Tax incentives proposed by MAS review group not a ‘silver bullet’, say experts

TAX deductions and lower corporate tax rates may be among the incentives that the MAS equities market review group considers as part of measures to strengthen Singapore’s equities market development, industry experts told The Business Times. However, they cautioned that tax perks alone will not be a silver bullet and must be paired with other strategic initiatives.

“To attract quality companies to list in Singapore, the review group may consider enhanced tax deduction(s) which could be accorded to companies that list on the Singapore Exchange (SGX),” said Ajay Kumar Sanganeria, KPMG Singapore partner and head of tax.

These could cover expenses such as underwriting and placement agent fees, listing application fees payable to SGX, and professional services fees for legal, accounting, and tax advisory support.

Such deductions would help “lower the financial barriers to listing and make SGX a more attractive venue for initial public offerings (IPO),” Sanganeria added.

The MAS review group announced last Thursday (Feb 13) that tax incentives will be introduced, as part of the initial measures to strengthen Singapore’s equities market. Further details are expected to be announced this Friday (Feb 21).

These incentives mark the first phase of the review group’s proposals, with additional measures slated for release in the second half of 2025. 

The group, established last August and chaired by Second Minister for Finance Chee Hong Tat, has submitted its proposals – including tax incentives – to the Prime Minister and Minister for Finance Lawrence Wong.

Lennon Lee, PwC Singapore tax leader, noted that targeted incentives could reduce overall listing costs. Possible measures include double deductions on listing fees, relaxed group relief and stamp duty concessions to facilitate pre-IPO restructuring.

“We expect tax incentives such as exemptions on income derived by the listed company and other tax-related deduction schemes could be announced,” he added. 

In addition to deductions, Sanganeria suggested that the review group could consider a concessionary corporate income tax rate of 5 to 10 per cent for newly listed corporate groups with consolidated revenue below 750 million euros (S$1.1 billion), keeping them outside the scope of the global minimum tax. 

This preferential rate, he explained, could apply to Singapore-sourced income earned by entities within the group.

“This targeted incentive would support mid-sized, high-growth companies, ensuring Singapore remains a compelling destination for businesses seeking both capital and regional expansion opportunities,” Sanganeria said.

Concurring, Johnny Lim, partner at law firm Reed Smith, added that tax perks could “range from corporate income tax to stamp duty savings – not uncommon for other jurisdictions but (the) devil (is) always in the details”.

Inspiration from fund management

The MAS review group’s proposed tax incentives have been designed to attract enterprises and fund managers to list in Singapore as well as to incentivise the launch and growth of funds with substantial investment in domestic equities.

Given this focus, it is believed that tax incentives are likely to be more applicable to these funds rather than high-growth tech companies, which often are not profitable yet and, as a result, are minimally taxed.

Market experts also noted that the proposed tax incentives may share similarities with existing incentives for family offices.

“There would likely be some inspiration from the fund management space,” said Lim, citing the widely recognised 13O and 13U tax incentives that have been critical in driving the growth of family offices in Singapore over the last few years.

The number of beneficiaries under these schemes surged 3.5 times from 400 in 2020 to more than 1,400 in 2023, according to MAS figures.

“We can expect to see some features being adopted or adapted,” said Lim.

Ooi Chee Keong, Forvis Mazars Singapore partner and capital markets head, added that SGX listing incentives are about accelerating business growth in the short-term to encourage companies to go public, while single family office incentives are designed to attract ultra-high-net-worth individuals for wealth management over a longer term. 

“The former is about fuelling public markets; the latter is about private capital preservation,” he said, adding that Singapore needs both as they each serve distinct purposes.

In this context, PwC’s Lee pointed out that one condition under the current family office tax incentive regime requires investments in Singapore, including companies listed on SGX or funds that invest in local equities.

“We would see the proposed incentives to attract companies to be listed in Singapore complementing those for incentivised single-family offices,” he said.

Elaborating, Sanganeria added that while family office tax incentives focus on investment income, listing incentives should target reducing public listing costs and strengthening Singapore’s appeal as a listing hub. 

These incentives, he added, should also “enhance Singapore’s appeal as a public listing jurisdiction – such as by offering (a) concessionary tax rate derived from operating income derived by Singapore entities within the corporate group”.

“Familiar and effective”

Tax incentives are seen by industry experts as a proven, fast-track solution to enhance Singapore’s appeal as a listing venue. However, they caution that such incentives alone are unlikely to drive a thriving equities market.

“Offering tax incentives to attract companies to list is not novel, as some of our neighbouring countries have offered certain tax incentives to companies listing there,” said PwC’s Lee.

He believes its use to encourage the growth of the capital market would not be a surprise to many given Singapore’s past successes.

The Republic holds an advantage due to its comprehensive tax framework that can be easily tweaked to incentivise listing on the SGX, Sanganeria said. “This contrasts with other types of incentives, such as cash grants or subsidies, which would require additional government spending and actual cash outflow from the government.”

Lim further emphasised the effectiveness of tax incentives, describing them as being “familiar and effective, capable of being readily deployed as part of the suite of arsenal rolled out to attract quality listings”.

Ooi also noted that tax perks “can be rolled out quickly and send a strong signal to the market without overhauling existing regulations”.

In line with this, industry experts suggested that the proposed tax incentives should be tailored to support sectors that align with Singapore’s long-term economic strategy.

Rick Chan, managing partner at Forvis Mazars, said that tax incentives could be “selective on industries that the SGX would like to promote based on the profile and appetite of institutional investors in Singapore”.

Similarly, PwC’s Lee noted that industries such as artificial intelligence and green technology may be prioritised.

“Tax incentives have been one of the tools that Singapore has employed successfully in attracting foreign investments and specifically in areas and industries that are strategic to Singapore,” he added.

Other sectors such as precision engineering, advanced manufacturing, and biotechnology are also likely to benefit, noted Lim from Reed Smith.

“There can be parameters on sector or activity or requirements for local or regional presence, headcount and economic substance to qualify for tax incentives,” he added.

However, as the full suite of tax incentives will only be unveiled on Friday, PwC’s Lee noted that it remains unclear how easily they can be implemented. 

“We hope that the proposed incentives will be straightforward to avoid creating confusion for aspiring companies exploring listing,” he added.

In parallel, Ooi stressed that to build a truly thriving equities market, Singapore must pair tax incentives with deeper liquidity, investor confidence, and competitive valuations. 

“This will ensure high-growth companies choose SGX over competing financial hubs like Hong Kong, London, or New York,” he said.

While tax incentives aimed at retail investors, such as reduced trading fees, may help boost trading volume, Sanganeria pointed out that their impact on overall liquidity and high-quality listings would be limited.

Lee said that while tax incentives and grants are important, they will not be the sole drivers of attracting top-tier companies to list in Singapore.

“Other important elements for a vibrant equity market include liquidity, active fund raising, private equity and credit markets, and a simple IPO process,” he added.