Singapore Budget 2026: What SMEs Actually Need to Do

Singapore Budget 2026, delivered by Prime Minister Lawrence Wong on 18 February 2026, includes a 40% corporate income tax rebate for YA 2026 (capped at S$30,000), a minimum S$1,500 cash grant for companies with at least one local employee in 2025, and expanded support for AI adoption, overseas expansion, and wage increases.

Every year, Budget day produces a wave of headlines, a flood of summary infographics, and a nagging question from business owners: what does this actually mean for me?

This guide cuts through the noise. Here's what was announced, who qualifies, and what you should do next.

Singapore Budget 2026: Key Measures for SMEs at a Glance

The 40% Corporate Income Tax Rebate

According to IRAS, for the Year of Assessment (YA) 2026, the government is granting a 40% rebate on corporate income tax payable. The maximum benefit is capped at S$30,000 per company.

The cash grant floor: If your company employed at least one local employee in 2025, you will automatically receive a minimum of S$1,500, even if you have little or no tax payable. This is paid as a cash grant, not a tax offset.

Who qualifies: Any active company, whether tax resident or not. "Active" means carrying on a trade, business, or investment activity at the point of disbursement.

How to claim: You don't need to do anything extra. IRAS will calculate and apply the rebate automatically when you file your ECI, Form C, Form C-S, or Form C-S (Lite) for YA 2026. The S$1,500 cash grant will be disbursed automatically to qualifying companies by Q2 2026.

What to check: If you employed local staff in 2025 but don't receive the cash grant by mid-2026, email IRAS via myTaxMail with the subject header 'Appeal for CIT Rebate Cash Grant' by 30 November 2026.

In plain terms: File your YA 2026 tax return as usual. If you're profitable, you'll pay 40% less tax on that profit (up to S$30,000 off). If you're breaking even or making a small loss but had local staff, you'll still get S$1,500 in cash. No forms to fill, no additional applications.

Enterprise Innovation Scheme: AI Expenditure Now Qualifies

Budget 2026 expands the Enterprise Innovation Scheme (EIS) to include AI expenditure as a qualifying activity. Businesses can now claim a 400% tax deduction on qualifying AI costs for YA 2027 and YA 2028, capped at S$50,000 per year in AI spend.

For context: the EIS already allows qualifying businesses to claim a 400% deduction on a range of innovation-related activities, effectively returning S$4 in tax deductions for every S$1 spent.

What AI spend qualifies: AI-related costs covering software, tools, or implementation that uses artificial intelligence, subject to qualifying criteria to be published by Enterprise Singapore.

Other EIS-qualifying activities (already in place):

• Research and development activities
• Qualifying intellectual property registration
• Qualifying IP licensing
• Innovation projects with polytechnics, universities, and qualifying partners
• Qualifying workforce training

What to do now:

• If you're spending on AI tools (subscriptions, development, integration), start documenting those costs clearly. You want a clean paper trail before YA 2027.
• Talk to your accountant about whether your AI-related spend meets the qualifying criteria; not all AI tool costs will automatically qualify.
• If you haven't explored EIS yet, it's worth a proper review. The 400% deduction is one of the most powerful tax incentives available to Singapore businesses.

Double Tax Deduction for Internationalisation (DTDi): Bigger Cap

The Double Tax Deduction for Internationalisation (DTDi) scheme lets Singapore companies claim a 200% tax deduction on qualifying overseas expansion costs: market research, trade fairs, overseas business development trips, and more. No prior approval is needed for the automatic track.

What changed in Budget 2026: According to Enterprise Singapore, the cap for automatic DTDi claims has been raised from S$150,000 to S$400,000 per year. Enterprise Singapore is also expanding the range of qualifying activities for the automatic track.

What to do:

• If you're actively pursuing overseas clients or markets, review your qualifying expenditure against the DTDi criteria.
• With the cap more than doubled, companies doing significant overseas business development now have considerably more headroom. Costs that previously required submission to Enterprise Singapore for approval may now fall under the automatic track.
• Keep clean records of overseas market development costs: airfares, accommodation, event fees, and market study expenses.

Market Readiness Assistance (MRA) Grant

The Market Readiness Assistance (MRA) Grant helps Singapore companies enter and expand in overseas markets. Budget 2026 extends MRA support to cover deepening activities in existing overseas markets, not just new market entry. For SMEs, support is up to 70% of qualifying costs (50% for non-SMEs).

What to do: If your business is looking to expand into regional markets (Southeast Asia, Greater China, or beyond), the MRA grant is worth reviewing with Enterprise Singapore. The expanded scope means existing overseas activity may now qualify, not just new market entry.

Productivity Solutions Grant (PSG): Digital and AI Tools

The Productivity Solutions Grant (PSG) co-funds the adoption of pre-approved digital and technology solutions for SMEs. Budget 2026 expands the list of supported solutions to include digital and AI-enabled tools, with support of up to 50% of qualifying costs, capped at S$30,000 per company.

What to do: If you've been considering upgrading your accounting software, HR systems, or digital tools, check the PSG pre-approved vendor list on the Enterprise Singapore website. Eligible purchases through approved vendors may be co-funded, meaning your actual out-of-pocket cost is halved.

Progressive Wage Credit Scheme (PWCS): Higher Co-Funding

According to IRAS, the Progressive Wage Credit Scheme (PWCS) helps businesses manage the cost of raising wages for lower-income workers by co-funding a portion of qualifying wage increases.

What changed in Budget 2026:

• Co-funding rate raised from 20% to 30%
• Scheme extended by two years to 2028
• From 2027, the minimum qualifying wage increase rises from S$100 to S$200 to be eligible for PWCS support

What to do:

• If you employ local workers earning lower wages and have been raising their pay, check whether your wage increases qualify for PWCS co-funding at the new 30% rate.
• If you plan to raise wages in 2026 or 2027, time the increase to qualify under the new threshold.
• IRAS administers PWCS disbursements automatically based on CPF data; make sure your CPF contributions are filed accurately and on time.

Employment Pass and S Pass: Salary Thresholds Are Rising

According to the Ministry of Manpower (MOM), Employment Pass minimum salaries will rise from S$5,600 to S$6,000 per month for new applications from 1 January 2027. S Pass minimums will rise from S$3,300 to S$3,600 per month. Renewals are not affected until 1 January 2028, giving companies time to plan.

Local Qualifying Salary is also being raised to S$1,800/month for full-time local employees, from 1 July 2026.

In plain terms: Bringing in a new foreign hire from January 2027? Budget at least S$6,000/month for an EP or S$3,600 for an S Pass. Existing EP and S Pass holders are not affected until renewals from January 2028; if renewals are due in late 2027, act early. The new Local Qualifying Salary of S$1,800 takes effect from July 2026 and may affect your firm's foreign hire quota if any local staff earn below that threshold.

What to do:

• If you currently employ or plan to hire EP or S Pass holders, review their salaries now against the new thresholds. Renewals won't be affected until 2028, but new applications must meet the higher floor from January 2027.
• If you're budgeting for headcount in 2026 or 2027, build the higher salary thresholds into your hiring plans.
• Review part-time local employees against the new Local Qualifying Salary; those earning less than S$1,800 pro-rated (based on full-time equivalent) may affect your firm quota.

Singapore Budget 2026 Action Checklist for SMEs

Here's a practical summary of immediate actions and near-term planning items from Budget 2026:

Immediate (by mid-2026):

1. File your YA 2026 ECI or Form C-S on time; the CIT rebate is applied automatically on filing
2. Confirm receipt of the S$1,500 cash grant if you had local employees in 2025
3. Review PSG pre-approved solutions if you're planning any digital tool investment

Before end of 2026:

1. Review your DTDi-eligible overseas expansion costs against the new S$400,000 cap
2. Start tracking AI-related expenditure if you intend to claim under the EIS for YA 2027
3. Check whether any wage increases qualify for the enhanced PWCS co-funding at 30%
4. Update payroll for the new Local Qualifying Salary of S$1,800 from 1 July 2026

Planning for 2027:

1. Review EP and S Pass holder salaries against the new January 2027 thresholds
2. Confirm your AI expenditure meets EIS qualifying criteria before YA 2027

Frequently Asked Questions

Do I need to apply for the 40% CIT rebate separately? No. According to IRAS, the rebate is applied automatically when you file your YA 2026 tax return. The minimum S$1,500 cash grant is also disbursed automatically to qualifying companies. No separate application is required.

When will I receive the S$1,500 cash grant? IRAS will disburse the cash grant by Q2 2026 (i.e., by June 2026) for companies that qualify. If you haven't received it by then, you can appeal via myTaxMail by 30 November 2026.

Can a startup on the Startup Tax Exemption (SUTE) also benefit from the CIT rebate? Yes. The 40% rebate applies to tax payable, so it compounds on top of the existing SUTE benefit. A startup with very low taxable income due to SUTE will see a smaller rebate in absolute terms, but may still qualify for the S$1,500 cash grant if local employees were on payroll in 2025.

What AI costs might qualify under the EIS? Enterprise Singapore has not yet published the detailed list of qualifying AI expenditures for YA 2027–2028. Generally, qualifying activities under EIS must involve innovation, not routine operations. AI tools used for genuine productivity transformation are more likely to qualify than standard business software. Your accountant can help assess your specific situation once detailed guidance is released.

Does the EP salary threshold change affect existing EP holders? According to MOM, new applications must meet the new minimums from 1 January 2027. Existing EP renewals are not affected until 1 January 2028, giving you time to plan. Act early if renewals are due in late 2027.

What is the Local Qualifying Salary and why does it matter? The Local Qualifying Salary (LQS) determines whether a local employee counts toward your firm's quota for EP and S Pass holders. If a local employee earns less than the LQS, they may not count toward your quota. The new LQS of S$1,800 per month applies from 1 July 2026. Companies with local staff earning below this threshold should review their quota eligibility before that date.

What is the DTDi scheme and who can use it? The Double Tax Deduction for Internationalisation (DTDi) is a scheme administered by Enterprise Singapore that lets Singapore companies deduct 200% of qualifying overseas business development costs from their taxable income. No prior approval is needed for the automatic track. Budget 2026 raises the annual cap for the automatic track from S$150,000 to S$400,000, giving businesses with active overseas programmes significantly more room to claim.

The Bottom Line

Budget 2026 is not a transformational budget, but it contains meaningful, practical relief for SMEs that know where to look. The 40% tax rebate is the headline, but the EIS expansion and DTDi cap increase could be worth significantly more to businesses actively investing in AI or pursuing overseas markets.

The common thread: most of these benefits are automatic, or require nothing more than clean, timely accounting records. The CIT rebate applies when you file. The cash grant comes to you. The PWCS disbursement follows your CPF filings.

That means the single best thing you can do after Budget 2026 is the same as before it: keep your books in order, file on time, and have an accountant who tracks these schemes proactively on your behalf.

This article is intended as general information only and does not constitute tax or legal advice. Budget measures are subject to change and legislative enactment. Please consult a qualified accountant for advice specific to your business situation.

Harvest Accounting is a Xero Platinum Partner and 2025 Xero Partner of the Year (Singapore). We handle bookkeeping, tax compliance, and monthly reporting for Singapore SMEs, all for a fixed monthly fee with no surprises. If you want to make sure you're capturing every relief and filing correctly for YA 2026, talk to us.