SINGAPORE’S corporate income tax regime will move ahead with two components from the second pillar of the Inclusive Framework on Base Erosion and Profit Shifting (BEPS 2.0).
First, an Income Inclusion Rule (IIR) will take effect for businesses’ financial years starting on or after Jan 1, 2025, Finance Minister Lawrence Wong said in his Budget speech on Friday (Feb 16).
The IIR will subject the overseas profits of multinational enterprise (MNE) groups that are parented in Singapore to a minimum effective tax rate of 15 per cent, regardless of where they operate.
A second component, the Domestic Top-up Tax (DTT), will also be introduced on the same date.
With the DTT, MNE groups have to pay a minimum effective tax rate of 15 per cent on their Singapore profits.
It is in Singapore’s interest to implement the DTT, so that the Republic can collect the tax, “rather than have it go somewhere else”, Wong said.
GET BT IN YOUR INBOX DAILY
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Both the IIR and DTT will apply to MNE groups with annual group revenues of at least 750 million euros (S$1.1 billion) – in line with Pillar 2 of BEPS 2.0.
Another component of Pillar 2, the undertaxed profits rule, will be considered at a later stage, Wong said.
The minister added that in the short term, the implementation of Pillar 2 will provide additional revenues to government coffers.
Yet, Singapore may see a reduction in its tax base, should MNEs shift some of their activities to other jurisdictions, in response to the new business environment, Wong said.
He added: “In any case, whatever additional revenues we obtain from Pillar 2 will need to be reinvested for Singapore to stay competitive in a post-BEPS world.”
For more of BT’s Budget 2024 coverage, go to bt.sg/budget24
Keyword added to your list