The Singapore government has recently taken a significant step by formally submitting a legislative proposal to the Parliament aimed at implementing the Organisation for Economic Cooperation and Development (OECD)'s Pillar Two framework. The core content of this proposal is to impose a minimum tax rate of 15% on large multinational enterprises, in response to the call for global tax reform and to ensure that multinational enterprises pay a fair share of taxes on their global income.
On September 9, 2024, the Singapore government submitted the Multinational Corporations (Minimum Tax) Bill to the Parliament. The Bill aims to implement domestic top-up taxes and income inclusion rules in Singapore in accordance with Pillar Two of the OECD's Two-Pillar Plan for International Tax Reform. This initiative marks a solid step forward for Singapore in promoting fairness and transparency in the international tax system.
The Multinational Corporations (Minimum Tax) Bill and its subsidiary regulations will have far-reaching impacts on large multinational enterprises operating in Singapore and globally. Specifically, the Bill will introduce a series of key changes for multinational enterprise groups with annual group income of EUR 750 million or more in at least two of the past four fiscal years, starting from fiscal years beginning on or after January 1, 2025.
One of the most significant changes is the imposition of domestic minimum top-up taxes on low-tax profits of group entities operating in Singapore. This means that if the taxes paid by subsidiaries or branches of multinational enterprises in Singapore are lower than 15% of their profits, the Singapore government has the right to require the group to top up the tax difference. This provision aims to ensure that the income of multinational enterprises in Singapore is taxed fairly and to prevent base erosion and profit shifting.
In addition, the Bill introduces income inclusion rules, particularly for multinational enterprise groups with parent companies in Singapore. According to these rules, if the overseas subsidiaries of these enterprises are not taxed at least 15% on their profits by their host countries, the Singapore parent company is responsible for including these profits in its taxable income and paying the corresponding taxes in Singapore. This provision helps to ensure that the global income of multinational enterprise groups is fully taxed and to prevent tax evasion and abuse of tax treaties.
The Singapore government's initiative has received widespread praise from the international community. As an important participant in the global economy, Singapore has been committed to promoting fairness and transparency in the international tax system. The submission and implementation of the Multinational Corporations (Minimum Tax) Bill not only demonstrate Singapore's firm commitment to global tax reform but also provide useful references for other countries and regions.
