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Navigating IRAS Audits: Top 3 Compliance Focal Points for Singapore Businesses

As the tax landscape in Singapore evolves, the Inland Revenue Authority of Singapore (IRAS) has sharpened its risk-based compliance strategy. For finance teams and business leaders, keeping up with standard tax filings is no longer enough—IRAS is digging deeper into line-item details that historically flew under the radar.

Here is a breakdown of the top three focal points IRAS is scrutinizing during tax reviews and audits, along with actionable steps to ensure your company remains compliant.

1. Transfer Pricing (TP): Stricter Enforcement & Exemption Thresholds

Transfer pricing remains IRAS’s highest-priority focus area. IRAS actively cross-checks cross-border and domestic related-party transactions to ensure compliance with the Arm’s Length Principle.

Mandatory Preparation Requirements

Under Section 34F of the Income Tax Act, businesses must prepare contemporaneous Transfer Pricing Documentation (TPD) prior to the tax filing due date if they meet either condition:

  • Gross Revenue: Exceeds S$10 million for the financial year.
  • Previous Obligation: The business was required to prepare TPD for the immediate preceding period.

Note: Completed TPD must be retained for at least 5 years and submitted within 30 days upon request by IRAS.

Exemption Thresholds

Taxpayers are exempt from preparing detailed TPD for specific related-party transactions if the transaction values fall below the prescribed limits:

Category of Transaction Annual Exemption Threshold
Purchase / Sale of Goods S$15,000,000 per category
Service Fees / Royalties / License Fees S$2,000,000 per category
Guarantees S$2,000,000
Related-Party Loans S$15,000,000
Other Transactions (excluding sales/purchases/loans) S$2,000,000

Audit Insight: Even if your transactions fall below the exemption thresholds, IRAS still expects businesses to maintain underlying commercial justification demonstrating arm’s length pricing. Furthermore, IRAS imposes a strict 5% non-deductible surcharge on any TP adjustments made during an audit, regardless of whether additional tax is payable.

2. Unpaid Accruals: The “Accrue and Didn’t Pay” Dilemma

A common area where businesses trigger tax audits is claiming tax deductions on accrued expenses that remain unpaid for extended periods.

The Core Issue

Under Singapore income tax rules, an expense is deductible when it is incurred—meaning an absolute legal liability to pay has arisen. However, IRAS is scrutinizing long-outstanding accruals (e.g., accrued director fees, management fees, or related-party bonuses) that linger on the balance sheet across multiple Years of Assessment (YAs) without actual cash settlement.

What IRAS Looks For:

  • Director’s Fees & Bonuses: Claiming a tax deduction in the year of accrual, but delaying payment for years (or voting/approving the fees after the financial year-end).
  • Contingent or Provision-based Accruals: Accruals that are estimates or conditional rather than definitive legal obligations.
  • Intercompany Service Charges: Expenses accrued to boost deductions locally, while the paying entity continuously defers settlement.

Key Audit Actions:

  • Clawback of Deductions: If IRAS determines an accrual was contingent or had no genuine intention of settlement, the tax deduction will be disallowed and prior YAs reassessed.
  • Reviewing Payment Timelines: Finance teams should regularly perform an Accrual Aging Analysis. If an accrued expense is reversed or written off in a subsequent year, it must be added back to taxable income.

3. Capital & Intercompany Accounts: Non-Income-Generating Assets

IRAS is paying close attention to balances sitting in capital and intercompany accounts—specifically non-income-generating assets such as interest-free or low-interest loans extended to company directors, shareholders, or related companies.

Where companies provide interest-free or below-market financing, IRAS scrutinizes both the accounting vs. tax treatment to ensure tax compliance across two major fronts: Employment Benefits (BIK) and Corporate Interest Expense Disallowance (Interest Adjustment).

A. Loans to Directors: Benefits-in-Kind (BIK) vs. Shareholder Capacity

Under Section 2 of the Singapore Income Tax Act, company directors are defined as employees. When a company extends an interest-free or subsidized loan to a director, the interest savings are treated as an employment perquisite (Benefit-in-Kind) taxable under Section 10(1)(b).

  • Taxable Benefit Calculation: The taxable interest benefit is computed monthly based on the outstanding loan balance at month-end using IRAS’s prescribed rate: from 1 April 2023, 1.5 percentage points above the 3-month compounded Singapore Overnight Rate Average (SORA) published by the Monetary Authority of Singapore on 1 March and 1 September each year. The company must report this value in the director’s annual Form IR8A.
  • The “Shareholder Capacity” Exception: If the loan is granted to an individual strictly in their capacity as a shareholder (and not as a director), the interest benefit is not taxable as employment income. However, IRAS strictly scrutinizes this distinction. To qualify, companies must prove:
    1. It is a genuine loan with documented repayment terms.
    2. Loans were offered to all shareholders in proportion to their shareholding.
    3. Contemporaneous shareholder/board resolutions explicitly approve the advance to them in their shareholder capacity.

B. Interest Adjustments for Non-Income-Generating Assets

Even if an interest-free loan to a director or related company is not taxed as a BIK (e.g., intercompany loans), IRAS targets the lending company’s tax deductions.

  • The Core Rule: Under Section 14(1)(a), interest expense is only tax-deductible if incurred on borrowings used to produce taxable income.
  • Corporate Tax Adjustment: If a company pays interest on bank loans/borrowings while simultaneously funding non-income-producing assets (such as interest-free intercompany receivables or director advances), IRAS requires an Interest Adjustment:
    • Direct Identification Method: If bank borrowings can be directly traced to funding the interest-free loan, the corresponding interest expense is 100% disallowed.
    • Total Asset Method (TAM): If funds are commingled, IRAS applies a mathematical formula to attribute a proportionate amount of bank interest expense to the non-income-producing assets, disallowing that portion in the tax computation.
Scenario Tax Impact Focus Area for IRAS Audit
Interest-Free Loan to Director BIK Taxable on Director Must be declared in IR8A based on SORA + 1.5% benchmark rates.
Interest-Free Loan to Shareholder No BIK Requires proof of genuine shareholder capacity and proportion.
Interest-Free Intercompany Loan Interest Adjustment on Company Disallows company’s bank interest expense (Direct or Total Asset Method).

Manager’s Checklist: How to Stay Audit-Ready

To protect your business from tax adjustments, surcharges, and penalties:

  1. Review Transfer Pricing Annually: Check gross revenue and transaction values against threshold requirements before finalizing your Form C/C-S.
  2. Clear Out Aged Accruals: Review balance sheet accruals prior to tax filing. Ensure accrued director fees are formally approved within the relevant accounting period.
  3. Assess Non-Income-Generating Loans: Identify all interest-free advances to directors or related entities, report BIK in IR8A where applicable, and apply proper interest adjustments in tax computations.
  4. Maintain Complete Audit Trails: Keep supporting invoices, contracts, board resolutions, and TPD for a minimum of 5 years.

Information in this article is correct as at October 2026.

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Changes to Financial Reporting Standards (FRS) Effective 2024–2027: What Singapore Companies Need to Know

Singapore’s Accounting Standards Committee (ASC) has issued a steady flow of new and amended standards since 2024. Some are already in force and others start on 1 January 2027. The ASC has kept FRS and SFRS(I) effective dates in step with the IASB’s dates for the matching IFRS Accounting Standards. This article sets out what has changed, when each change applies and what finance teams of private companies should do now.

At a glance: key changes and effective dates

Standard Change Effective for annual periods beginning on or after Who is affected
FRS 1 / SFRS(I) 1-1 Classification of liabilities as current or non-current; non-current liabilities with covenants 1 January 2024 Companies with borrowings, especially loans with covenants
FRS 116 / SFRS(I) 16 Lease liability in a sale and leaseback 1 January 2024 Seller-lessees in sale and leaseback deals with variable payments
FRS 7 and FRS 107 Disclosures on supplier finance arrangements 1 January 2024 Companies using reverse factoring or supply chain finance
FRS 21 Lack of exchangeability 1 January 2025 Companies with transactions in currencies that cannot readily be exchanged
FRS 109 and FRS 107 Classification and measurement of financial instruments 1 January 2026 Companies settling payments electronically, or holding loans with ESG-linked or similar features
FRS 109 and FRS 107 Contracts referencing nature-dependent electricity 1 January 2026 Buyers of solar or wind power under power purchase agreements
Various Annual Improvements to FRSs, Volume 11 1 January 2026 All FRS reporters (minor clarifications)
FRS 118 / SFRS(I) 18 Presentation and Disclosure in Financial Statements, replacing FRS 1 1 January 2027 All FRS and SFRS(I) reporters
FRS 119 (as amended) Subsidiaries and Small Entities without Public Accountability: Disclosures (optional reduced disclosures) 1 January 2027 Eligible subsidiaries and small private companies
FRS 21 / SFRS(I) 1-21 Translation to a hyperinflationary presentation currency 1 January 2027 Groups with operations in hyperinflationary economies
SFRS for Small Entities (third edition) Revised small-entity framework aligned with the third edition of the IFRS for SMEs 1 January 2027 Companies reporting under SFRS for Small Entities

The changes that matter most for SMEs

1. Loan covenants and current/non-current classification (2024)

A liability is non-current only if, at the reporting date, the company has a right to defer settlement for at least 12 months. Covenants that must be met after year-end do not affect that classification, but the company must disclose information that helps readers judge the risk of the loan becoming repayable early. Review facility agreements every year, because a breach at or before year-end can still move a loan into current liabilities.

2. Supplier finance disclosures (2024)

Companies using supplier finance or reverse factoring must disclose the terms of these arrangements, the amounts involved, the range of payment due dates, and the effect on cash flows and liquidity risk. Banks and investors want visibility of working capital that these arrangements may otherwise obscure.

3. Financial instruments amendments (2026)

The amendments clarify when a financial liability settled through an electronic payment system can be derecognised. They also explain whether loans with contingent features, such as interest rates linked to sustainability targets, still pass the “solely payments of principal and interest” test. New disclosures cover these instruments and equity investments designated at fair value through other comprehensive income. A related amendment helps buyers of renewable electricity under nature-dependent contracts apply own-use and hedge accounting.

4. Optional reduced disclosures under FRS 119 (2027)

This is likely the most useful change for many private companies. In August 2025 the ASC widened FRS 119 so that eligible small entities, not only subsidiaries, can use it. Qualifying companies keep full FRS recognition and measurement but present far fewer disclosures. A small entity qualifies if it has no public accountability, is not a public company or registered charity, and publishes general purpose financial statements. It must also meet at least two of three size tests: revenue of S$10 million or less, total assets of S$10 million or less, and 50 or fewer employees, in each of the two previous consecutive periods. Using FRS 119 is voluntary, and early application is permitted.

5. FRS 118 replaces FRS 1 (2027)

FRS 118 introduces defined subtotals in the profit or loss statement, disclosures for management-defined performance measures, and tighter rules on how information is grouped. Because 2026 comparatives will need to be restated, companies should start planning now. See our separate article on IFRS 18 for more detail.

Other developments to note

  • In August 2025 the ASC issued the third edition of the SFRS for Small Entities, effective 1 January 2027. It follows the IASB’s third edition of the IFRS for SMEs, with revised sections on revenue, financial instruments, fair value measurement, consolidation and business combinations.
  • In August 2026 the ASC issued amendments to FRS 28 on the fair value option for investments in associates and joint ventures. Check the effective date on the ASC website before applying them.
  • The ASC withdrew Practice Statement 1 (Management Commentary) from the FRS framework with effect from 24 June 2025.

What to do now

  • Review loan agreements and covenant tests, and make sure classification and disclosures in your 2025 and 2026 financial statements are complete.
  • List any supplier finance, reverse factoring or electronic payment arrangements, and collect the data needed for disclosure.
  • Check whether any loans or receivables have ESG-linked or other contingent features, and reassess their classification.
  • Test whether your company meets the FRS 119 criteria for the two periods before 2027, and decide whether to adopt reduced disclosures, including early adoption.
  • If you report under SFRS for Small Entities, assess the effect of the third edition, particularly on revenue recognition.
  • Plan the move to FRS 118: map your chart of accounts to the new categories and prepare restated 2026 comparatives.
  • Update accounting policies, financial statement templates and board reporting timelines.

How we can help

Every company’s circumstances are different. If you would like to discuss how these changes affect your financial statements and your next audit, please contact K.S. NG & Co at enquiries@ksng.com.sg.

Information in this article is correct as at October 2026.

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Foreign Workforce Policy Changes 2023–2026: Levies, Quotas and Pass Criteria

Since 2023, the Ministry of Manpower (MOM) has tightened the requirements for hiring foreign professionals and mid-skilled staff, while making the Work Permit scheme more flexible. Employers should note the higher qualifying salaries, the single S Pass levy rate, a higher Local Qualifying Salary and new Work Permit rules. The Committee of Supply (COS) 2026 announcements add another round of changes from 2027. Below is a summary of what has changed and what is still to come.

Employment Pass (EP)

Qualifying salary

The EP minimum salary was raised from $5,000 to $5,600 a month, and for the financial services sector from $5,500 to $6,200. The new levels applied to new applications from 1 January 2025 and to renewals from 1 January 2026. The minimum rises with the candidate’s age, reaching $10,700 ($11,800 in financial services) for candidates aged 45 and above.

COS 2026 announced the next increase. From 1 January 2027 for new applications, and 1 January 2028 for renewals, the minimum becomes $6,000 ($6,600 in financial services). For candidates aged 45 and above it becomes $11,500 ($12,700 in financial services).

COMPASS

The Complementarity Assessment Framework (COMPASS) took effect for new EP applications from September 2023 and for renewals from September 2024. Candidates must first meet the qualifying salary, then score 40 points across four criteria: salary against local PMET pay in the sector, qualifications, nationality diversity within the firm, and the firm’s support for local employment. Each criterion is worth up to 20 points. Bonus points are available for roles on the Shortage Occupation List and for firms in strategic economic programmes. Candidates earning a fixed monthly salary of at least $22,500, overseas intra-corporate transferees, and those filling a role for one month or less are exempt.

COS 2026 also announced a new ONE Pass (AI and Tech) track, starting in January 2027 and replacing the Tech.Pass.

S Pass

Qualifying salary

The S Pass minimum salary has gone up in steps:

  • $3,150 ($3,650 in financial services) for new applications from 1 September 2023;
  • $3,300 ($3,800 in financial services) for new applications from 1 September 2025 and renewals from 1 September 2026;
  • $3,600 ($4,000 in financial services) for new applications from 1 January 2027 and renewals from 1 January 2028.

The current amount for candidates aged 45 and above is $4,800 ($5,650 in financial services). MOM expects the minimum to reach about $4,000 to $4,500 by around 2030.

Levy

The Tier 1 S Pass levy went up from $450 to $550 on 1 September 2023, and then to $650 on 1 September 2025. As the Tier 2 levy was already $650, all S Pass holders are now charged $650 a month in every sector.

Quotas: dependency ratio ceilings

The dependency ratio ceiling (DRC) is the maximum share of a firm’s total workforce that can be foreign. The sub-DRC is a separate limit on S Pass holders within that ceiling. Current limits by sector:

Sector DRC S Pass sub-DRC
Services 35% 10%
Manufacturing 60% 15%
Construction and Process 83.3% 15%
Marine Shipyard 75% (from 77.8% on 1 January 2026) 15%

Within these limits, Work Permit holders from Non-Traditional Sources (NTS) are capped at 8% of the workforce.

Work Permit

  • Maximum period of employment removed: the previous cap of 14 to 26 years no longer applies, from 1 July 2025.
  • Age limits: from 1 July 2025, existing workers can be employed up to age 63 (previously 60), and new applicants must be aged 61 or below. Previously, new applicants had to be under 50 (under 58 for Malaysians).
  • New source countries: Bhutan, Cambodia and Laos were added as Non-Traditional Sources from 1 June 2025.
  • NTS Occupation List: from 1 September 2025, the list was expanded to include manufacturing operators, cooks and heavy vehicle drivers. More occupations in food services, social services and air transport are being added from September 2026. These hires must be paid a fixed salary of at least $2,000 a month.
  • Levies: Marine Shipyard levies rose on 1 January 2026, to $500 for basic-skilled and $350 for higher-skilled workers. From 2028, basic-skilled levies in Marine Shipyard and Process will rise by $100 to $150, and Manufacturing and Services will move from three levy tiers to two. Check MOM’s published tables for the exact rates.

Local Qualifying Salary (LQS)

The LQS sets how much a local employee must earn to count toward a firm’s foreign worker quota. It went from $1,400 to $1,600 on 1 July 2024, and from $1,600 to $1,800 on 1 July 2026. A local employee now counts as one worker if paid at least $1,800 a month, and as half a worker if paid between $900 and $1,800. For part-time staff, the minimum is $10.50 an hour.

Other workforce changes from Budget 2026

  • The retirement age rose to 64 and the re-employment age to 69 on 1 July 2026.
  • The Progressive Wage Credit Scheme was extended to 2028.
  • The Senior Employment Credit was extended to December 2027.
  • CPF contribution rates for older workers will rise again from 2027, with the CPF Transition Offset covering half of the employer’s increase in 2027.

Key thresholds at a glance

Item Amount Effective
EP minimum (general / financial services) $5,600 / $6,200 New: 1 Jan 2025; renewals: 1 Jan 2026
EP minimum (general / financial services) $6,000 / $6,600 New: 1 Jan 2027; renewals: 1 Jan 2028
S Pass minimum (general / financial services) $3,300 / $3,800 New: 1 Sep 2025; renewals: 1 Sep 2026
S Pass minimum (general / financial services) $3,600 / $4,000 New: 1 Jan 2027; renewals: 1 Jan 2028
S Pass levy (all sectors and tiers) $650 a month From 1 Sep 2025
Local Qualifying Salary $1,800 a month From 1 Jul 2026
NTS Occupation List minimum salary $2,000 a month Current

What employers should do

  • Check each EP and S Pass holder’s salary against the 2027 and 2028 minimums for their age, especially for passes due for renewal from 2028.
  • Recalculate your quota using the $1,800 LQS. Local staff paid below that may now count as half a worker or not at all.
  • Budget for the $650 S Pass levy and for the Work Permit levy changes in 2028.
  • Check that your foreign headcount is within your sector’s DRC and sub-DRC before applying for or renewing passes.
  • Score new EP candidates against COMPASS before making an offer.
  • Consider whether the expanded NTS Occupation List, higher age limits or removal of the employment period cap would help your Work Permit hiring.

How we can help

Higher salary thresholds, levies and CPF rates affect payroll costs, accruals and budgets. If you have questions about how these changes affect your financial statements or audit, please contact K.S. NG & Co at enquiries@ksng.com.sg.

Information in this article is correct as at October 2026.

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Singapore Budget 2025: Key Measures for SMEs and Employers

Singapore’s Budget 2025 was delivered on 18 February 2025. It continued to help businesses with costs while pushing for growth, innovation and the hiring of local and older workers. This article sets out the measures most relevant to SMEs, with Years of Assessment (YA) and effective dates where these were announced.

Corporate income tax rebate and cash grant (YA 2025)

  • Rebate: 50% of corporate income tax payable for YA 2025.
  • Cash grant: a minimum of $2,000 for companies that were active and made CPF contributions for at least one local (Singapore Citizen or PR) employee in calendar year 2024. Shareholders who are also directors do not count towards this.
  • Cap: the rebate and cash grant together are limited to $40,000 per company.
  • Timing: eligible companies received the benefits automatically from 2Q 2025.

For example, a company with $30,000 of tax payable and local employees in 2024 receives a $2,000 cash grant and a $13,000 rebate, which is $15,000 in total.

Other tax changes for businesses

  • Innovation cost-sharing: companies can deduct 100% of payments made under an approved cost-sharing arrangement for innovation work that does not meet the definition of R&D, from 19 February 2025.
  • Employee equity remuneration: from YA 2026, a company can deduct payments it makes to its holding company, or to a special purpose vehicle, for new holding company shares issued to its employees.
  • Land Intensification Allowance: extended to 31 December 2030. From 1 January 2026, the shareholding test for related users is relaxed from at least 75% to more than 50%.
  • Double Tax Deduction for Internationalisation and the M&A scheme: both extended to 31 December 2030.

Enterprise support

  • Enterprise Financing Scheme (EFS): the maximum Trade Loan rises permanently from $5 million to $10 million. From 1 April 2025 to 31 March 2030, the EFS M&A Loan can also be used to buy targeted assets.
  • SkillsFuture Enterprise Credit (SFEC): redesigned as a $10,000 credit for companies with at least three resident employees. Companies can use the credit directly instead of only claiming it back as a reimbursement.
  • Market Readiness Assistance grant: the higher cap of $100,000 per new market is extended to 31 March 2026.
  • Funding top-ups: the National Productivity Fund receives $3 billion, supporting investment incentives including the Refundable Investment Credit. A $1 billion Private Credit Growth Fund is set up for high-growth local companies.

Employment and CPF measures

  • Progressive Wage Credit Scheme (PWCS): co-funding for qualifying wage increases is raised:
    • increases given in 2025: from 30% to 40%, paid in 1Q 2026;
    • increases given in 2026: from 15% to 20%, paid in 1Q 2027.

    Employees must earn an average gross monthly wage of up to $3,000 before the increase and up to $4,000 after it, and the increase must be at least $100 a month.

  • CPF for senior workers: from 1 January 2026, total CPF contribution rates rise by 1.5 percentage points:
    • employees aged above 55 to 60: employer rate 16%, employee rate 18% (total 34%);
    • employees aged above 60 to 65: employer rate 12.5% (total 25%).
  • CPF Transition Offset: for 2026, the Government covers half of the increase in employer contributions (0.25 percentage points of wages), paid automatically.
  • Senior Employment Credit: extended to 31 December 2026 for Singaporean workers aged 60 and above earning less than $4,000 a month. Employers receive up to 2% of wages for workers aged 60–64, up to 4% for ages 65–68 and up to 7% from age 69.
  • Uplifting Employment Credit: extended to 31 December 2028. It offsets up to 20% of wages for the first nine months, capped at $600 a month per eligible employee.

GST and stamp duty

Budget 2025 did not change the GST rate or introduce general stamp duty changes for businesses. GST remission for certain S-REITs and registered business trusts was extended to 31 December 2030. If you are planning a transaction, check the IRAS website for the latest position.

Household measures relevant to employers

From January 2026, the new Matched MediSave Scheme matches voluntary MediSave top-ups for some members aged 55 to 70, up to $1,000 a year. It creates no obligation for employers, but older staff may ask about it alongside the CPF rate changes above.

What this means for your financial statements

Consider the recognition, measurement and disclosure of:

  • CIT rebates and cash grants;
  • wage-support payouts such as PWCS, the Senior Employment Credit and the Uplifting Employment Credit;
  • CPF Transition Offset receipts.

Payroll costs for older employees also rise from 2026, which should be reflected in budgets and forecasts.

How we can help

If you have questions about how these Budget 2025 measures affect your company’s audit or financial statements, please contact K.S. NG & Co at enquiries@ksng.com.sg.

Information in this article is correct as at October 2026.

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Singapore Budget 2024: Key Measures for SMEs and Employers

Singapore’s Budget 2024 was delivered on 16 February 2024. For businesses, its main aims were to ease cost pressures, support wage increases for lower-wage workers and attract high-value investment. This article sets out the measures most relevant to SMEs, with Years of Assessment (YA) and effective dates where these were announced.

Corporate income tax rebate and cash grant (YA 2024)

Companies received a 50% rebate on corporate income tax payable for YA 2024. The rebate came in two parts:

  • CIT Rebate Cash Grant: a minimum of $2,000 for companies that made CPF contributions for at least one local (Singapore Citizen or PR) employee in calendar year 2023. Shareholders who are also directors do not count towards this. IRAS paid the grant automatically by 3Q 2024.
  • Remaining rebate: 50% of tax payable, less any cash grant received. This was applied when the YA 2024 assessment was raised after the company filed Form C-S, C-S (Lite) or C.
  • Cap: the cash grant and the rebate together are limited to $40,000 per company.

For example, a company with $30,000 of tax payable receives a $2,000 cash grant and a $13,000 rebate, which is $15,000 in total.

Refundable Investment Credit (RIC)

The RIC is a new incentive for substantial investments, such as new productive capacity, headquarters activities, R&D and commodity trading. It can fund up to 50% of qualifying expenditure. The credit is first set off against corporate income tax payable. Any unused amount is refunded in cash within four years of the company meeting the qualifying conditions. EDB and Enterprise Singapore award the RIC on an approval basis. The Government added $2 billion to the National Productivity Fund to pay for it.

Other tax changes for businesses

  • Renovation and refurbishment (R&R) deduction, from YA 2025: designer and professional fees will qualify. The expenditure cap will be measured over fixed three-year periods, with the first running from YA 2025 to YA 2027. Companies may also choose to claim the deduction in a single YA, subject to the cap.
  • Global minimum tax (Pillar Two): the Income Inclusion Rule and a Domestic Top-up Tax apply from financial years starting on or after 1 January 2025. Together they set a 15% minimum effective tax rate. They affect only multinational groups with annual revenue of €750 million or more, so most SMEs are outside scope. A local subsidiary of a large group may be caught, however.
  • Concessionary tax rate tiers: from 17 February 2024, a 10% tier was added to some incentives and a 15% tier to others, including the Development and Expansion Incentive and the Global Trader Programme.

Enterprise support

  • Enterprise Financing Scheme (EFS): the maximum EFS-SME Working Capital Loan was raised permanently from $300,000 to $500,000. Other parts of the scheme, including green and fixed-asset financing, were also enhanced.
  • Energy Efficiency Grant (EEG): first launched in 2022 for food services, food manufacturing and retail, it was widened to cover manufacturing, construction, maritime and data centres, with higher support levels. The usual conditions are at least 30% local shareholding, at least one local employee and group annual sales of no more than $500 million.
  • SkillsFuture Enterprise Credit (SFEC): eligible companies received a one-off $10,000 credit, covering up to 90% of out-of-pocket costs for qualifying workforce and enterprise transformation programmes. It was available until 30 June 2025.

Employment and CPF measures

  • Progressive Wage Credit Scheme (PWCS): co-funding for qualifying wage increases given in 2024 was raised:
    • employees earning up to $2,500 a month: from 30% to 50%;
    • employees earning above $2,500 and up to $3,000: from 15% to 30%.

    For qualifying years 2025 and 2026, the gross monthly wage ceiling rises from $2,500 to $3,000. From 2024, no co-funding is given if the employee’s average monthly wage after the increase is above $4,000.

  • CPF for senior workers: from 1 January 2025, the total CPF contribution rate for employees aged above 55 to 65 rose by 1.5 percentage points, with the employer’s share up by 0.5 percentage points.
  • CPF Transition Offset: for one year, the Government paid employers half of the 2025 increase in employer CPF contributions for these workers.
  • Local Qualifying Salary: raised to at least $1,600 a month for full-time staff and $10.50 an hour for part-time staff from 1 July 2024. This affects how local employees are counted for foreign worker quotas.

GST and stamp duty

Budget 2024 did not change the GST rate. On stamp duty, from 16 February 2024:

  • housing developers can get a lower Additional Buyer’s Stamp Duty (ABSD) remission clawback rate in some cases;
  • single Singapore Citizens aged 55 and above can claim an ABSD refund when they buy a lower-value replacement private home, subject to conditions.

Household measures relevant to employers

The qualifying wage cap for the Workfare Income Supplement rose from $2,500 to $3,000 for work done from 1 January 2025. More lower-wage staff may therefore receive payouts, so employers should make sure their CPF submissions are complete and correct.

What this means for your financial statements

When preparing your financial statements, consider how to account for and disclose:

  • CIT rebates and cash grants;
  • PWCS payouts and CPF Transition Offset receipts, which are generally government grants;
  • any RIC awarded.

Timing matters as well, because some payouts are received in a later period than the one they relate to.

How we can help

If you have questions about how these Budget 2024 measures affect your company’s audit or financial statements, please contact K.S. NG & Co at enquiries@ksng.com.sg.

Information in this article is correct as at October 2026.

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Consolidation Exemptions for Intermediate Holding Companies under SFRS(I) 10 vs. FRS 110

Overview

For Singapore intermediate holding companies, determining whether consolidated financial statements must be prepared is a crucial year-end financial reporting requirement.

While both SFRS(I) 10 (Consolidated Financial Statements) and FRS 110 (Consolidated Financial Statements) offer a practical exemption under Paragraph 4(a), the accounting framework applied by the ultimate or higher-tier parent dictates whether the exemption is valid.

A common pitfall during audit preparation is assuming these two frameworks share identical conditions. In this technical update, we outline the operational differences between SFRS(I) 10 and FRS 110 to help management teams and financial controllers evaluate their reporting obligations correctly.

The Core Criteria: Paragraph 4(a)

Under both Singapore Financial Reporting Standards (International) [SFRS(I)] and Singapore Financial Reporting Standards [FRS], a parent company is generally required to present consolidated financial statements.

However, an intermediate parent need not present consolidated financial statements if it satisfies four mandatory conditions under Paragraph 4(a):

  1. Owner Non-Objection: It is a wholly-owned subsidiary, or its non-controlling owners have been informed about and do not object to the exemption.

  2. Unlisted Status: Its debt or equity instruments are not traded in a public market.

  3. No Public Filings: It is not in the process of filing financial statements with a securities regulator for the purpose of issuing public instruments.

  4. Higher-Tier Parent Financial Statements: Its ultimate or intermediate parent produces publicly available financial statements that fulfill specific framework requirements.

Key Framework Differences in Condition (iv)

The critical difference lies within sub-clause (iv) of Paragraph 4(a), which governs the accounting framework acceptable at the higher-tier parent level.

1. Applying SFRS(I) 10

FRS(I) 10 is fully aligned with International Financial Reporting Standards (IFRS Accounting Standards). As a result, its exemption rule is strict:

SFRS(I) 10.4(a)(iv):

“Its ultimate or any intermediate parent produces consolidated financial statements that are available for public use and comply with SFRS(I)s or IFRS Accounting Standards.”

  • Impact: If an intermediate holding company reports under SFRS(I) 10, but its higher-tier parent prepares consolidated statements under local FRS (Singapore) or another non-IFRS local GAAP, the intermediate entity cannot claim the exemption. It must prepare consolidated financial statements.

Applying FRS 110

FRS 110 provides broader operational flexibility for entities reporting under standard Singapore FRS:

FRS 110.4(a)(iv):

“Its ultimate or any intermediate parent produces financial statements that are available for public use, in which subsidiaries are consolidated or are measured at fair value through profit or loss.”

  • Impact: Under FRS 110, the requirement centers on whether the higher-tier parent’s statements are publicly available and properly consolidate subsidiaries (or measure them at fair value through profit or loss). As long as this condition is met—regardless of whether the parent uses FRS, SFRS(I), IFRS, or another recognized public GAAP—the intermediate parent can claim the exemption (provided conditions 4(a)(i)–(iii) are satisfied).

How We Can Help

Navigating group financial reporting structures and accounting framework transitions requires careful review. If you require assistance evaluating your group consolidation exemptions or preparing your financial statements, please reach out to our Technical Accounting Advisory team.

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Budget 2026 – Workforce & Employment Policy Updates

Local Qualifying Salary (LQS) Increase

What is LQS?
The Local Qualifying Salary (LQS) sets the minimum salary that local full-time workers must be paid at companies that hire foreign workers (e.g., Work Permit, S Pass or EP holders). Local workers paid at least the LQS help determine a firm’s foreign worker quota.

Budget 2026 Update:

  • From 1 July 2026, the LQS will be raised from S$1,600 to S$1,800 per month for full-time local employees.

  • Part-time local workers must be paid at least S$10.50 per hour.

  • The LQS is used to compute foreign worker quota as:

    • 1 local workforce count: local employee earning ≥ S$1,800/month

    • 0.5 count: local employee earning ≥ S$900 but < S$1,800

    • Local employees earning < S$900 are not counted toward quota.

Business Impact:

  • Employers hiring foreign workers must budget for higher base salaries for local employees.

  • Workforce planning and foreign worker quota calculations now require adjustment.

  • The change supports wage growth for lower-wage local workers.

Employment Pass (EP) & S Pass Minimum Salary Revisions

Budget 2026 also revised minimum qualifying salaries for foreign skilled passes to better align them with local wage standards as wage levels rise:

Employment Pass (EP) Minimum Salary

  • New pass applicants (from Jan 1 2027):

    • Non-financial sector: S$6,000/month (up from S$5,600)

    • Financial services sector: S$6,600/month (up from S$6,200)

  • Renewal applications will align with these thresholds from Jan 1 2028.

S Pass Minimum Salary

  • New pass applicants (from Jan 1 2027):

    • Non-financial sector: S$3,600/month (up from S$3,300)

    • Financial services sector: S$4,000/month (up from S$3,800)

  • Renewal alignment begins Jan 1 2028.

Business Impact:

  • Companies hiring foreign professionals must factor in higher salary thresholds from 2027/2028.

  • The changes aim to ensure that foreign pass holders’ wages keep pace with local workforce norms.

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Budget 2026

Corporate Income Tax (CIT) Rebate – YA 2026

Purpose: Provide operating cost relief to all active companies to support cash flow and competitiveness.

Details

  • Rebate Rate: 40 % of corporate tax payable for Year of Assessment (YA) 2026.

  • Minimum benefit: S$1,500 (if company employed at least one local worker in 2025).

  • Cap: S$30,000 total benefit (rebate + cash grant)

Enterprise Innovation Scheme (EIS)

Purpose: Encourage innovation, capability building and tech adoption (including AI) through enhanced tax deductions.

Under EIS, companies can claim up to 400% tax deductions or allowances on qualifying expenditures. Eligible businesses may also opt to convert part of the qualifying expenditure into a 20% non-taxable cash payout, subject to conditions.

Qualifying Activities (existing base)

  • Qualifying R&D conducted in Singapore.

  • Registration of Intellectual Property (IP) rights.

  • Acquisition/licensing of IP rights.

  • Training courses eligible for SkillsFuture funding aligned to the national Skills Framework.

  • Innovation projects with approved partner institutions (e.g., polytechnics, ITE).

New AI-related Activity

From YA 2027 to YA 2028, qualifying AI-related expenditure will be added to the list of activities eligible for 400% deduction.

Important Clarification:

AI-related expenditure is not eligible for the cash conversion option (see below).
The enhanced deduction applies only to qualifying AI adoption and implementation costs as defined by IRAS.

Typical AI-related spend that may qualify:

  • AI platform subscriptions used for business transformation
  • Implementation costs for AI systems integrated into workflows
  • Fees for AI development services

(The final scope of qualifying AI expenditure will be published by IRAS.)

Market Readiness Assistance (MRA) Grant

Purpose: Help companies defray costs of entering and expanding in overseas markets (overseas promotion, business development, set-up).

Pre-Budget (Prior Structure)

  • SMEs could get 50 % co-funding, capped at S$100,000 per company per new market.

  • Eligible activities included trade fair participation, overseas partner searches, overseas staff deployment, and advisory/legal services.

Budget 2026 Enhancements

  • Support levels:

    • SMEs: Up to 70 % of eligible costs (from 1 Apr 2026 until 31 Mar 2029).

    • Non-SMEs: Up to 50 % of eligible costs.

  • Enhanced cap S$100,000 per company per market continues.

  • The prior requirement of selling <S$100,000 in a target market to qualify is phased out later in 2026.

Where To Apply

Double Tax Deduction for Internationalisation (DTDi)

Purpose: Support companies expanding overseas by allowing enhanced tax deductions on internationalisation expenses.

Qualifying Activities (Expanded)
Businesses can automatically claim a 200 % tax deduction on qualifying expenses up to S$400,000 per YA (raised from S$150,000). Qualifying activities (without prior approval) now include:

  • Overseas market development and investment study trips.

  • Market feasibility and surveys.

  • Master licensing and franchising costs.

  • Overseas business development (e.g., trade visits).

  • Production of corporate brochures for overseas distribution.

Note: Expenses beyond S$400,000 or specific campaigns (trade offices, e-commerce campaigns) still require approval by EnterpriseSG or Singapore Tourism Board.

Where To Apply/Claim

  • Claim via the company’s tax return (Form C) with supporting documentation.

  • Prior approval for large or special categories through EnterpriseSG/STB as needed.

Enterprise Financing Scheme (EFS)

Purpose: Provide financing support and credit for business expansion (trade, working capital and asset financing).

Budget 2026 Enhancements

  • Higher loan quantum options for trade and fixed asset loans.

  • Overall exposure cap raised to up to S$50 million per borrower (group cap).

  • This allows larger firms or groups to access higher financing limits under the scheme.

Where To Apply

  • Via Enterprise Singapore’s EFS portal (accessible through the Business Grants Portal or EnterpriseSG site).

  • Applications involve business financials, loan purpose, and risk assessment.

Startup SG Equity Scheme

Purpose: Government co-invests with independent private investors into Singapore-based startups to catalyse funding and growth.

Budget 2026 Investment

  • S$1 billion top-up to support both early-stage and growth-stage companies.

Where To Apply / Eligibility

  • Administered by Enterprise Singapore / SEEDS Capital / EDBI.

  • Typical eligibility (for early-stage startups):

    • Singapore-incorporated private limited company.

    • Innovative product/service with IP or strong technical foundation.

    • Scalable business with global market potential.

    • A ready, independent third-party investor (e.g., VC) for co-investment engagement.

How To Apply

  • Contact EnterpriseSG, SEEDS Capital or EDBI directly (find contacts via EnterpriseSG soft-landing pages).

  • Submit company profile, business plan, financials and investor term sheet.

Champions of AI Programme

Purpose: Help companies adopt and scale enterprise-wide AI transformation.

What It Is

  • A new initiative to provide tailored support to companies undertaking comprehensive AI adoption — beyond point solutions.

  • May include transformation planning, capability building, workforce training and advisory support.

Where To Find Details

  • Exact scheme details and application modalities are likely to be announced by Enterprise Singapore or government agencies in 1H 2026. (Watch EnterpriseSG and MOF announcements.)

Senior Employment Credit (SEC)

Purpose: Provide wage offsets to help employers hire and retain senior Singaporean workers.

Details (Post-Budget 2026)

  • Extended until 31 Dec 2027.

  • Employers receive wage offsets for Singaporean workers aged 60+ earning under S$4,000 per month.

  • Offset rates vary by age band, up to 7 % of wages (for older age tiers).

How It Works

  • Payouts are automatic (through IRAS) if eligibility conditions are met — no separate application required.

Progressive Wage Credit Scheme (PWCS)

Purpose: Help employers adjust to mandatory wage increases and voluntarily raise wages of lower-wage workers.

Key Features

  • Co-funding support for wage increases of eligible resident employees continues through 2026.

  • 2025: 40 % co-funding; 2026: 20 % co-funding (on qualifying wage increases).

  • Employers do not need to apply — payouts are computed and disbursed based on CPF contribution data.

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Tax Alert: Missing Trader Fraud and GST Input Tax Exposure

The Inland Revenue Authority of Singapore (IRAS) continues to emphasise the risks associated with Missing Trader Fraud (MTF). Businesses claiming GST input tax may face denial of claims, penalties, and interest where suppliers fail to report or remit output tax, even if the purchaser acted in good faith.

What is Missing Trader Fraud?

Missing Trader Fraud typically occurs when a supplier:

  • Charges GST on taxable supplies;

  • Fails to report or remit the corresponding output tax to IRAS; and

  • Becomes uncontactable or ceases operations.

IRAS may disallow input tax claims where it determines that the purchaser knew or ought reasonably to have known that the transaction was linked to fraudulent activity.

Further information on IRAS’ approach to audits and investigations can be found here:
IRAS – Audits and Investigations on Missing Trader Fraud

IRAS’ Knowledge Principle

Under the Knowledge Principle, input tax may be denied if a business:

  • Had actual knowledge of the fraud; or

  • Did not take reasonable steps and therefore should have known of the risk.

The absence of intent to participate does not automatically protect a business. IRAS’ assessment focuses on whether reasonable due diligence was performed.

IRAS’ Three-Pillar Due Diligence Framework

IRAS has published an e-Tax Guide, “Due Diligence Checks to Avoid Being Involved in Missing Trader Fraud”, providing guidance for managing MTF risks:
e-Tax Guide – Due Diligence Checks

The framework comprises three pillars:

Pillar 1: Identify and Assess Risk Indicators

Key risk indicators include:

  • Pricing significantly below market norms;

  • Newly incorporated or low-substance suppliers;

  • Unusual transaction structures or payment arrangements;

  • Transactions lacking clear commercial rationale.

Pillar 2: Perform Due Diligence Checks

Businesses should carry out reasonable checks and document them, including:

  • Verification of the supplier’s GST registration status;

  • Assessment of the supplier’s business activities and operational presence;

  • Review of contractual terms and supporting documents;

  • Validation of payment flows and bank account ownership.

Pillar 3: Respond to Identified Risks

Where risks are identified, appropriate follow-up is required:

  • Obtain clarifications or supporting evidence from the supplier;

  • Escalate matters internally;

  • Refrain from proceeding if risks cannot be adequately mitigated.

Merely identifying risks without taking action may be insufficient to protect input tax claims.

Potential Consequences of Non-Compliance

Where due diligence is not performed to a reasonable standard, IRAS may:

  • Disallow GST input tax claims;

  • Impose penalties and late payment interest;

  • Expand the scope of audits or investigations.

These consequences may arise even where goods or services were genuinely received and payments were made.

Key Takeaways

  • GST input tax entitlement is conditional on performing reasonable due diligence.

  • Robust documentation of checks and risk assessments is essential.

  • High-risk transactions require enhanced scrutiny and controls.

  • Businesses should periodically review internal GST procedures and supplier onboarding practices.

Conclusion

Missing Trader Fraud remains a priority area for IRAS audits. Businesses are expected to adopt structured due diligence procedures, assess risk indicators, and take appropriate action to protect input tax claims.

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CPF Contribution Changes Effective 1 January 2026

The Central Provident Fund (CPF) contribution adjustments taking effect on 1 January 2026 introduce changes to both the wage ceiling and the contribution rates for senior workers. Employers should assess the financial and administrative impact early, as these updates will directly affect payroll costs, manpower budgeting and HRIS configurations.

Adjustment to CPF Ordinary Wage (OW) Ceiling

From 1 Jan 2026, the monthly OW ceiling will increase from S$7,400 to S$8,000.
Implication:

  • A larger portion of monthly wages becomes CPF-liable.

  • Employers with mid- to higher-income earners will see a corresponding increase in employer CPF contributions.

  • No change to the annual CPF salary ceiling (S$102,000), meaning the combined OW + AW cap remains unchanged.

Increased CPF Contribution Rates for Senior Workers

Higher contribution rates will apply to employees aged 55 to 65, for wages above S$750/month:

Age 55–60

  • Total contribution rate: 32.5% → 34%

  • Employer: 15.5% → 16%

  • Employee: 17% → 18%

Age 60–65

  • Total contribution rate: 23.5% → 25%

  • Employer: 12% → 12.5%

  • Employee: 11.5% → 12.5%

Allocation:
The incremental contribution will be directed fully to the Retirement Account (RA), up to the Full Retirement Sum. Excess, where applicable, will flow into the Ordinary Account.

Impact Assessment for Employers

Payroll Cost Increase

Employers should recalibrate manpower costs, particularly where:

  • The workforce has a significant proportion of employees aged 55–65.

  • Employees earn between S$7,400 and S$8,000, or exceed the current OW ceiling.

  • Annual budgeting cycles begin before 2026, requiring accurate cost forecasting.

HR & Payroll System Updates

System changes will be required to reflect:

  • New CPF wage ceiling (S$8,000).

  • Updated age-indexed contribution rates.

  • Adjustments to payroll formulas, caps, and validation rules.

  • Review of Additional Wage (AW) capping logic in HRIS.

Cash Flow & Accrual Adjustments

Finance teams should:

  • Update monthly accrual models to incorporate higher CPF expenses.

  • Re-evaluate manpower budgets and salary bands for 2026.

  • Ensure accurate forecasting for year-end provisions tied to CPF liabilities.

Transitional and Compliance Considerations

  • Employers should ensure payroll teams are fully briefed before the first 2026 pay cycle.

  • Review and update HR policies, employment contracts (where contribution details are referenced), and staff communication templates.

  • Companies planning workforce restructuring or remuneration reviews should factor in higher CPF cost impact for senior workers.

Recommended Employer Actions

✔ Incorporate new CPF rates into FY2026 budget and manpower plans
✔ Update payroll and HR management systems
✔ Conduct staff cost impact analysis for employees aged 55–65
✔ Communicate upcoming changes to affected employees
✔ Review salary structures and hiring plans in light of increased statutory costs