In October 2024, Singapore has moved to implement Pillar Two of the Base Erosion and Profit Shifting (“BEPS“) 2.0 initiative by way of:
- Passing the Multinational Enterprise (Minimum Tax) Bill (“MNE Bill”) to introduce a global effective tax rate (“ETR“) of 15% for large multinational enterprise (“MNE“) groups with global revenues of at least €750 million annually, pursuant to the Global Anti-Base Erosion Model (“GloBE“) Rules; and
- Holding a public consultation on proposed subsidiary legislation to the MNE Bill, namely the MNE (Minimum Tax) (GloBE Safe Harbours) Regulations and the MNE (Minimum Tax) Transition Rules) Regulations (collectively, “MNE Regulations“).
Passing of MNE Bill
Under the MNE Bill, Singapore will implement a Multinational Top-Up Tax (“MTT“) and Domestic Top-Up Tax (“DTT“). The MTT may impose a top-up tax on constituent entities (“CEs“) of MNE groups to which the MNE Bill applies (“in-scope MNE groups“) that are located in Singapore if the CE has ownership interests in CEs located in jurisdictions with an ETR of less than 15%, subject to specified conditions. In turn, the DTT aims to ensure that a foreign equivalent of the MTT will not be levied on CEs located in Singapore. It imposes a top-up tax on certain CEs located in Singapore to raise their ETR to at least 15%.
Per clause 8, the MNE Bill will apply to in-scope MNE groups for a financial year (“FY“) beginning on or after 1 January 2025. For in-scope MNE groups, the MNE Bill may impose several obligations, including designating a CE located in Singapore as the designated local DTT filing entity or designated local GloBE information return filing entity.
The MNE Bill was passed on 15 October 2024. For more information, please see our September 2024 Legal Update titled “Bills Introduced in Parliament to Implement BEPS 2.0 Pillar Two, Amend Income Tax Act“.
Consultation on MNE Regulations
On 4 October 2024, the Inland Revenue Authority of Singapore announced a public consultation titled “Consultation on the Proposed Multinational Enterprise (Minimum Tax) Regulations – GloBE Safe Harbours and Transition Rules” (“Consultation“). It covers the proposed subsidiary legislation that will provide further details on the calculation of the top-up tax, specifically regarding:
- GloBE Safe Harbours to simplify the compliance process, namely:
- Transitional Country-by-Country Reporting (CbCR) Safe Harbour;
- Qualified Domestic Minimum Top-Up Tax (QDMTT) Safe Harbour; and
- Simplified Calculations Safe Harbour.
- Adjustments in computing adjusted covered taxes under the transition rules that will apply when an MNE group first comes within the scope of the GloBE rules (including MTT or DTT in Singapore).
The Consultation ran from 4 October 2024 to 18 October 2024. For more information, click here to read our October 2024 Legal Update titled “Implementation of BEPS 2.0: IRAS Consults on Draft Subsidiary Legislation to MNE Bill“.
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