Singapore businesses shouldn’t underestimate impact of new global minimum tax rules

AS THE new global minimum tax rules under the Base Erosion and Profit Shifting (BEPS) 2.0 framework look set to be introduced from 2024, many countries have been hard at work reconsidering legislative changes and broader incentives to keep their jurisdictions attractive for multinational enterprises (MNEs).

European Union (EU) member states have just reached agreement to implement minimum taxation at the bloc level. Singapore is also studying a domestic top-up tax regime for affected local and foreign MNE groups.

To recap, one measure to be expected under the latest rules is the global minimum tax of 15 per cent. MNEs will face top-up taxes in any jurisdiction where they currently pay an effective rate of below 15 per cent. In addition, a subject-to-tax rule (STTR) will be imposed on certain cross-border related party payments currently subject to tax below a minimum rate of 9 per cent in the payee jurisdiction.