New tax measures target multinational enterprises to ensure a minimum effective tax rate of 15%
In a move to align with global tax reforms, Singapore has introduced the Multinational Enterprise (Minimum Tax) Bill, ensuring that multinational enterprises (MNEs) operating within the country will adhere to a minimum effective tax rate of 15%. This legislation, announced on Sept 9, 2024, is part of Singapore’s commitment to implement Pillar 2 of the Base Erosion and Profit Shifting (BEPS 2.0) framework, a global tax agreement signed by over 140 countries.
The proposed bill targets MNEs with consolidated annual revenues of at least 750 million euros (approximately S$1.1 billion) over two of the preceding four financial years. It introduces two key components: a multinational enterprise top-up tax (MTT) and a domestic top-up tax (DTT).
The MTT applies to Singapore-based companies that have ownership interests in entities based in low-tax jurisdictions. If those entities’ tax rates fall below 15%, the Singapore company must pay the top-up tax.
The DTT ensures that MNEs operating in Singapore pay a minimum of 15% tax on their domestic profits.
The Singapore government aims to prevent the shifting of profits to low-tax jurisdictions and maintain its commitment to global tax fairness, as previously announced in Budget 2023.
The bill also proposes penalties for MNEs that fail to comply with these new tax regulations.
