The reliance on large multinational enterprises continues to shape Singapore’s tax landscape.
Singapore stands as the fourth-most dependent economy globally on large multinational enterprises (MNEs) for its corporate tax revenue, with MNEs accounting for 73% of its total corporate income tax revenue in 2021. This figure highlights the crucial role foreign-owned MNEs play in Singapore’s economic structure.
While countries like Ireland (87%), Hong Kong (79%), and Chile (76%) are even more reliant on MNEs, Singapore’s fiscal model remains largely centered on these enterprises. The country offers various tax incentives to attract and retain these global players, such as a statutory corporate tax rate of 17%, which is reduced by special regimes to support specific industries like research and development (R&D).
A recent OECD report sheds light on Singapore’s tax incentives, particularly its 5% tax rate on income under its intellectual property (IP) regime to stimulate innovation. However, with global tax reforms under the OECD’s two-pillar tax agreement, Singapore must prepare for upcoming changes, including the Income Inclusion Rule (IIR) and Domestic Top-up Tax (DTT), which will be implemented from 2025 onwards. These measures aim to ensure that MNEs pay a minimum effective tax rate of 15% on their global profits, addressing concerns over tax base erosion.
While Singapore continues to adapt its tax framework, it remains focused on attracting MNEs, as evidenced by its approach to international tax cooperation and investment incentives.
