Page 6 - RSM Budget 2023 Highlights

CORPORATIONS AND BUSINESSES

Implement the Global Anti-Base Erosion Effective date
Rules (i.e. Income Inclusion Rule and Financial year starting on or after 1 January 2025
Undertaxed Profits Rule) and Domestic
Top-up Tax Comments
Current  It is no surprise that Singapore will be adopting
In Budget 2022, Minister for Finance announced that the Pillar 2 GloBE Rules of the BEPS 2.0 initiative,
in response to the global minimum effective tax rate following the recommendations by the OECD,
under the Pillar 2 Global Anti-Base Erosion (“GloBE”) and implementing a Domestic Top-up Tax
Rules of the Base Erosion and Profit Shifting (“BEPS”) regime to top up the MNE group’s effective tax
2.0 project, and based on consultation with industry rate in Singapore to 15%. The implementation
stakeholders, MOF would study the introduction of a date for Singapore is targeted to be from
top-up tax. If introduced, this would top up the financial year starting on or after 1 January 2025.
effective tax rate of MNEs operating in Singapore  The early announcement by the Singapore
with annual group revenue of at least €750 million, as Government in this regard provides clarity to the
reflected in the consolidated financial statements of impacted MNEs and gives them sufficient time to
the ultimate parent entity, to 15%. get prepared to meet the challenges of the new
tax compliance and reporting requirements.
Proposed changes
 Once an MNE group is impacted by BEPS 2.0, the
Singapore plans to implement the GloBE Rules and minimum effective tax rate of 15% applies in
Domestic Top-up Tax from financial year starting on every jurisdiction where the MNEs have physical
or after 1 January 2025 for businesses. operations, be it in Singapore or elsewhere if that
jurisdiction has implemented Pillar 2 GloBE Rules
The Government will continue to monitor the and a top-up tax regime.
international developments and adjust the
implementation timeline as needed if there are delays  The fact that Singapore will only implement
internationally. BEPS 2.0 in 2025, would mean that a Singapore-
based subsidiary of an impacted MNE group may
The Government will also continue to engage
businesses and provide them with sufficient notice end up having to pay top-up taxes in another
ahead of any rules becoming effective. jurisdiction in 2024 if the group operates in a
country which has adopted such Rules earlier
than 2025.

 In order to continue to attract and retain foreign
investments and entice MNCs to anchor their
regional or global operations in Singapore, the
nation would need to compete based on non-
fiscal factors such as continuing to maintain
quality infrastructure and workforce, political
stability, good communications and connectivity
and a business-friendly regime.

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