Singapore introduces legislation for top-up corporate taxes, in line with Pillar 2 of BEPS 2.0

Singapore has introduced legislation for a previously announced domestic top-up tax, in line with changes to global tax rules.

The Multinational Enterprise (Minimum Tax) Bill, introduced in Parliament on Monday (Sep 9), ensures that large multinational enterprises (MNEs) operating in Singapore will face a minimum effective tax rate of 15 per cent.

This is in line with the global minimum set out in Global Anti‑Base Erosion Model Rules under Pillar 2 of the Base Erosion and Profit Shifting (BEPS 2.0) framework, a global tax pact that more than 140 countries and jurisdictions have inked.

The rules aim to prevent such companies from shifting profits to low-tax jurisdictions. Singapore’s commitment to implement Pillar 2 was announced in Budget 2023.

In line with the BEPS 2.0 framework, Singapore’s proposed law targets MNEs with consolidated annual revenues of at least 750 million euros (S$1.1 billion) over two of the preceding four financial years.

It introduces a multinational enterprise top-up tax (MTT) and a domestic top-up tax (DTT), aimed at bridging gaps where an MNE’s effective tax rate falls below 15 per cent, either internationally or domestically.

The MTT will apply to Singapore-based companies that hold ownership interests in entities located in lower-tax jurisdictions. If those entities’ effective tax rates fall below 15 per cent, the Singapore company will be required to pay a top-up tax.

Meanwhile, the DTT ensures that MNEs operating in Singapore are also subject to at least a 15 per cent tax on their domestic profits.

The Bill also proposes penalties for MNEs that fail to comply with tax regulations.

Offences include failure to submit mandatory tax returns, providing false or misleading information in filings, and engaging in fraudulent tax evasion.

For instance, companies may incur surcharges of up to 10 per cent of the total top-up tax due, for breaches such as late registration.

Stiffer penalties – such as fines and prosecution – could be levied for more serious violations.

The Bill will be debated at the next sitting of Parliament.

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