Reframing Singapore’s investment attractiveness in a post-BEPS world

THE scrutiny on ensuring that large multinational enterprises (MNEs) pay their fair share of taxes has gained momentum globally. In Singapore, Deputy Prime Minister (DPM) Lawrence Wong announced in Budget 2023 that the country is looking to effect the recommendations from Pillar 2 of the Inclusive Framework on Base Erosion and Profit Shifting (BEPS) from 2025 onwards.

BEPS Pillar 2 specifies the introduction of a minimum effective tax rate of 15 per cent for MNEs with annual global revenues of at least 750 million euros (S$1.08 billion). In particular, this will impact larger organisations with a global footprint. Small and medium-sized enterprises (SMEs), as well as startups, are unlikely to be impacted by this change.

Singapore has long deployed tax incentives as one of the key policy tools to attract and anchor foreign direct investment (FDI). About 80 of the world’s top 100 tech companies and many of the world’s top fast-moving consumer goods companies call Singapore home – a reflection of the country’s success in attracting the largest MNEs globally. With BEPS Pillar 2, the efficacy of tax incentives in attracting FDI from large global MNEs will no longer be what it was before.