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Changes in Corporate Tax...

Changes in Corporate Tax & Personal Income Tax for YA 2025

February 25, 2025vodichuser

Welcome to our latest edition of Tax Insights, where we provide key updates on Singapore’s tax landscape for YA 2025. Stay informed on tax reliefs, corporate tax adjustments, and new incentive schemes that could impact your financial planning.

Working Mother’s Child Relief (WMCR)

Starting from the Year of Assessment 2025, the WMCR will shift from being a percentage of an eligible working mother’s annual earned income to a fixed dollar amount as a tax relief.

Comparison of WMCR Before and After YA 2025

	For Year of Assessment 2024	With effect from Year of Assessment 2025
Child Order	Qualifying Singaporean child born/adopted before 1 Jan 2024 Working Mother’s Child Relief amount	Qualifying Singaporean child born/adopted on or after 1 Jan 2024 Working Mother’s Child Relief amount
1st Child	15%	$8,000
2nd Child	20%	$10,000
3rd & Beyond	25%	$12,000

Key Takeaway:

This change ensures simpler tax calculations while maintaining significant support for working mothers raising children.

Renovation & Refurbishment (R&R) Expenditure

As announced in Budget 2024, effective from YA 2025, designer fees or professional fees that are not related to structural works requiring approval from the Commissioner of Building Control will be considered qualifying R&R (renovation and refurbishment) expenditures Additionally, companies will have the option to claim a 1-year write-off for R&R expenditures incurred from the basis period of YA 2025 onwards, subject to the prevailing expenditure cap within the fixed 3-year period. Once the 1-year write-off option is chosen, it is irrevocable.

To simplify compliance for businesses, the relevant three-year period for claiming R&R expenditure will be standardized for all businesses, with the first fixed period running from YA 2025 to YA 2027 (refer to the table below). This will replace the current system where the three-year period depends on when the business first incurred R&R expenditure and made a claim under Section 14N.

Fixed 3-Year Periods & Expenditure Cap

Fixed Period	Expenditure Cap
YA 2025 – YA 2027	$300,000
YA 2028 – YA 2030	$300,000
YA 2031 – YA 2033	$300,000
YA 2034 to YA 2036; and so on	$300,000

As a transitional measure, if your business’s current 3-year period does not align with the first fixed 3-year period (YA 2025 to YA 2027), your business will still be entitled to the full expenditure cap of $300,000 for that period.

Transitional Relief Example:

	YA 2023	YA2024	YA2025
Total Qualifying R&R Expenditure Incurred	$150,000	$50,000	$200,000
Qualifying R&R Expenditure	$150,000	$50,000	$200,000*

*With the Budget 2024 enhancement, the qualifying R&R expenditure for YA 2025 will not be capped at $100,000 (i.e. $300,000 – $150,000 – $50,000). The business will be allowed a full expenditure cap of $300,000 in the first fixed 3-year period (i.e. YA 2025 to YA 2027). The full $200,000 qualifying R&R expenditure incurred in YA 2025 will be allowed. If the business incurs qualifying R&R expenditure in YA 2026 and/or YA 2027, it will be allowed to claim a R&R deduction of up to $100,000 (i.e. $300,000 – $200,000 claimed in YA 2025).

Businesses that do not operate throughout the entire fixed 3-year period will also be granted the full expenditure cap of $300,000 for each fixed 3-year period.

Example:

A newly incorporated company which commences business in YA 2026 will be allowed an expenditure cap of $300,000 for YA 2026 and YA 2027.

Key Highlights:

Effective YA 2025, designer and professional fees (excluding structural works) will qualify as R&R expenditures.
Businesses can opt for a 1-year write-off for R&R expenditures incurred from YA 2025 onwards (irrevocable once chosen).
A standardized 3-year period applies to all businesses for R&R expenditure claims.

Overseas Humanitarian Assistance Tax Deduction Scheme (OHAS)

The Overseas Humanitarian Assistance Tax Deduction Scheme is a pilot initiative introduced in Budget 2024, aimed at encouraging Singaporeans to provide support for overseas humanitarian needs.

Under this scheme, both corporate and individual donors can claim a 100% tax deduction on qualifying cash donations made to approved overseas emergency humanitarian causes. These donations must be channelled through designated charities that hold a valid Fund-Raising for Foreign Charitable Purposes permit from the Commissioner of Charities, for the period between 1 January 2025 and 31 December 2028.

Key details of the scheme include:

The tax deduction is limited to 40% of the donor’s statutory income. This limit is shared with the Philanthropy Tax Incentive Scheme (PTIS) for Family Offices.
The Overseas Humanitarian Assistance Tax Deduction Scheme deductions will be ranked after PTIS deductions but will take priority over the 250% tax deductions for other qualifying donations.
Any unused tax deductions cannot be carried forward or transferred to another company under the Group Relief System.
The list of designated charities will be available starting 1 January 2025.

Maritime Sector Incentive (MSI): Alternative Taxation for Shipping Entities

The Maritime and Port Authority of Singapore (MPA) is introducing an alternative taxation method for qualifying shipping entities under certain sub-schemes of the Maritime Sector Incentive (MSI), starting from the Year of Assessment 2024. Under this method, the qualifying income of these entities will be taxed based on the net tonnage of their ships rather than traditional profit-based taxation.

The sub-schemes affected are:

MSI-Shipping Enterprise (MSI-SRS)
MSI-Approved International Shipping Enterprise (MSI-AIS)
MSI-Maritime Leasing (Ship) (MSI-ML(Ship))

This new tonnage-based tax approach aligns Singapore’s regime with international practices in the shipping industry. Entities that do not choose this option will remain under the existing MSI tax framework.

MSI-Shipping Enterprise (Singapore Registry of Ships) (MSI-SRS)

An MSI-SRS entity can benefit from either tax exemption or an alternative taxation method based on the net tonnage of its ships for qualifying shipping income. The options are:

a 10-year renewable period; or
a 5-year non-renewable period, with the option of graduating to the 10-year renewable award at the end of the 5-year period, if qualifying conditions are met.

Applicants with a strong operational track record and a clear business plan for shipping operations in Singapore can apply for the MSI-SRS award. The business plan must demonstrate how the operations will contribute economically to Singapore, including business spending, new activities undertaken in Singapore, and ensuring that strategic or commercial decisions are made locally.

MSI-Approved International Shipping Enterprise (MSI-AIS)

An MSI-AIS entity can benefit from either tax exemption or an alternative taxation method based on the net tonnage of its ships for qualifying shipping income. The options are:

a 10-year renewable period; or
a 5-year non-renewable period, with the option of graduating to the 10-year renewable award at the end of the 5-year period, if qualifying conditions are met.

Applicants with a strong operational track record and a clear business plan for shipping operations in Singapore can apply for the MSI-AIS award. The business plan must demonstrate how the operations will contribute economically to Singapore, including business spending, new activities undertaken in Singapore, and ensuring that strategic or commercial decisions are made locally.

MSI-Maritime Leasing (Ship) (MSI-ML(Ship))

Ship or container leasing entities, including business trusts or partnerships, can benefit from tax concessions for up to 5 years on qualifying leasing income. Ship leasing entities may also opt for a net tonnage-based tax for qualifying income. Additionally, approved managers of asset-owning entities can receive a 10% concessionary tax rate on qualifying management income.

Both operating and finance leases are covered under the MSI-ML award, offering flexibility in ship or container leasing arrangements. Applicants with a good track record and a solid business plan for leasing operations in Singapore can apply for the award, provided they demonstrate economic contributions through local spending, employment, and decision-making. Applications must be made by 31 December 2026.

Final Thoughts

With these tax changes, businesses and individuals should review their tax strategies to optimize benefits. If you need assistance navigating these updates, reach out to your tax advisor today!

Stay tuned for more insights in our next issue of Tax Insights.