Income Tax Updates 2025 – Part 1
Last updated on 24 June 2025
The following is Part 1 of our 2-part series, covering key tax updates for 2025.
Corporate income tax rebate and cash grants
The rebate and grant would continue to be extended to businesses for YA2025. Active companies with at least one local employee in 2024 will receive a cash grant of S$2,000, and a tax rebate equivalent to 50% of the total tax payable will be granted to all companies. The maximum combined tax rebate and cash grant that a company can receive is capped at S$40,000.
Transfer Pricing Rules and the Latest Developments
Under Transfer Pricing Rules (TP), unless exemptions apply, companies must prepare transfer pricing documentation (TPD) for related party transactions when either of these conditions is met:
a. Gross annual revenue for the financial year is more than S$10 million; or
b. The requirement to prepare a TPD existed in the previous financial year, and the gross annual revenue in the previous two financial years was more than S$10 million.
Amendments to the existing subsidiary legislation under the ITA governing the form and content requirements of transfer pricing documentation, as well as corresponding updates to the IRAS e-Tax Guide – Transfer Pricing Guidelines (TPG), were made in June 2024. One of the key amendments made pertains to the treatment of related-party domestic loans.
Related party domestic loans entered into on or after 1 January 2025
With effect from 1 January 2025, IRAS discontinued the assumption of interest restriction treatment in place of arm’s length methodology for related party domestic loans provided by a taxpayer which is not in the business of borrowing and lending. The revised requirements are summarised in the table below.
| Status of Parties to the Loan | TP Treatment | TPD Requirement | |
|---|---|---|---|
| Domestic Loan entered into before 1 January 2025 | Lender not in the business of borrowing and lending | Interest free loans permitted, subject to interest deduction restriction on the lender | Exempt from TPD |
| Lender in the business of borrowing and lending | • arm’s length interest rate; or • the indicative margin may be applied, provided that the principal value of the loan does not exceed the threshold of SGD 15 million — except in the case of domestic loans where both the lender and borrower are not in the business of borrowing and lending, in which case no threshold applies. | Exempt from TPD if the indicative margin is applied. Otherwise, TPD is required to substantiate the arm’s length interest rate. | |
| Domestic Loan entered into on or after 1 January 2025 | Lender and borrower are both not in the business of borrowing and lending | ||
| Either lender or borrower (or both) is in the business of borrowing and lending | |||
| Cross Border Loan | Whether or not the lender or borrower is in the business of borrowing and lending |
All related party loans, like all other types of related party transactions, are subject to annual review as the facts and circumstances relating to the parties and the transactions may change over time.
With the clarifications and updates surrounding related party loans, specified transactions qualifying for exemption from TPD have been updated and summarised as follows:
Specified transactions qualifying for exemption from TPD comprise:
i. Related party domestic transaction (other than a loan) subject to the same tax rate;
ii. Related party loans fulfilling conditions summarised in the table above;
iii. Routine support services on which a 5% cost mark-up is applied;
iv. Related party transaction covered by Advance Pricing Agreement; and
v. Related party transactions not exceeding specified thresholds.
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