February 24, 2023
Singapore plans to implement GloBE Rules and Domestic Top-up Tax as of 1 January 2025
Singapore has announced its plans to implement the GloBE Rules and DTT1 with dates of entry into effect:
The Singapore Government will continue to monitor the international developments and adjust its implementation timeline as needed if there are delays internationally. Companies may also expect adequate notice ahead of any rules becoming effective.
This Alert summarizes key measures of the Singapore Budget announcement, as well as potential issues and planning considerations that businesses should be aware of.
Domestic Top-up Tax
The DTT will top-up an MNE group's effective tax rate in Singapore to 15%. The DTT will apply to MNE groups operating in Singapore that have annual revenues of at least €750 million, as reflected in the consolidated financial statements of the ultimate parent entity.
Timing of implementation
The DTT will be implemented for fiscal years starting on or after 1 January 2025.
While it is noted the Organisation for Economic Co-operation and Development (OECD) has provided in their earlier statement2 that the UTPR should be implemented one year after the IIR, the Budget announcement seems to suggest that the IIR and UTPR will be implemented in 2025 (this will need to be validated when the legislation is released).
The Singapore Government will continue to monitor the international developments and adjust its implementation timeline as needed if there are delays internationally. Further, it would engage businesses and provide them with sufficient notice ahead of any rules becoming effective.
Legislation of GloBE rules and DTT
The legislation has not been released. The Budget 2023 announcement alone should not be considered nor constitute substantive enactment of the GloBE Rules and DTT.
Considerations for foreign MNEs with Singapore operations
Opportunities that companies could avail of include a possible reprieve from complying with the Singapore DTT requirements in 2024. Whether these foreign MNEs will ultimately have a top-up tax liability in relation to Singapore operations will depend on the profile of that specific foreign MNE group.
The implementation of the GloBE rules and DTT in 2025 may give Singapore MNEs the initial impression that they can temporarily scale back the preparation for GloBE rules. However, it should be noted that various jurisdictions (such as South Korea, Switzerland, and the United Kingdom) have announced their intention to implement the GloBE rules effectively from 2024. Therefore, Singapore MNEs may still be impacted by the GloBE rules in 2024 if they have presence in such jurisdictions.
Organizations in Singapore that are planning to apply or those with existing tax incentives should consider strategies and formulate options for their incentive package.
For additional information concerning this Alert, please contact the following:
Ernst & Young Solutions LLP, International Tax and Transaction Services, Singapore
Ernst & Young Solutions LLP, Business Incentives Advisory, Singapore
Ernst & Young LLP (United States), Singapore Desk, New York
Ernst & Young LLP (United States), ASEAN Tax Desk, New York
Ernst & Young LLP (United States), Asia Pacific Business Group, New York
Ernst & Young LLP (United States), Asia Pacific Business Group, Chicago
1 Formerly referred to as a Minimum Effective Tax Rate (METR).
2 Statement on a Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy issued by the OECD/G20 Inclusive Framework on 8 October 2021.
3 Such as the Investment Allowance, Pioneer incentive, Development and Expansion Incentive, the Intellectual Property Development Incentive, etc.