Singapore eyes 15% top-up tax on MNEs to prevent foreign tax losses

Additional revenues from the top-up taxes will be used to enhance the local business environment.

Second Minister for Finance, Indranee Rajah said that amending tax laws will sustain Singapore's economic competitiveness, better support businesses and individuals, and keep up with international tax developments.

Indranee spoke during the debate on the Income Tax (Amendment) Bill, where she discussed the Multinational Enterprise Top-up Tax (MTT).

The MTT will apply to Singapore-based large multinational enterprises (MNEs) that hold entities in lower-tax foreign jurisdictions. These companies must pay a top-up tax if their entities have an effective tax rate below 15%.

The MTT applies the Income Inclusion Rule, which is part of the BEPS Pillar Two Global Anti-Base Erosion rules (GloBE rules).

Meanwhile, the Domestic Top-up Tax (DTT) will apply to the Singapore entities of a large MNE group, payable if the group’s effective tax rate in Singapore is below 15%.

“If we do not impose the DTT and MTT, affected MNE groups would have to pay these taxes to other jurisdictions that have imposed the GloBE rules. Hence, it is in Singapore’s interest to impose the DTT and MTT, so that we can collect the tax, rather than cede it to other jurisdictions,” Indranee said.

“We plan to reinvest the additional revenues from DTT and MTT to enhance our overall business environment, in areas such as upskilling our workforce, growing a vibrant innovation ecosystem, and providing quality infrastructure and connectivity,” she added.