Multinational Enterprise (Minimum Tax) Bill passed to implement two new top-up taxes under BEPS 2.0

29 October 2024

On 15 October 2024, the Multinational Enterprise (Minimum Tax) Bill (“Bill”) was read the second time and passed in Parliament. The Bill, which was tabled for first reading on 9 September 2024, seeks to implement two new top-up taxes under the Base Erosion and Profit Shifting 2.0 initiative (“BEPS 2.0”):

  • Domestic Top-up Tax (“DTT”); and
  • Multinational Enterprise Top-up Tax (“MTT”). The MTT applies the Income Inclusion Rule, which is part of the BEPS 2.0 Global Anti-Base Erosion (“GloBE”) rules.

The implementation of the DTT and MTT ensures that Singapore is aligned with the international implementation of BEPS 2.0.

The Ministry of Finance (“MOF”) conducted a public consultation on a draft version of the Bill from 10 June 2024 to 5 July 2024. On 31 August 2024, MOF published its response to the feedback.

Changes under the Bill

DTT and MTT will apply to large multinational enterprise (“MNE”) groups, i.e. those with annual group revenue of €750 million or more in at least two of the four preceding financial years. DTT and MTT will apply from businesses’ financial years commencing on or after 1 January 2025.

DTT will apply to the Singapore entities of a large MNE group and will be payable if the group’s effective tax rate in Singapore is below 15%.

MTT will apply to large MNE groups that are parented in Singapore. If the effective tax rate of the MNE group’s entities in any foreign jurisdiction is below 15%, MTT will be imposed to top up the effective tax rate to 15%.

The Bill will also provide the Comptroller of Income Tax with the powers to administer, collect, and enforce the DTT and MTT. Offences in the Bill include the failure to keep proper records, tax evasion, and the obstruction of the Comptroller. These powers and offences mirror those that already exist under the Income Tax Act 1947 and ensure that the Inland Revenue Authority of Singapore (“IRAS”) has the necessary powers to enforce compliance with the DTT and MTT.

Proposed regulations on GloBE safe harbours and transition rules

On 4 October 2024, IRAS published a consultation paper and sought comments on draft versions of the following regulations:

  • Multinational Enterprise (Minimum Tax) (GloBE Safe Harbours) Regulations
  • Multinational Enterprise (Minimum Tax) (Transition Rules) Regulations

The proposed regulations provide details on the calculation of the top-up tax based on the GloBE rules and specifically on the following:

  • GloBE safe harbours to simplify the compliance process; and
  • Adjustments in computing adjusted covered taxes under the transition rules. These rules will apply when an MNE group first comes within the scope of the GloBE rules (including MTT in Singapore) or DTT in Singapore.

The consultation closed on 18 October 2024.

Reference materials

The following materials are available on Singapore Statutes Online sso.agc.gov.sg and the MOF website www.mof.gov.sg: