Tax measures for the financial sector

Tax incentives for Project and Infrastructure Finance

Over the years, the Government has introduced several tax incentives as part of its strategy to develop the country as a leading debt capital market and support infrastructure development and financing needs in Asia.

The tax incentives for project and infrastructure finance include:

• exemption of qualifying income from Qualifying Project Debt Securities (QPDS); and
• exemption of qualifying foreign-sourced income from qualifying offshore infrastructure projects / assets received by approved entities listed on the Singapore Exchange (SGX).

The QPDS scheme will be allowed to lapse after 31 December 2025. Investors in QPDS issued on or before 31 December 2025 will continue to enjoy the tax benefits for the remaining life of the securities. Going forward, investors can continue to make use of tax incentives for debt securities such as the Qualifying Debt Securities (QDS) scheme. We welcome the move to streamline the incentive schemes as the QPDS provides benefits that are similar to existing QDS scheme.

To continue supporting Singapore-based infrastructure project sponsors that leverage Singapore’s financial ecosystem to invest in and finance overseas infrastructure projects, the tax exemption for qualifying foreign-sourced income will be extended to 31 December 2030.

From an infrastructure financing perspective, given that funds are typically set up in Singapore to invest in regional infrastructure projects, the tax incentive for foreign-sourced dividends or other distributions will strengthen Singapore’s role as the regional infrastructure financing hub.

Refine the Financial Sector Incentive Scheme

The Financial Sector Incentive (FSI) scheme is aimed at enhancing financial intermediation and deepening capabilities in key financial services and banking activities in Singapore.

With effect from 19 February 2025, an additional concessionary tax rate of 15% will be introduced for the FSI-Standard Tier (FSI-ST), FSI-Trustee Company (FSI-TC) and FSI-Headquarter Services (FSI-HQ) schemes. The current concessionary rates are 13.5% for FSI-ST and FSI-TC schemes, and 10% for FSI-HQ scheme.

As in the case of the change to the incentive sub-schemes under the Insurance Business Development scheme, having a 15% CTR tier may offer FSI entities another option to manage their tax burdens while minimising potential top-up tax under the Multinational Enterprise (Minimum Tax) Act 2024. 

In addition, the introduction of additional concessionary tax rate tiers for certain corporate tax incentives last year was accompanied by reduced economic commitments and hence, we are optimistic that the same should apply to the changes to these FSI schemes.

Further details on the implementation of the new 15% tier will be released by the Monetary Authority of Singapore by the second quarter of 2025.

Extend and enhance the tax concessions for Singapore-listed real estate investment trusts (S-REITs) and S-REIT Exchange Traded Funds

S-REITs on the Singapore Exchange (SGX) have a combined market capitalisation of approximately $92 billion, representing approximately 11% of Singapore’s listed equities market as at the fourth quarter of 2024¹. Singapore’s market leading position is attained with a set of carefully calibrated tax measures that provide tax neutrality to S-REITs and their investors. The proposed extension and enhancements of these tax measures for S-REITs and S-REIT Exchange Traded Funds (S-REIT ETFs) (as set out below) will provide continued certainty to the market and support Singapore’s position as the preferred listing location for REITs in the Asia Pacific. The Inland Revenue Authority of Singapore will provide further details by the second quarter of 2025.

Existing measures – S-REIT/ S-REIT ETF

Depending on the investment strategy of the S-REIT and its sponsor, S-REITs broadly may enjoy the following tax concessions:

1. Trustees of S-REITs are accorded tax transparency treatment on specified income. Amongst others, specified income includes rental income or income from the management or holding (or ancillary to the management or holding) of immovable property, subject to meeting other relevant qualifying conditions (Tax Transparency Treatment).
2. S-REITs enjoy income tax exemption on certain prescribed foreign-sourced income received in Singapore by S-REITs and their wholly-owned sub-trusts/companies under section 13(12) of the Income Tax Act 1947, subject to meeting other relevant qualifying conditions (FSIE-REIT Exemption).

Additionally, trustees of S-REIT ETFs enjoy tax transparency treatment on distributions from S-REITs paid out of the latter’s specified income (S-REIT ETFs Tax Transparency Treatment).

Existing measures – Investors

Investors currently enjoy the following concessions:

1. Qualifying non-resident, non-individual investors and qualifying non-resident funds enjoy a final withholding tax (WHT) of 10% on distributions from both S-REITS and S-REIT ETFs (10% WHT Concession).
2. Individual investors who do not invest through a partnership in Singapore or carry on a trade or business in Singapore are exempt from tax on S-REIT distributions.

Extension and refinement of existing tax concessions for S-REITs / S-REIT ETFs and their investors

As a widely expected measure to ensure tax certainty for market participants, Budget 2025 has proposed that the FSIE-REIT Exemption and the 10% WHT Concession be extended to 31 December 2030. In addition, the sunset date of 31 December 2025 for the S-REIT ETFs Tax Transparency Treatment will be removed.

Enhancements to the list of specified income qualifying for tax transparent treatment

Under the Tax Transparency Treatment for S-REITS, any non-specified income of S-REITs is excluded and would be subject to tax at 17% in the hands of the trustee. With effect from 1 July 2025, the list of specified income will be expanded to include all co-location and co-working income.

Facing a higher interest rate environment, the expansion should allow S-REITs to expand their investment strategy beyond traditional asset classes (e.g. commercial properties). This move also aligns with consumers’ and businesses’ changing preferences on the usage of real properties resulting in increased demand for co-location and co-working assets.

Enhancements to FSIE-REIT Exemption

With effect from 19 February 2025, qualifying foreign-sourced income will include rental and ancillary income received in Singapore for S-REITs enjoying the FSIE-REIT Exemption, subject to qualifying conditions. The proposals will be welcomed by all S-REITs which have been deploying increasing amount of capital outside of Singapore as they seek to simplify the application of the tax exemption scheme and reduce compliance burden.

In addition, with effect from 19 February 2025, the following refinements are proposed to the FSIE-REIT Exemption to provide S-REITs flexibility in managing their operations:

1. The requirement for wholly-owned companies of the REIT to be incorporated in Singapore will be removed. However, the wholly-owned companies would still need to qualify as tax resident in Singapore.
2. The repayment of shareholder loans and return of capital will now be recognised as qualifying modes of remittance for wholly-owned Singapore sub-trusts and wholly-owned Singapore tax resident companies to pass remitted foreign income to S-REITs.
3. Singapore sub-trusts will be allowed to deduct other operational expenses against their income before passing the remaining amounts to S-REITs.

_{¹ SGX Chartbook: SREITs & Property Trusts 4Q 2024 - https://api2.sgx.com/sites/default/files/2025-01/SGX%20Research%20-%20SREIT%20%26%20Property%20Trusts%20Chartbook%20-%20Q4_2.pdf, accessed on 18 February 2025}

Extend the GST remission for S-REITS and Singapore-listed RBTs

The existing Goods and Services Tax (GST) remission for S-REITs and Singapore-listed Registered Business Trusts (S-RBTs) in the infrastructure business, ship leasing and aircraft leasing sectors allows S-REITs, S-RBTs and their special purpose vehicles (SPV) to claim GST on their listing and business expenses even if they are not eligible for GST registration. The GST remission was set to expire on 31 December 2025.

It was announced in Budget 2025 that the above GST remission will be extended to 31 December 2030. The extension should be well received by business especially in light of the recent GST rate increase to 9%. The extension is also aligned with other tax measures to promote Singapore as a preferred destination for the listing of S-REITs and S-RBTs.

We believe that there is scope for the GST remission to be expanded to provide relief for the irrecoverable GST costs suffered by SPVs which are set up to raise and on-lend the funds to the S-REITs or S-RBTs. This is because the provision of loans by the financing SPVs are regarded as exempt supplies which do not fall within the ambit of regulation 33 of the GST (General) Regulations. As a result, the financing SPVs will not be able to claim the GST on their expenses in full and will be subject to the reverse charge rules despite the existing GST remission.

Interestingly, we note that the GST remission enjoyed by S-REITs is not available to listed property business trusts even though the business of such a property business trust is very similar to that of an S-REIT. It remains to be seen if the GST remission will be extended to cover listed property business trusts in the future.

Insurance Business Development scheme

The Insurance Business Development (IBD) scheme was introduced in 2015 to strengthen Singapore's position as a leading insurance and reinsurance centre in Asia. Approved insurers and insurance brokers are granted a 10% concessionary tax rate (CTR) on qualifying income under the IBD, IBD-Insurance Broking Business (IBD-IBB) and IBD-Captive Insurance (IBD-CI) schemes.

The sunset date for the IBD and IBD-CI schemes, originally set for 31 December 2025, will now be extended to 31 December 2030. This extension gives insurers more time to benefit from these schemes and continue using Singapore as a hub for their Asian operations.

Effective from 19 February 2025, a new CTR tier of 15% will be introduced for the IBD, IBD-CI and IBD-IBB schemes. This change aligns with other corporate tax incentives such as the Development and Expansion Incentive and Global Trader Programme that have also introduced a 15% CTR tier. As with those incentives, having a 15% CTR tier may offer businesses an avenue to manage their tax burdens while minimising potential top-up tax under the Multinational Enterprise (Minimum Tax) Act 2024, especially where the 15% CTR tier comes with reduced economic commitments.

More details will be provided by the Monetary Authority of Singapore (MAS) by the second quarter of 2025.

While the proposed changes to the IBD scheme are positive, further changes could be made in the areas of aligning qualifying underwriting income with the business classifications used in the MAS statutory returns to reduce the administrative workload for approved insurers. The scope of qualifying investment income could also be expanded to cater to today’s fast-changing environment where insurers are increasingly utilising sophisticated financial instruments and holding hybrid investment portfolios.