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Budget 2022: Singapore studying ‘top-up’ corporate tax in response to new global minimum tax rate

GLOBAL TAX CHANGES

Discussions to revise worldwide tax guidelines and enhance the taxes paid by giant companies have been underneath approach since 2013, however gathered momentum final yr.

As of November 2021, greater than 140 international locations and jurisdictions, together with Singapore, have endorsed an settlement brokered by the Organisation for Economic Co-operation and Development to overhaul global corporate tax guidelines and battle what is named base erosion and revenue shifting (BEPS) points.  

The new tax deal includes two major pillars.

The first pillar appears to be like to reallocate revenue of the most important and most worthwhile MNEs from the place actions are carried out to the place their customers are situated.

“There are ongoing international discussions on how to determine the jurisdictions which will surrender profits for re-allocation to the markets under Pillar 1 and how much each will surrender,” mentioned Mr Wong. 

“Given our small domestic market and the extent of activities conducted here by MNEs, Singapore will lose tax revenue under Pillar 1,” he added.

The second pillar goals to set a minimum corporate tax rate of 15 per cent for MNE teams with annual global revenues of 750 million euros or extra, in order to curtail revenue shifting to lower-tax jurisdictions.

“What this means is that if such an MNE were to have an effective tax rate of less than 15 per cent in Singapore at the group level, other jurisdictions such as its home jurisdiction can collect the difference up to 15 per cent,” Mr Wong defined.

Currently, Singapore’s headline corporate tax rate is at 17 per cent however the efficient tax rate of many companies could also be decrease than that, and even the proposed global minimum, due to tax incentives awarded to these seen as useful to the nation’s financial growth, specialists have mentioned.

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