SINGAPORE Trends and Developments Contributed by: Lee Woon Shiu and Cheung Kuan Swan (Catherine), DBS Private Bank
The implementation of Pillar Two of the Base Erosion and Profit Shifting (BEPS) 2.0 (Pillar Two BEPS 2.0) A major global development influencing Singapore’s corporate tax landscape is the OECD’s Base Erosion and Profit Shifting (BEPS) 2.0 framework which intro - duces a global minimum effective tax rate of 15% for large multinational enterprises (MNEs) with glob - al annual consolidated revenues of EUR750 million (approximately SGD1.1 billion) or more. Implications for Singapore Singapore has begun the implementation of the Pil - lar Two BEPS 2.0 initiative through the Multinational Enterprise (Minimum Tax) Act 2024 (MMT Act), which became effective for financial years starting on or after 1 January 2025. The MMT Act primarily implements (i) the Domestic Top-Up Tax (DTT) and (ii) the Multinational Enterprise (MNE) Top-Up Tax (MTT), which is Singapore’s version of the income inclusion rule (IRR). These measures ensure a minimum effective tax rate (ETR) of 15% on MNE profits within Singapore for groups with consoli - dated revenues exceeding EUR750 million. The DTT allows Singapore the first right to collect a “top-up” tax from MNEs operating within Singapore if these entities pay an effective tax rate (ETR) of less than 15% on their Singapore profits, thereby safe - guarding Singapore’s taxing rights. The MTT enables Singapore to collect top-up tax from Singapore-parented MNEs that have subsidiaries in foreign jurisdictions where the ETR is below 15%. Where the source country does not have a DTT and the local tax is still below 15%, the parent’s home country applies the IIR to collect the remaining tax. While these components are put in place to achieve the 15% minimum ETR globally, it is important to note that the full scope of Pillar Two, including components like the Undertaxed Profits Rule (UTPR), may involve further phased implementation or have different effec - tive dates in various jurisdictions.
The introduction of the Philanthropy Tax Incentive Scheme (PTIS) in January 2024 and Overseas Human - itarian Assistance Tax Deduction Scheme (OHAS) in January 2025 marked a significant shift in this policy, specifically allowing for tax deductions on certain overseas donations under defined conditions. The PTIS, effective from 1 January 2024, allows qualify - ing SFOs to claim a 100% tax deduction for overseas donations made through qualifying local intermediar - ies, capped at 40% of their statutory income. Similarly, OHAS, piloted from 1 January 2025 to 31 December 2028, grants a 100% tax deduction for qualifying cash donations made towards approved overseas emer - gency humanitarian assistance causes through des - ignated charities, also capped at 40% of the donor’s statutory income. These new schemes explicitly changed the long- standing principle that donations to foreign charities would not qualify for tax deductions. The Not-for-Profit Organisation Tax Incentive (NPOTI), a tax scheme introduced in 2007 to attract organisa - tions that add economic value, offers tax exemptions to qualifying NPOs on their income for up to ten years and this scheme was recently extended to 31 Decem - ber 2032. The Corporate Volunteer Scheme (CVS) which is to be extended to 31 December 2029, is a government initiative that allows businesses to claim a 250% tax deduction on qualifying expenditure such as employee wages, transportation and material costs when they volunteer with registered IPCs. The CVS, enhanced in 2024 to encourage corporate social responsibility, covers virtual and off-site activities, with a capped expenditure of SGD100,000 per IPC annually. Through these measures, Singapore aims to attract philanthropic capital, encouraging sustained contribu - tions from individuals, corporations and family offices, ensuring that charitable donations are utilised effec - tively and solidifying its reputation as an attractive base for international philanthropy.
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