Singapore’s tax authority has updated its guidance so that businesses can claim a 100% tax deduction on spending on carbon credits and renewable energy certificates (RECs), according to Carbon Pulse. For buyers, the change matters because the deduction now reaches credits retired for voluntary sustainability commitments, not only those used to meet mandatory obligations. That lowers the after-tax cost of voluntary demand in Singapore and gives developers a clearer picture of who may be buying.

What IRAS Changed

The Inland Revenue Authority of Singapore (IRAS) updated its guidance on business expense deductions to cover qualifying Green Certificates and Green Credits (GCCs), according to Regfollower. The previous guidance on carbon credits has been removed, because their tax treatment is now covered under the GCC guidance.

Under Section 14ZJ of the Income Tax Act 1947, businesses can claim a 100% deduction for qualifying GCC costs from Year of Assessment (YA) 2026. The deduction covers credits surrendered or retired to meet voluntary sustainability commitments or statutory requirements.

From Mandatory Only to Voluntary Too

Before YA 2026, deductions were available only for expenses incurred to meet mandatory statutory or regulatory obligations. A company buying credits purely to back a net zero pledge or a corporate claim could not rely on the same treatment.

The revised guidance removes that distinction. For corporate sustainability teams, the voluntary purchase is now treated, for deduction purposes, in the same way as a compliance purchase.

What Qualifies

Qualifying GCCs include two groups:

  • Carbon credits representing greenhouse gas emission reductions, removals or avoidance.
  • Renewable Energy Certificates (RECs) representing the environmental attributes of renewable electricity supplied in Singapore under the Electricity Act 2001.

Eligible costs include purchase prices, intermediary and trading fees, professional services, and registration and compliance expenses. The material does not list further conditions on credit quality or standards, so buyers should check the full guidance before assuming a given credit qualifies.

Timing and Cost Basis

The deduction must be claimed in the YA corresponding to the basis period in which the credits are surrendered or retired. Buying a credit is therefore not enough: the deduction follows retirement or surrender.

Deductions are based on actual costs incurred, not the market value of the credits when surrendered. A buyer who bought early at a low price cannot deduct a later, higher market value. Conversely, one who bought at a premium deducts what was actually paid.

Who Is Left Out

Validation and verification costs incurred by project developers selling credits do not qualify under Section 14ZJ. The relief is aimed at the buyer side, the entity that surrenders or retires the credit, rather than at the cost of producing it.

For developers, the direct benefit is therefore indirect: any effect would come through stronger or steadier demand from Singapore-based buyers, not through a tax break on their own project costs.

Implications for Buyers and Developers

For buyers, a 100% deduction reduces the net cost of each retired credit or REC, to the extent the company has taxable income against which to claim it. The material does not quantify the saving, which depends on the company’s tax position.

For developers and traders, the guidance also covers intermediary and trading fees, which suggests transaction costs sit inside the deductible amount. Whether this shifts volumes is not shown in the source material, so any demand effect is an expectation rather than a finding.

What to Watch

  • How companies treat the YA 2026 claim for credits retired in the relevant basis period.
  • Whether IRAS gives further detail on which credits and standards qualify.
  • Whether Singapore-based buyers increase voluntary retirements as a result.
  • How the guidance interacts with Singapore’s carbon tax offsetting rules, which the material does not cover.

The guidance is a tax clarification, not a subsidy for credits themselves. Its effect on demand will only show in retirement data over the coming assessment periods.