SINGAPORE Trends and Developments Contributed by: Lee Woon Shiu and Cheung Kuan Swan (Catherine), DBS Private Bank
International tax agreements Singapore actively engages in international tax co- operation, maintaining an extensive network of almost 100 Double Taxation Agreements (DTAs). These DTAs, along with Exchange of Information (EOI) arrange - ments, are crucial in preventing tax evasion and ensur - ing adherence to global tax standards. Singapore has also adopted the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). This adoption demonstrates Singapore’s commitment to implementing minimum standards for preventing treaty abuse, thereby stra - tegically recalibrating its approach to maintain com - petitiveness in the global tax landscape. Relevant case law The Missing Trader Fraud (MTF) Crackdowns in Sin - gapore in 2024 and 2025 demonstrate a clear and firm direction for the nation’s tax landscape, emphasis - ing stricter compliance and enhanced accountability, particularly concerning GST. These cases involved the High Court upholding the Comptroller’s decision to deny GST input tax claims from businesses found to be part of the MTF arrangements. A key aspect reinforced by these rulings is the “Knowledge Princi - ple”, which asserts that businesses lose their right to GST refunds and face a 10% surcharge if they “knew or should have known” their transactions were part of a fraudulent chain. This signals a significant shift towards mandating rigorous due diligence for all GST- registered entities, placing a greater burden on them to ensure the legitimacy and transparency of their supply chains. The overarching message from these cases is that Singapore is adopting a proactive stance to combat tax fraud, aiming to cultivate a robust and defined tax environment that rewards legitimate economic activ - ity while simultaneously clamping down on evasion through stringent internal controls and compliance
Impact on businesses in Singapore For decades, many MNEs in Singapore enjoyed effec - tive tax rates significantly lower than the statutory 17% due to various tax incentives (eg, the PSI and DEI schemes mentioned above). In-scope MNEs that previously paid less than 15% due to incentives will now see their effective tax rate (ETR) rise to the global 15% minimum. According to the Singapore Ministry of Finance’s estimates and official Budget announcements, the Pillar Two BEPS 2.0 is projected to yield additional tax revenue from FY2027 onwards, increasing Sin - gapore’s corporate tax revenue. However, to ensure that Singapore remains an attractive headquarters location for reasons beyond tax, the government has signalled that this bigger amount of tax revenue will be reinvested into the business ecosystem with the aim of improving infrastructure, talent development and green energy transitions. The transition to Pillar Two BEPS 2.0 is not just a fis - cal shift but also an operational one. Companies will need to enhance their data management processes, register promptly with the Inland Revenue Authority of Singapore (IRAS), and closely monitor develop - ments in both local and international tax regulations. These steps are essential for maintaining compliance and strategically managing their tax obligations amid evolving global standards. Implications for the tax landscape Singapore recognises that traditional tax incentives with lower tax rates alone are becoming less effec - tive due to their benefits being offset by the global minimum tax. In response, the government is adopt - ing alternative “non-tax” measures such as the Refundable Investment Credit (RIC), which qualifies as a “qualified refundable tax credit”. Under Pillar Two BEPS 2.0 regulations, this credit is classified as income rather than a reduction in taxes, making it less likely to prompt a top-up tax compared to convention - al exemptions. Since it is regarded as income under Pillar Two BEPS 2.0 rules, the likelihood of triggering additional taxation is reduced.
frameworks. Conclusion
Singapore’s tax system continues to adapt to local and global changes and this is evident in the recent developments to its corporate and personal taxes, tax-related incentive schemes and a gradual GST hike. The city-state’s participation in international
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