Budget 2025: Income tax concessions, GST remission for S-Reits extended for 5 years

INCOME tax concessions as well as goods and services tax (GST) remission for Singapore-listed real estate investment trusts (S-Reits) will be extended for five more years, as part of tax changes announced in Budget 2025 on Tuesday (Feb 18).

The enhancement and extension of income tax concessions for S-Reits till Dec 31, 2030, will “continue promoting the listing of Reits in Singapore”, as well as sustain the country’s position as a global Reit hub, said the Ministry of Finance (MOF).

Among the key changes is that the scope of specified income for tax transparency treatment will be expanded to include all co-location and co-working income derived from Jul 1, 2025.

From Wednesday, a few refinements will be introduced to existing income tax concessions for S-Reits, their wholly owned Singapore sub-trusts, as well as their wholly owned companies.

First, qualifying foreign-sourced income will include rental and ancillary income received in Singapore. 

Second, the requirement for S-Reits’ wholly owned companies to be incorporated in Singapore will be removed, but these companies must still be tax residents of the country to qualify for the concession.

Third, repayment of shareholder loans and return of capital will now be recognised as qualifying modes of remittance for wholly owned sub-trusts and Singapore tax resident companies of S-Reits.

And fourth, Singapore sub-trusts can now deduct other operational expenses against their income before passing the remaining amount to S-Reits.

The Inland Revenue Authority of Singapore is expected to provide further details by the second quarter.

Income tax concessions for S-Reit exchange-traded funds (ETFs) were also announced.

There is currently accorded tax transparency treatment in the hands of the trustee of S-Reit ETFs on distributions received by these ETFs from S-Reits, which are paid out of the latter’s specified income.

MOF said the sunset date for this concession will be removed “to support the continued growth of the S-Reit ETFs sector”.

At present, a final withholding tax rate of 10 per cent is imposed on S-Reit ETFs’ distributions. This will be extended till Dec 31, 2030. 

The Monetary Authority of Singapore will furnish more details by Q2.

For S-Reits and registered business trusts in the infrastructure business, ship leasing and aircraft leasing sectors, the existing GST remission will also be extended till Dec 31, 2030. This will allow them to continue to claim input GST on relevant business expenses, subject to conditions.

What analysts say

The extension of tax concessions will support existing listings, said Liu Miao Miao, research analyst at Phillip Securities Research. The various concessions will support the bottom line of all S-Reits and strengthen Singapore’s position as a Reit hub, she added.

Derek Tan, head of regional property research at DBS Group Research, said that the enhancements to the tax regime provide more certainty for Reits, given that the global economy is approaching a new tax regime where large multinational companies are subject to a minimum tax rate and a large proportion of S-Reits are geographically diversified.

The enhanced tax concessions will also be one of many other components – such as liquidity and vibrancy of the Singapore market – that will entice new issuers to choose Singapore as a listing destination, he added.

Singapore properties that derive their income beyond rental sources stand to benefit from the tax enhancements, said Klenn Yeo, financial services tax partner at Deloitte Singapore. Data centres deriving co-location service income and new economy offices deriving co-working income, in particular, will benefit from the changes, he said.

Toh Ai Tee, a partner for tax services at Ernst & Young Solutions, said that the managers of data centre and commercial S-Reits can now be confident that their business models can be adapted to evolving real estate trends, while not risking a loss of the tax transparency treatment that investors desire. 

MOF said the scope of specified income for the tax transparency treatment will be expanded to include such additional income derived from Jul 1.

With S-Reits no longer required to be incorporated in Singapore, locally listed Reits will have more leeway to structure their overseas property investments, added Yeo.

Digital infrastructure funds, sponsors, S-Reits with data centres and co-working assets both domestically and abroad stand to benefit the most from the increased clarity on the investment returns or yield of S-Reits, said Evangeline Hu and Agnes Lo, both partners in the real estate and asset management division at KPMG in Singapore.