Singapore has introduced new legislation for a domestic top-up tax, aligning with global tax rule changes. The Multinational Enterprise (Minimum Tax) Bill, presented in Parliament on September 9, mandates a minimum effective tax rate of 15% for large multinational enterprises (MNEs) in Singapore.
This legislation adheres to the global minimum tax rate established under the Global Anti-Base Erosion Model Rules of the BEPS 2.0 framework, a global tax agreement endorsed by over 140 countries and jurisdictions. The rules aim to prevent profit shifting to low-tax regions, with Singapore’s commitment to Pillar 2 announced in Budget 2023.
Targeting MNEs with consolidated annual revenues of at least 750 million euros (S$1.1 billion) over two of the last four financial years, the law introduces a multinational enterprise top-up tax (MTT) and a domestic top-up tax (DTT). These taxes address situations where an MNE’s effective tax rate falls below 15%, internationally or domestically.
The MTT applies to Singapore-based companies with ownership interests in lower-tax jurisdictions, requiring them to pay a top-up tax if those entities’ effective tax rates are below 15%. The DTT ensures that MNEs operating in Singapore are taxed at least 15% on their domestic profits.
The Bill also includes penalties for non-compliance, such as failing to submit mandatory tax returns, providing false or misleading information, and engaging in fraudulent tax evasion. Companies may face surcharges of up to 10% of the total top-up tax due for breaches like late registration, with more severe penalties, including fines and prosecution, for serious violations.
The Bill will be debated in the next Parliament session.
Source: The Business Times