As part of the tax changes announced in the 2025 Budget on Tuesday (February 18th), the income tax concessions and Goods and Services Tax (GST) remission for Singapore-listed Real Estate Investment Trusts (S-Reits) will be extended for five years.

The Ministry of Finance stated that upgrading and extending the income tax concession scheme for Singapore Real Estate Investment Trusts (Reits) until December 31, 2030, will "continue to promote the listing of Reits in Singapore" and maintain the country's position as a global Reit hub.

The most significant change is that, starting July 1, 2025, the scope of income eligible for tax transparency treatment will be expanded to include all income derived from co-location and co-working arrangements.

Effective from Wednesday, some improvements will be made to the existing income tax concession schemes for S-Reits, their wholly-owned Singapore sub-trusts, and their wholly-owned companies.

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

Secondly, the requirement for wholly-owned companies of S-Reits to be incorporated in Singapore will be removed, although these companies must still be tax residents of Singapore to qualify for the concessions.

Thirdly, the repayment of shareholder loans and the return of capital will now be considered qualifying remittance methods for wholly-owned sub-trusts and Singapore tax-resident companies of S-Reits.

Fourthly, Singapore sub-trusts can now deduct other operating expenses from their income before passing the remaining amount to the S-Reits.

The Inland Revenue Authority of Singapore is expected to provide more details in the second quarter.

Additionally, an income tax concession scheme for S-Reit Exchange-Traded Funds (ETFs) was announced.

Currently, trustees of S-Reit ETFs enjoy tax transparency treatment for distributions received from S-Reits that are paid out of designated income.

The Ministry of Finance stated that removing the sunset clause for this concession will "support the continued growth of the S-Reit ETF industry."

At present, distributions from S-Reit ETFs are subject to a final withholding tax rate of 10%. This policy will be extended until December 31, 2030.

The Monetary Authority of Singapore will provide more details in the second quarter.

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

What Analysts Say

Derek Tan, Regional Head of Property Research at DBS Group Research, noted that while the tax regime improvements are not groundbreaking, they still provide more certainty for Reits. This is because a significant portion of S-Reits are geographically diversified. The global economy is also moving towards a new tax regime where large multinational corporations are subject to a minimum tax rate.

He added that enhanced tax concessions will be one of many factors, such as market liquidity and vibrancy, that will attract new issuers to choose Singapore as a listing destination.

Liu Miaomiao, Research Analyst at Phillip Securities Research, stated that extending the tax concessions will support existing listed entities. She added that various concessions will bolster the earnings of all S-Reits and strengthen Singapore's position as a Reit hub.

Klenn Yeo, Tax Partner for Financial Services at Deloitte Singapore, said that income sources from Singapore properties, beyond rental income, will benefit from the tax concessions. He noted that data centers earning income from co-location services and new economy offices earning income from co-working spaces will particularly benefit from these changes.

The Ministry of Finance stated that, starting July 1, the scope of income eligible for tax transparency treatment will be expanded to include such additional income.

Yeo added that, with S-Reits no longer required to be incorporated in Singapore, locally listed Reits will have greater flexibility in structuring their overseas property investments.