Budget 2025: Tax incentives to beef up equities market could have ‘limited impact’, say industry experts

• The government will introduce three tax incentives targeting corporate listings, fund manager listings and fund managers’ qualifying income arising from funds investing substantially in Singapore-listed equities.

• The moves are part of the first set of measures developed by the MAS equities market review group, chaired by Second Minister for Finance Chee Hong Tat.

SINGAPORE will attract companies and fund managers to the local bourse with tax incentives, but industry watchers cautioned that these could have limited impact.

In his Budget 2025 speech on Tuesday (Feb 18), Finance Minister Lawrence Wong introduced three tax incentives targeting corporate listings, fund-manager listings and fund managers’ qualifying income arising from funds investing substantially in Singapore-listed equities.

One of the incentives – a corporate income tax (CIT) rebate for new listings – is expected to make Singapore more attractive to profitable listed companies as income tax is a major cost for businesses, noted EY Asean private tax leader and Institute of Singapore Chartered Accountants (ISCA) member Desmond Teo.

“Any initial public offering (IPO) exercise is never cheap, and this tax rebate can help to defray listing costs for newly listed companies that are profitable,” he said.

Under this initiative, companies that put up primary listings will get a 20 per cent CIT rebate; those with secondary listings with share issuance will be given a 10 per cent rebate.

Lennon Lee, PwC Singapore’s tax leader, noted that the CIT Rebate comes with specific conditions which “may add more complexities for companies to ensure that they meet those requirements before choosing Singapore”.

Similarly, Ajay Kumar Sanganeria, KPMG Singapore partner and head of tax, acknowledged the CIT rebates as a “significant incentive”, but said that “high-growth companies that are not yet profitable may find limited benefit, as they may be unable to offset their listing costs through the rebate”.

Under the second incentive, newly listed fund managers are granted an enhanced concessionary tax rate; the third incentive involves tax exemptions on fund managers’ qualifying income arising from funds investing substantially in Singapore-listed equities.

However, these could be regarded as “more of a sweetener rather than a key driver” of listings, said Klenn Yeo, Deloitte Singapore Financial Services tax partner.

He pointed out that these managers may currently not be allocating 30 per cent of their assets under management (AUM) to Singapore-listed equities, which is the minimum eligibility criterion.

He said allocations to different jurisdictions are usually motivated by the performance of the listed equities, and may not be tax-driven.

In his speech, PM Wong acknowledged “feedback that the Singapore stock exchange is not attractive, even for companies focused mainly on Singapore and South-east Asia”.

To address this, the equities market review group was set up to enhance the attractiveness of Singapore’s stock market. The group’s first set of measures include several tax-related recommendations, which were submitted to the Ministry of Finance “just in time” for Budget 2025, added PM Wong.

Further details are expected to be announced this Friday (Feb 21).

Tax incentives have their limitations 

Market experts have suggested that while tax incentives are an important factor in attracting listings, other perks are also needed.

Evelyn Lim, executive director of tax advisory at BDO Singapore, said: “While any tax assistance provided is good, we are of the view that a more direct and impactful approach, such as providing grants to defray listing costs, would be more effective to entice companies to list.”

Paul Chew, head of research at brokerage Phillip Securities, pointed out that the US has much higher tax rates, but they have not been “an impediment to the growth of fund management and new listings”.

The full impact of the tax incentives would, however, depend on specific conditions, said Teo. These include headcount requirements, assets under management and the types of qualifying income.

There are also concerns that some listed companies may not fully benefit from the CIT rebate.

“Companies typically list their holding entity, and such an entity may not derive substantial taxable income to enjoy the CIT rebate,” said Sim Siew Moon, fellow chartered accountant of ISCA.

Chew shared similar concerns, anticipating a “limited impact” from the CIT rebate.

He said: “Aspiring companies look for higher valuations of their companies that are multiple times the tax benefit. They look for equity capital, not less tax when listing.”