What to review for YA 2026 corporate tax filing

A timely review can help companies identify deductions, support exemptions and manage withholding tax risk before filing.

As companies prepare their Year of Assessment (YA) 2026 corporate income tax filings, an early review of key tax positions can help identify deduction opportunities, preserve available tax exemptions and manage withholding tax risks. It also helps ensure that supporting documents are in place before questions arise during an Inland Revenue Authority of Singapore (IRAS) review. 

This article highlights three areas that companies should review before filing their YA 2026 corporate income tax returns. 

1. Share-based compensation: new tax deduction opportunities from YA 2026 

Employee equity-based remuneration (EEBR) schemes remain an important tool for attracting and retaining talent. Historically, no tax deduction was available where employees were remunerated through the issuance of new shares. 

From YA 2026, Singapore has enhanced the tax deduction framework for EEBR schemes. Under the revised rules, a Singapore company may be eligible to claim a tax deduction for payments made to a holding company or special purpose vehicle in connection with the issuance of new shares by a holding company to Singapore employees under such schemes. 

The deduction may apply to qualifying share awards or share options that vest on or after YA 2026. This includes awards or options for which the related accounting expense was recognised in earlier financial years. 

Companies should revisit share-based compensation arrangements that were previously regarded as non-deductible and assess whether the conditions under the enhanced framework can be met. They should also maintain appropriate documents to support any deduction claimed. 

2. Foreign-sourced dividends: do not assume tax exemption applies 

The exemption for foreign-sourced dividends under section 13(8) of the Income Tax Act 1947, known as the S13(8) exemption, is commonly claimed by Singapore companies. However, companies should not assume that the exemption applies simply because similar dividends qualified in prior years. 

As group structures and business operations evolve, companies should reassess whether the conditions for the S13(8) exemption continue to be met and whether sufficient supporting documents are available. In practice, companies may focus on the dividend receipt without fully considering the underlying conditions for the exemption. 

One common pitfall arises where dividends are received from a foreign holding company that owns operating subsidiaries in the same jurisdiction. This risk is particularly relevant where dividend income received by the foreign holding company is exempt from tax and no withholding tax applies on dividends paid by the foreign holding company. 

Companies may incorrectly rely on the consolidated financial statements of the foreign holding company, which reflect taxes paid by the operating subsidiaries, to conclude that the “subject to tax” condition under the S13(8) exemption is satisfied. However, the dividend income received by the foreign holding company and subsequently distributed may not itself have been subject to tax. A separate analysis at the level of the foreign holding company is often required. 

An exemption claimed in prior years also does not guarantee that future dividends will qualify. Changes in the group’s holding structure, business activities or foreign tax laws may affect the analysis and should be reviewed periodically. 

Where the S13(8) exemption is unavailable, companies should consider whether the dividend may instead qualify for exemption under section 13(12) of the Income Tax Act 1947, known as the S13(12) exemption. As a section 13(12) claim requires a prescribed declaration form to be submitted with the income tax return, the analysis should be performed early. Failing to identify the need for a section 13(12) claim in good time may result in the exemption being unavailable and the foreign-sourced dividend being taxable in Singapore. 

3. Withholding tax obligations: common pitfalls remain 

Withholding tax remains a key focus area in tax audits. Companies often face challenges in determining whether withholding tax applies and, where it does, whether the correct rate and treatment have been adopted. We highlight below two common pitfalls.  

A. Disclosure in the income tax return 

Companies are required to disclose in their income tax returns whether any amount paid or payable to non-residents is subject to Singapore withholding tax and, if so, whether the requirement to withhold tax on the payments has been complied with. The IRAS will cross-check this disclosure with its records and raise queries on any discrepancies noted. For example, a company may not have made any withholding tax filings but disclosed that it had complied with the withholding tax requirements in its income tax return. In this case, the IRAS will raise queries, as it does not have any records of the withholding tax filings. As such, companies should exercise care in ensuring that the disclosure made in the income tax return is in order. 

B. Reimbursements of accommodation, meals and transport expenses

Where accommodation, meals and transport expenses incurred by a non-Singapore tax resident service provider are recharged to a Singapore payer, the withholding tax implications should be assessed based on the overall contractual arrangement and the nature of the underlying payment. 

Before 1 November 2022, the IRAS granted an administrative concession under which such reimbursements were not subject to withholding tax. The concession was withdrawn with effect from 1 November 2022. As a result, these reimbursements may now be subject to withholding tax where the underlying payment falls within the scope of the withholding tax rules. 

Withholding tax at 17% on payments made to the non-Singapore tax resident service provider is generally not a final tax, as the non-resident service provider may file a Singapore income tax return and claim qualifying deductions. Even so, companies should not assume that reimbursements are automatically excluded from withholding tax. Following the withdrawal of the concession, they should assess whether the amounts form part of the consideration for services rendered in Singapore and retain documents to support the withholding tax treatment adopted. 

Conclusion 

As the IRAS continues to focus on tax governance and compliance, companies should take note of evolving tax rules and assess whether their tax positions are adequately supported. A proactive review before filing the YA 2026 tax return can help identify risk areas early, reduce the likelihood of queries or adjustments, and protect available tax positions. 

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The co-authors of this article are Wen Zheng Tay, Partner, Tax Services, Ernst & Young Solutions LLP, and Eevie Hoh, Manager, Tax Services, EY Corporate Advisors Pte. Ltd.