Singapore identifies qualifying tax incentives for Pillar Two substance-based relief

IRAS’s GloBE and Domestic Top-up Tax guidance, updated on 13 October 2026, now explains its approach to Singapore qualified tax incentives (QTIs) for the Substance-based Tax Incentive (SBTI) Safe Harbour. It links a two-page list of Singapore incentives and qualifying components specifically for domestic top-up tax purposes.

The development is an administrative mapping of domestic incentives to the OECD framework, not the creation of new deductions. It is distinct from the parliamentary passage of the Finance (Income Taxes) Bill covered in our earlier analysis. The guidance update should not be treated as evidence of that Bill’s assent or commencement.

What the list adds

The important distinction is between an incentive’s qualifying component and its headline scheme name. IRAS identifies both base and enhanced deductions for some schemes, but enhanced deductions alone for others. For example, its list includes base and enhanced deductions for IP protection under section 14A, while identifying only the enhanced component for IP licensing under section 14U and SkillsFuture-eligible training under section 14ZG. These are descriptions of IRAS’s classification, not amendments to those provisions.

The broader guidance explains when a deduction for otherwise non-deductible expenditure can itself be an incentive: the deduction must be specifically allowed to encourage the relevant activity, rather than simply recognise an ordinary business cost. A taxpayer therefore cannot treat every deductible expense as a QTI merely because it reduces taxable profit.

The existing OECD calculation remains essential

The OECD’s 5 January 2026 package, Chapter 4, boxed rules 1–8, supplies the underlying mechanism. On election, adjusted covered taxes increase by the lower of the QTIs used in the fiscal year and the jurisdiction’s substance cap. The relief targets top-up tax attributable to qualifying incentives; it does not automatically eliminate all top-up tax in the jurisdiction.

For an enhanced deduction, the relevant amount is its tax value, not the expenditure or gross deduction. Chapter 4, paragraphs 25–27, distinguishes the additional deduction from the ordinary cost deduction, while allowing the entire deduction to count where the expenditure would otherwise be non-deductible. This is why the component-level mapping matters.

IRAS states that Singapore will adopt the SBTI Safe Harbour for financial years commencing on or after 1 January 2026. That financial-year date is separate from the October guidance update. Groups must still test the election, qualifying amount and cap rather than assume that inclusion on the list guarantees full relief.