MOF seeks comments on proposed Multinational Enterprise (Minimum Tax) Bill to implement Domestic Top-up Tax and Income Inclusion Rule under Pillar Two of BEPS 2.0 initiative

25 June 2024

On 10 June 2024, the Ministry of Finance (“MOF”) published a consultation paper seeking comments on a proposed Multinational Enterprise (Minimum Tax) Bill (“Bill”) and related subsidiary legislation. The draft Bill and subsidiary legislation will implement a Domestic Top-up Tax (“DTT”) and the Income Inclusion Rule (“IIR”) under Pillar Two of the Base Erosion and Profit Shifting (“BEPS”) 2.0 initiative.

The proposed Bill also contains amendments to the Income Tax Act 1947 (“ITA”) to provide clarity and certainty on the income tax treatment of taxes imposed by Singapore and other jurisdictions under Pillar Two of the BEPS 2.0 initiative.

The proposed subsidiary legislation provides details on the adjustments to the financial accounting net income or loss and the qualifying tax expenses, for the purposes of calculating the effective tax rate and top-up tax based on the Global Anti-Base Erosion (“GloBE”) Model Rules. Subsidiary legislation on other details of DTT and IIR will be made available at a later date.

MOF is expected to publish in September 2024 a summary of the main comments received along with MOF’s responses.

Background

By way of background, it was announced in the 2024 Budget Statement on 16 February 2024 that Singapore will implement the DTT and IIR to impose a minimum effective tax rate of 15% on businesses’ profits from financial years starting on or after 1 January 2025. This will apply to relevant multinational enterprise (“MNE”) groups with annual group revenue of €750 million or more in at least two of the four preceding financial years (“in-scope MNE groups”), in line with the Pillar Two Global Anti-Base Erosion Model Rules.

Scope of consultation

The following proposed changes will be effective for financial years commencing on or after 1 January 2025:

  • Apply a DTT to in-scope MNE groups in respect of any low-taxed profits of their group entities that are operating in Singapore, to ensure that the effective tax rate imposed on an in-scope MNE group’s constituent entities located in Singapore is at least 15%.
  • Apply the IIR, which is referred to as the Multinational Enterprise Top-up Tax (“MTT”) in the proposed legislation, to in-scope MNE groups that are parented in Singapore, in respect of any low-taxed profits of their group entities that are operating outside Singapore. This is to ensure that the effective tax rate imposed on an in-scope MNE group's constituent entities located outside Singapore is at least 15%.

The proposed Bill, if passed into law, will be construed as one with the ITA. Certain provisions, such as administration, enforcement, and appeals that apply under the ITA, will also apply to DTT and MTT, with modifications as set out under the proposed Bill.

Details about the registration of in-scope MNE group and obligations for DTT and MTT can be found in the consultation paper.

Reference materials

The following materials are available on the MOF website www.mof.gov.sg: