Public Consultation on Proposed Multinational Enterprise (Minimum Tax) Bill and Subsidiary Legislation

Ministry of Finance

Consultation Period: 10 Jun 2024 - 05 Jul 2024

Status: Closed

Detailed Description

INTRODUCTION

The Ministry of Finance is proposing a Multinational Enterprise (Minimum Tax) Bill and subsidiary legislation to implement a Domestic Top-up Tax (“DTT”) and the Income Inclusion Rule (“IIR”) under Pillar Two of the Base Erosion and Profit Shifting (“BEPS”) 2.0 initiative, as announced in the 2024 Budget Statement on 16 February 2024.

2. The Ministry is seeking public feedback on the proposed legislation from 10 June to 5 July 2024.

SCOPE OF THE CONSULTATION

3. The proposed Bill and the subsidiary legislation will introduce the following key changes that apply to in-scope multinational enterprise (“MNE”) groups, defined as those with annual group revenue of 750 million euros or more in at least two of the four preceding financial years. The proposed changes will be effective for financial years commencing on or after 1 January 2025:

   1. Apply a DTT to in-scope MNE groups in respect of any low-taxed profits of their group entities that are operating in Singapore, to ensure that the effective tax rate imposed on an in-scope MNE group’s constituent entities located in Singapore is at least 15%.

   2. Apply the IIR, which is referred to as the Multinational Enterprise Top-up Tax (“MTT”) in the proposed legislation, to in-scope MNE groups that are parented in Singapore, in respect of any low-taxed profits of their group entities that are operating outside Singapore. This is to ensure that the effective tax rate imposed on an in-scope MNE group's constituent entities located outside Singapore is at least 15%.

4. The proposed Multinational Enterprise (Minimum Tax) Bill, if passed into law, will be construed as one with the Income Tax Act 1947 (“ITA”). Certain provisions, such as administration, enforcement and appeals that apply under the ITA, will also apply to DTT and MTT, with modifications set out under the proposed Bill.

5. The key provisions for DTT and MTT include the following:

   1. Registration of in-scope MNE group. The ultimate parent entity of an in-scope MNE group must notify the Comptroller of its liability to be registered.

   2. Obligations for DTT. The ultimate parent entity of an in-scope MNE group must designate a constituent entity located in Singapore as the designated local DTT filing entity (“DFE”) for DTT purposes. The DFE must file a DTT return within 15 months after the end of each financial year (or 18 months after the end of the transition year). Any DTT payable must be paid no later than one month after the due date for the return. If the DFE fails to pay DTT, the DTT may be collected from the other constituent entities located in Singapore on a joint and several basis. Subject to conditions, in-scope MNE groups may also opt for certain constituent entities to be assessed separately on its allocated DTT.

   3. Obligations for MTT. The constituent entities of an in-scope MNE group must designate a constituent entity located in Singapore as the designated local Global Anti-Base Erosion (“GloBE”) information return filing entity (“GFE”) for MTT purposes. The GFE must file a GloBE information return¹ in Singapore within 15 months after the end of each financial year (or 18 months after the end of the transition year) if a similar return has not been filed by a filing entity of the MNE group in another jurisdiction. If a similar return has been filed in another jurisdiction, the GFE must notify the Comptroller of the particulars of the filing entity and the jurisdiction where it is located. In addition, parent entities located in Singapore liable to MTT must file the MTT return² within 15 months after the end of each financial year (or 18 months after the end of the transition year), and any MTT payable must be paid no later than one month after the due date for the return.

Proposed amendments to the ITA

6. The proposed Bill also contains amendments to the ITA. The amendments are intended to provide clarity and certainty on the income tax treatment of taxes imposed by Singapore and foreign jurisdictions under Pillar Two of the BEPS 2.0 initiative. These include whether these taxes are eligible for tax deduction and foreign tax credit, and whether they satisfy conditions for the foreign-sourced income exemption regime.

Proposed subsidiary legislation

7. The proposed subsidiary legislation provides details on the adjustments to the financial accounting net income or loss and the qualifying tax expenses, for the purposes of calculating the effective tax rate and top-up tax based on the GloBE Model Rules³.

GUIDELINES FOR SUBMISSION

8. Respondents are requested to observe these guidelines:

   1. Please identify yourself and the organisation you represent (if any) so that we can follow up to clarify any comments if necessary.

   2. Be clear and concise in your comments, and use the template provided to organise your feedback.

   3. Focus your comments on how the drafting of the legislation can be better written to make them clearer and to make compliance easier.

   4. As far as possible, explain your points with illustrations, examples, data or alternative formulations of the amendments.

9. This proposed legislation is released only for the purpose of consultation and should not be used for individual or business decisions as it does not represent the final legislation.

10. All comments received during the consultation will be reviewed thoroughly and, if accepted, will be incorporated in the Bill and the subsidiary legislation.

FEEDBACK CHANNEL

11. We request that all interested parties submit your comments using the template, through email to pc_mmtbill@mof.gov.sg.

SUMMARY OF RESPONSE

12. We will publish a summary of the main comments received on the Ministry of Finance’s website, together with our responses, in September 2024. The identities of respondents will not be disclosed in the summary.

DOCUMENTS TO DOWNLOAD

13. Please refer below to the proposed Multinational Enterprise (Minimum Tax) Bill and the accompanying Explanatory Statement for details of the proposed DTT and MTT provisions, and the proposed changes to the ITA, as well as the proposed subsidiary legislation. Annex A provides a brief description of the proposed changes to the ITA.

14. Please click on the links below to download the relevant documents for this public consultation. 

Other useful references:

• You may obtain a copy of the Income Tax Act https://sso.agc.gov.sg

• For more details on the tax changes, you may refer to the circulars on IRAS’ website.

¹An internationally agreed information return that will provide tax administrations with information required to perform risk assessments on the constituent entity’s liability to top-up tax. It includes identification of constituent entities, corporate structure of the MNE group, information necessary to compute ETR, top-up tax, allocation of top-up tax and record of elections made.

² A tax return that is filed by parent entities that are liable to MTT. It contains the MNE group’s assessment of the MTT liability in Singapore.

³ Subsidiary legislation on other details of DTT and MTT will be made available at a later date.

Entire Bill [PDF, 784 KB]

Clause 1 to 94 [PDF, 708 KB]

Explanatory Statement [PDF, 147 KB]

Subsidiary Legislation on the determination of GloBE income or loss and adjusted covered taxes [PDF, 379 KB]

Annex A Proposed Changes to the ITA under the proposed Multinational Enterprise (Minimum Tax) Bill [PDF, 114 KB]

Template for Submission of Comments xlsx, 21 KB]