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The Future of Taxation for Singapore Business Industry

The Organization for Economic Co-operation and Development (OECD) released its blueprints for tackling the Future of Taxation challenges associated with digitalization in 2020. The Two Pillar approach proposes a global minimum tax on profits and a top-up tax on MNEs in any jurisdiction where their effective tax rate is below 15%. The subject-to-tax rule (STTR) will also apply to certain cross-border related party payments not subject to tax in the jurisdiction of the payee. With BEPS 2.0 and the rapidly evolving global tax landscape, taxpayers must prepare for increased tax enforcement.

Singapore was ranked second by the World Bank in 2019 as the most accessible country to do business in due to its low corporate tax rate and strong financial incentives. It is likely to generate additional income through Pillar One but may lose traction with foreign direct investments if it loses traction with Pillar Two. In addition, if a top-up tax is not imposed in Singapore, the Immediate/Ultimate Parent Entity jurisdiction may get the right to tax the balance tax.