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THE Singapore government will introduce a 50 per cent corporate income tax rebate in the year of assessment 2025, said Finance Minister Lawrence Wong in his Budget speech on Tuesday (Feb 18).

This will provide support for companies’ cash flow needs as they continue to adjust to structurally higher costs, said Wong, who is also the prime minister.

All active companies that employed at least one local employee last year will get a minimum benefit of S$2,000. The total benefit for each company is capped at S$40,000.

Here are some reactions from analysts and observers on the latest announcement:

Lennon Lee, tax leader at PwC Singapore

• While the 50 per cent corporate income tax rebate applies only when a Singapore enterprise has chargeable income and payable tax, the S$2,000 cash grant is given to all eligible enterprises, regardless whether they are taxpaying.

• We believe that the rebate is granted to enterprises to share the economic growth of Singapore and help to defray costs.

• It is relative whether the rebate in itself is sufficient for an enterprise to deal with rising costs and inflation.

• That said, the corporate income tax rebate, together with a number of the budgetary changes and enhancements to the Progressive Wage Credits for small and medium enterprises (SMEs), collectively should help with tackling the rising costs and inflation.

Tan Tay Lek, tax partner at PwC Singapore

• Companies should make the most of the corporate income tax rebate to further invest in enhancing their competitiveness.

• They can do so by tapping the new Enterprise Compute Initiative, for instance, which will see up to S$150 million being set aside to enable eligible enterprises to partner major cloud service providers as well as access artificial intelligence tools and computing power.

Lim Kexin, partner specialising in tax and entrepreneurial and private business at PwC Singapore

• The extension of the 50 per cent corporate income tax rebate and a minimum cash payout for businesses which employ Singaporeans acknowledge the diverse challenges faced by companies, given the uncertain environment. They could all benefit from the short-term support. 

• This will be especially welcomed by Singapore SMEs pressured by rising business costs as they pivot towards mid-term productivity measures and new opportunities.

Ajay Kumar Sanganeria, partner and head of tax at KPMG in Singapore

• The corporate income tax rebate of 50 per cent (capped at S$40,000) for the year of assessment 2025 mirrors the initiative introduced in last year’s Budget for the year of assessment 2024.

• Under this scheme, companies with taxable profits nearing S$500,000 will maximise the benefit of the full 50 per cent rebate.

• This measure is set to provide significant relief to a large segment of businesses across Singapore, helping them manage operational costs and reinvest in growth amid inflationary pressures and rising expenses.

Ang Yuit, president of the Association of Small and Medium Enterprises 

• Overall, this helps the really micro-sized businesses more. And if you’re a profitable business, getting up to S$40,000 in cash back will defray your costs quite a bit.

• Now, the question is, for companies that hire at least three to five people and they made some losses last year, the S$2,000 in rebates alone would not really help them.

David Sandison, head of tax at Grant Thornton Singapore

• As always, income tax rebates are welcome for companies that are profitable and taxpaying. They are not so useful for companies that may be loss-making with cash flow difficulties.

• Interestingly, the regularity of such rebates has caught the eye of other tax jurisdictions as being a permanent fixture of Singapore’s tax structure, prompting the view that it is a “low-taxed” jurisdiction. We need to keep an eye on this.

• To put the rebate in context, a company would have to be earning taxable income of S$573,000 to “max out” on the S$40,000 rebate cap, after taking into account existing partial exemptions.

• And just to showcase the reasonableness of Singapore’s tax rates overall, to hit an effective rate of 15 per cent, a company can earn up to S$2.8 million in 2024.