Is Singapore still competitive in a world with a global minimum tax?

BURIED in the latest June 2026 edition of the Inland Revenue Authority of Singapore’s (Iras) Transfer Pricing Guidelines is a technical amendment on how share-based compensation is treated when a Singapore subsidiary provides services to its foreign parent. 

It is one of the more revealing signals we have had in some time about the pressure Singapore’s tax system is now under, and about a question the Republic can no longer avoid.

In a world where a global minimum tax has diminished the tax incentives that long flattered our regime, is Singapore still as competitive as it needs to be?

The stock-based concession

The technical problem was real and long-standing.

When a Singapore subsidiary provides services to an overseas affiliate on a cost-plus basis, a common arrangement for the global multinational corporations this country works hard to attract, Iras took the position that the cost of employee stock awards should sit in the cost base and be marked up. That generates taxable profit in Singapore. 

That held true even when the parent, not the Singapore entity, actually bore the economic cost of issuing those shares, and even when nothing was ever charged to Singapore.

For years, the same expense was often non-deductible for income tax. The result was a double whammy – tax on a mark-up over a cost the subsidiary never incurred, with no offsetting relief.   

Iras has now moved. From 2026 onwards, uncharged and merely notional stock-compensation costs may be left out of the Singapore entity’s taxable service income, even as they remain in the base on which the arm’s-length mark-up is calculated. 

However, there are still many features of the Singapore tax system which might be considered unwieldy, uncertain or disproportionate in comparison with other countries.

The benefits of tax incentives have long masked these features. With that benefit largely removed for large businesses, does Singapore need to do more to remain competitive?

Three frictions worth removing

Consider Singapore as a holding and intellectual-property (IP) location: one of the most valuable roles a financial centre can play, and one that Singapore is well-placed to excel at.

Look closely and three obstacles appear – each of which raises costs and uncertainty without meaningfully protecting the tax base.

The first is the taxation of foreign dividends. Income such as overseas dividends is exempt when brought into Singapore only if it clears a set of conditions: it must have been taxed abroad, the source country’s headline rate must be at least 15 per cent, and the exemption must benefit the taxpayer. 

When dividends flow up through several tiers of holding companies before reaching Singapore, these tests become awkward to satisfy. 

Exemption depends on a separate provision and a tracing exercise back through each tier – a patchwork of statute and administrative practice that rewards only those who can afford careful planning. 

In comparison, many jurisdictions such as the Netherlands and Luxembourg provide participation exemption regimes for foreign dividends with clearer rules.

Why not remove the cost and uncertainty of navigating this incomplete mishmash and introduce a simplified participation exemption regime?

The second is the taxation of gains on the sale of shareholdings. Singapore offers a safe harbour that exempts such gains when a company has held at least 20 per cent of the shares for at least 24 months. 

This sits alongside, and is now overridden by, a separate regime for foreign-asset disposals. Why live with this complexity of different rules, and different thresholds, to essentially try to achieve the same result? 

The third, and sharpest, concerns IP. Under the foreign-asset disposal rules introduced by the Iras, IP is singled out. The substance-based escape that shields other foreign assets (foreign-share or foreign-property gain where the company has real people and activity here) simply does not apply to IP.  

Patents and software attract only partial relief, and only to the extent the underlying research was actually carried out in Singapore. Brands, trademarks and other marketing IP are taxed in full when the gain is brought home. 

So, a company that develops its IP here keeps some relief, while one that merely holds foreign IP through Singapore has little or none.  It is a clear signal not to anchor IP here, once an incentive has lapsed. 

As a result, Singapore also potentially loses other economic spin-offs that it could benefit from if businesses choose to locate their IP in Singapore.

So, why not extend the substance-based exemption to IP asset class and reward owners who bring real substance in Singapore?

Addressing these three at a stroke and Singapore would sharply reduce any uncertainty that multinationals face when weighing the country as a holding and IP base.

The real prize is certainty

There is a deeper point beneath all of this.

Singapore’s strengths are not in doubt: no withholding tax on dividends, a clean one-tier system, a deep treaty network, political stability and rule of law. Those are real and they endure. 

The problem is not that Singapore is uncompetitive. It is that Singapore is not obviously competitive at first sight.

In a world now layered with a global minimum tax, new profit-allocation rules and substance tests, the scarcest commodity for any multinational is certainty. 

That is where Singapore’s sharpest opportunity lies. Not in competing on tax rate – that game is over – but in becoming the most predictable, fastest and clearest jurisdiction in which to operate.  

A multinational choosing where to locate a holding company or IP platform can now evaluate Singapore alongside the Netherlands, Ireland, Luxembourg, among others, on broadly the same footing. 

The stock-compensation concession shows Iras can move with pragmatism when the case is made.

The invitation now is to apply that same instinct more broadly and make Singapore competitive again so that it becomes the preferred IP and holding location for the global enterprises, encouraging them to commit substantial investments and research and development activities for Singapore.

The writer is the CEO of infer360, an international tax and transfer pricing specialist and a former senior tax partner at a Big Four firm