In a major development in the tax regime in Singapore, the Singapore Parliament approved two major bills on October 15, 2024. These are the Multinational Enterprise (Minimum Tax) Bill and the Income Tax (Amendment) Bill, which introduce significant changes in tax to ensure compliance with global frameworks while supporting local economic activities.
For businesses operating in Singapore, it’s imperative to remain abreast of these tax updates to ensure compliance. Consulting established companies providing professional taxation services in Singapore, enterprises can adhere to the latest regulations.
In this edition, check out what these new updates are, and how they can impact your business.
1. Multinational Enterprise (Minimum Tax) Bill
Key Features:
a. Domestic Top-up Tax (DTT)
- Targets entities in Singapore within large MNE groups.
- Imposed if the effective tax rate of the group in Singapore is below 15%.
b. Multinational Enterprise Top-up Tax (MTT)
- Applicable to MNE groups with their headquarters in Singapore.
- Imposed if the entities of the company in foreign jurisdictions have an effective tax rate below 15%.
- The MTT ensures that the global effective tax rate for the group is increased to a minimum threshold of 15%.
Compliance and Enforcement
The Comptroller of Income Tax is authorized to administer, collect, and enforce the MTT and DTT.
Offences under the new norms include:
- Failure to maintain proper records
Tax evasion - Obstruction to the duties of the Comptroller
2. Income Tax (Amendment) Bill
a. Refundable Investment Credit (RIC)
- Capital investments
- Research and development (R&D)
- Manpower training
- Freight and logistics
Eligible Activities
- Establishing or expanding manufacturing facilities
- Setting up headquarters and services operations
- Conducting R&D and innovation projects
- Commodity trading
- Decarbonization initiatives
How It Works
- Tax credits offset corporate income tax payable
- Unused credits are refunded within four years of the qualifying claim for expenditures
b. Renovation and Refurbishment (R&R) Scheme Enhancements
Standardized Expenditure Cap Period
Why These Changes Matter for Businesses
1. Global compliance
2. Encouraging investments
3. Greater flexibility
What Businesses Should Do Next?
Successful businesses are looking to adopt a proactive stance and assess the updated tax structures. For large MNEs, it’s necessary to evaluate their global tax positions and maintain compliance with the DTT and MTT requirements by 2025.
Another challenge involves detecting qualifying expenditures early to maximize benefits under the RIC framework. Forward-thinking businesses are already reaching out to leading companies providing professional taxation services in Singapore, like the IMC Group. Consulting these experts can help in optimizing their tax deductions for expenses related to renovation and refurbishments. With a trusted tax advisory partner providing accurate guidance, businesses in Singapore can remain compliant amidst the new tax regime.
