Singapore has formally enacted the Multinational Enterprise (Minimum Tax) Act 2024, marking a significant step in implementing the global tax agreement targeting large multinational corporations. President Tharman Shanmugaratnam assented to the legislation on 8 November 2024, with the Act officially published in the Government Gazette on 27 November 2024.
Key Provisions of the Act:
- Implementation of OECD/G20 GloBE Rules: The Act transposes the Global Anti-Base Erosion (GloBE) Model Rules under Pillar 2 of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) into Singaporean law.
- Income Inclusion Rule (IIR) / Multinational Top-up Tax (MTT): This rule ensures that Singapore-based parent entities of large multinational groups pay a top-up tax on profits of their foreign subsidiaries taxed below the new global minimum rate of 15%.
- Domestic Top-up Tax (DTT): The Act introduces a complementary domestic top-up tax. This ensures that low-taxed profits of entities within Singapore belonging to in-scope multinational groups are also subject to the 15% minimum effective tax rate.
Scope and Application:
The GloBE rules implemented by this Act apply to Multinational Enterprise (MNE) Groups meeting specific criteria:
- Revenue Threshold: The group must have consolidated annual group revenue of at least €750 million.
- Duration: This revenue threshold must have been met in at least two of the four immediately preceding fiscal years.
Significance:
This legislation solidifies Singapore’s commitment to the international consensus aimed at curbing profit shifting and ensuring large multinational enterprises pay a fair share of tax wherever they operate. The Act provides the legal framework for:
- Ensuring in-scope MNEs operating in Singapore meet the global minimum effective tax rate of 15%.
- Aligning Singapore’s tax regime with evolving international standards.
- Providing greater tax certainty for businesses operating globally.
The detailed regulations and operational guidance for affected multinational enterprises are expected to follow.
Source: The Government Gazette, 27 November 2024.