Singapore Budget 2026: What SMEs Actually Need to Do

Singapore Budget 2026, delivered by Prime Minister Lawrence Wong on 18 February 2026, announced a corporate income tax rebate for YA 2026, a cash grant for companies with local employees, and expanded support for AI adoption, overseas expansion and wage increases. The rebate has since been enhanced: IRAS now grants 50% of tax payable, a S$2,000 cash grant floor, and a combined cap of S$40,000.

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 YA 2026 Corporate Income Tax Rebate: Now 50%

Budget 2026 originally announced a 40% rebate on corporate income tax payable, a S$1,500 cash grant floor and a S$30,000 cap. According to IRAS, the package has since been enhanced for YA 2026 to help companies with cashflow during the energy crisis:

How the rebate and cash grant fit together: the cap covers both. If your company gets the cash grant, IRAS deducts it from the rebate. Here's how it works for a company that qualifies for the grant:

1. If 50% of your tax payable is S$2,000 or less, you get the S$2,000 cash grant and no further rebate.
2. If it is more than S$2,000, you get the S$2,000 cash grant plus the rebate (capped at S$40,000) less S$2,000.

A company that doesn't qualify for the grant simply gets 50% of its tax payable, up to S$40,000.

Who gets the cash grant: active companies that made CPF contributions for at least one local employee (a Singapore citizen or permanent resident) in 2025. Shareholders who are also directors don't count. A company whose only CPF-paid staff are its founder-directors will get the rebate on any tax payable, but not the cash grant.

How to claim: you don't need to apply. IRAS computes the rebate automatically from your YA 2026 ECI filing and Form C, Form C-S or Form C-S (Lite). If your YA 2026 assessment was already finalised before the enhancement, IRAS issues an amended Notice of Assessment.

What to check now: compare your YA 2026 Notice of Assessment against the enhanced figures. If your company met the local employee condition but didn't receive the cash grant (common with centralised hiring or secondment arrangements), email IRAS via myTaxMail with the subject header 'Appeal for CIT Rebate Cash Grant' and supporting documents by 30 November 2026.

In plain terms: if you're profitable, the rebate takes half off your YA 2026 corporate tax, up to S$40,000 in total benefits. If you had little or no tax to pay but employed at least one local non-director on CPF in 2025, you still receive S$2,000 in cash. Unsure whether your assessment reflects the enhancement? Our corporate tax team can check it against your filing.

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, from YA 2027 companies can claim the 200% deduction on the first S$400,000 of eligible expenses under automatic DTDi, up from S$150,000. The cap applies per company across all automatic DTDi activities (Overseas Trade Office and e-commerce campaign costs are excluded).

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 from YA 2027, companies doing significant overseas business development have considerably more headroom. Costs that previously needed an Enterprise Singapore application because they exceeded S$150,000 may 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: Closing 29 September 2026

The Market Readiness Assistance (MRA) Grant helps Singapore companies expand into new overseas markets. As announced in Budget 2026, support for local SMEs rose to up to 70% of eligible costs from 1 April 2026, capped at S$100,000 per company per new market.

Important: MRA closes on 29 September 2026. From 30 September, overseas expansion support moves to the new EDGE Grant, which replaced EDG, MRA and PSG on 30 September 2026. EDGE covers eight business areas including internationalisation, with up to 70% support for SMEs and a combined cap of S$100,000 a year across all activities. Applications already submitted under MRA will still be processed.

What to do: If you have an overseas project ready to go, decide whether to apply under MRA before 29 September or under EDGE from 30 September. Remember that applications must be made before the project starts.

Productivity Solutions Grant (PSG): Closed 29 September 2026

The Productivity Solutions Grant (PSG) co-funded pre-approved IT solutions and equipment for SMEs, with support of up to 50% of eligible costs, capped at S$30,000.

Important: PSG closed to new applications on 29 September 2026. From 30 September, digital and automation support sits under the EDGE Grant under its Automation & Digitalisation area. Pre-approved digital solutions such as Xero get up to 50% support, within a S$30,000 yearly limit for digital solutions. PSG applications already submitted will still be processed.

What to do: If you're planning an accounting software, HR system or other digital tool upgrade, apply under EDGE through a pre-approved vendor, before you sign or pay. For Xero, see our EDGE Grant for Xero packages.

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 passes expiring from 1 January 2028, giving companies time to plan.

Local Qualifying Salary rose 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 Local Qualifying Salary of S$1,800 has applied since 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:

Now (September to November 2026):

1. Check your YA 2026 Notice of Assessment reflects the enhanced 50% rebate
2. If you qualified for the S$2,000 cash grant but didn't receive it, appeal via myTaxMail by 30 November 2026
3. Plan any digital tool or overseas expansion project under the EDGE Grant (PSG and MRA closed on 29 September 2026)
4. Confirm local staff meet the S$1,800 Local Qualifying Salary, which applies from 1 July 2026

Before end of 2026:

1. Start tracking AI-related expenditure if you intend to claim under the EIS for YA 2027
2. Prepare records of overseas expansion costs for the higher S$400,000 automatic DTDi cap from YA 2027
3. Check whether any wage increases qualify for the enhanced PWCS co-funding at 30%

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

Is the YA 2026 CIT rebate 40% or 50%? 50%. Budget 2026 announced 40%, capped at S$30,000 with a S$1,500 cash grant. IRAS has since enhanced it to 50% of tax payable, with a S$2,000 cash grant and a combined cap of S$40,000.

Do I need to apply for the CIT rebate separately? No. According to IRAS, the rebate is computed automatically from your YA 2026 tax filing, and the cash grant is paid automatically to qualifying companies. If your assessment was finalised earlier, IRAS issues an amended Notice of Assessment.

Why didn't my company get the cash grant? The grant needs CPF contributions for at least one local employee in 2025, and shareholders who are also directors don't count. If you did meet the condition, for example through a centralised hiring or secondment arrangement, you can appeal via myTaxMail with supporting documents by 30 November 2026.

Can a startup on the Startup Tax Exemption (SUTE) also benefit from the CIT rebate? Yes. The 50% rebate applies to tax payable after the exemption, so it stacks on top of the SUTE benefit. A startup with very low taxable income will see a smaller rebate in absolute terms, but may still qualify for the S$2,000 cash grant if it paid CPF for a local employee who isn't a shareholder-director 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. From YA 2027, the annual cap for the automatic track rises 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 enhanced 50% 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.