stephen Bruce, Partner, Financial Services Tax, Ernst & Young Solutions LLP, says: 

“To support the competitiveness of Singapore’s banking and capital markets sector, we recommend that the 31 December 2026 sunset date for the WHT exemption under Section 12(6) for payments made by specified entities to non-residents be removed. This provides long-term certainty for specified entities on their WHT positions, particularly concerning loans and other arrangements giving rise to indebtedness, thereby reinforcing Singapore's competitive edge in attracting and retaining financial activity.”  

Sector focus: Manufacturing 

Manufacturing is a cornerstone of Singapore's economy, contributing significantly to GDP, employment and high-value exports. To ensure Singapore's manufacturing sector continues to thrive as a leader in advanced production, the following recommendations are proposed:  

• Link higher benefits to local technology diffusion 

Andre Toh, EY-Parthenon Asean Valuation, Modeling & Economics Leader, says: 

“By linking higher incentive benefits to commitments for technology diffusion across local supply chains, Singapore can foster a stronger local ecosystem. This will create valuable spillovers to local enterprises and upskill the local talent pool, raising the overall technological capability of Singapore's manufacturing ecosystem and strengthening its supply chain.”  

Empowering workers and families 

Enhance support for hiring and reskilling senior workers 

While senior workers bring with them a wealth of experience, institutional knowledge, and resilience, many seniors face challenges in securing or retaining employment due to outdated skills, health considerations, or the lack of flexible work arrangements. At the same time, businesses navigating digital transformation, AI adoption, and sustainability transitions require adaptable and skilled talent across all age groups. 

Goh Jia Yong, Partner, People Consulting, Ernst & Young Advisory Pte. Ltd., says: 

“To bridge this gap, we recommend providing enhanced support to employers to hire, reskill and retain senior workers. The support can include further extension of existing schemes like the Senior Employment Credit to encourage sustained employment of senior workers; introduction of a Senior Workforce Reskilling Grant to subsidise training costs for older workers transitioning into new roles, especially in digital, AI and green economy sectors, as well as higher subsidies for courses under SkillsFuture or TechSkills Accelerator tailored for seniors. Lastly, launching a Job Fractionalisation Incentive Scheme to help companies redesign full-time roles into part-time, flexible or shared roles suitable for seniors would be helpful too.” 

Update relief conditions for evolving demographics and caregiving needs 

Singapore’s demographic landscape is changing rapidly. Many families now care for both younger and older dependents, highlighting the need for a more inclusive and responsive tax relief framework. 

Kerrie Chang, Partner, People Advisory Services Tax, Ernst & Young Solutions LLP, says: 

“To reflect these realities, caregiving-related reliefs should be expanded beyond the current scope. For example, the Parent Relief could be extended to include caregiving for extended elderly family members such as grand-aunts, grand-uncles. This would acknowledge the broader caregiving responsibilities many Singaporeans shoulder. On the topic of additional support for parents, we propose revisiting the treatment of National Service (NS) allowances and internship stipends in relation to relief eligibility. Currently, these allowances may disqualify parents from claiming relief due to the $8,000 annual income threshold. We recommend excluding NS allowances and internship stipends from this calculation, as they do not reflect sustained financial independence. This change would ensure families are not inadvertently excluded from support due to temporary earnings by their dependents.” 

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