400 per cent tax deductions for AI? Singapore’s new business incentives explained

Singapore is doubling down on artificial intelligence. During Budget 2026, PM Lawrence Wong introduced new incentives aimed at accelerating AI adoption, giving businesses a tangible reason to invest.

According to The Straits Times, companies will soon be able to claim enhanced tax deductions on qualifying AI-related expenses – a move that signals a broader national push to embed AI across industries.

Here’s what we know so far.

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Big perk for businesses

Under the expanded Enterprise Innovation Scheme (EIS):

• Businesses can claim 400 per cent tax deductions on qualifying artificial intelligence expenses
• The enhanced deduction is capped at S$50,000 per Year of Assessment
• Applicable for Years of Assessment 2027 and 2028

While the final qualifying criteria will be detailed by the authorities, the scheme is designed to encourage firms to invest in AI tools, technologies, and innovation initiatives that support business transformation.

In practical terms: companies that make eligible AI investments may deduct up to four times their expenditure, subject to the cap – potentially lowering taxable income while accelerating digital adoption.

Why is the government doing this?

Prime Minister Lawrence Wong emphasised that AI adoption is no longer optional for companies hoping to remain competitive.

He noted that meaningful AI transformation is demanding. It often requires:

• Reorganising and structuring data
• Rebuilding internal systems
• Redesigning workflows and job scopes
• Retraining employees

Even major global corporations are still navigating these challenges – but those that succeed tend to gain a significant advantage.

Manufacturing gets special attention

The scheme expansion also introduces AI-specific deductions for projects developed in partnership with the Sectoral AI Centre of Excellence for Manufacturing.

This centre:

• Was launched in 2024
• Is led by the Ministry of Trade and Industry (MTI) and A*STAR
• Helps manufacturers integrate AI into operations

Companies collaborating with the centre on AI innovation projects may qualify for deductions.

A new Initiative: Champions of AI

To further drive transformation, the Government is rolling out a programme called Champions of AI.

The idea is to support ambitious firms that want to embed AI deeply into their business models.

Support aims to include:

• Enterprise transformation guidance
• Workforce training and upskilling

As these companies succeed, they are expected to set examples for their industries.

Who’s already doing it well

PM Wong highlighted that several Singapore-based companies are already advancing aggressively in AI.

One standout example frequently cited in media coverage is DBS Bank:

• Uses over 2,000 AI models
• Across 430+ use cases organisation-wide

Reported applications include AI tools that:

• Reduce manual processing
• Shorten customer service handling times (by up to ~20 per cent)
• Achieve high task accuracy (above 95 per cent for certain functions)

AI isn’t just for tech giants

AI adoption is also surfacing in more traditional businesses. PM Wong referenced HarriAnns, a long-running local Peranakan F&B brand:

• Origins trace back to the 1940s
• Began with a stall at Tiong Bahru Food Centre
• Now operates multiple cafés and supplies hotels
• With support from the Productivity Solutions Grant (PSG), the company adopted an AI-enabled restaurant management system, helping automate ordering, billing, and operational workflows.
• The reported outcome: faster service and revenue growth.
• The Government also plans to widen the scope of the Productivity Solutions Grant, allowing businesses to tap a broader range of digital and AI-enabled solutions.

Further details are expected from the Ministry of Digital Development and Information.

Singapore’s growing AI ecosystem

Another notable announcement: the planned creation of an AI Park at one-north. The park is envisioned as a collaborative hub bringing together:

• Founders and start-ups
• Researchers
• AI practitioners and innovators

one-north already hosts major technology players such as Grab, Razer, Sea Group, and Apple, and is often described as Singapore’s version of a tech cluster or innovation district.

The AI Park will build on earlier initiatives like Lorong AI, a pilot space launched in Telok Ayer in 2025 that served as a community node for AI-focused learning and exchange.

When will we know more?

Authorities have indicated that the Inland Revenue Authority of Singapore (IRAS) will release further guidance by mid-2026. Additional clarifications from MTI and relevant ministries will follow shortly.