S’pore needs to keep up with global tax changes to stay competitive in tough times: Jeffrey Siow

SINGAPORE - To remain a choice location for businesses to expand and invest, despite a challenging economic landscape, Singapore must keep its tax system up to date, responsive to industry needs and aligned with global developments, said Senior Minister of State for Finance Jeffrey Siow.

Presenting in Parliament the Finance (Income Taxes) Bill for second reading, Mr Siow said on Nov 6 that the bulk of the proposed amendments in the Bill will help respond to intensifying geopolitical rivalries, sharper economic competition, home-shoring of key industries and companies by some countries, and fiercer competition for investment.

He said the global tax and tariff rules continue to evolve, creating uncertainty and complicating companies’ decisions on when and where to invest.

Hence, the Bill introduced amendments to the Multinational Enterprise (Minimum Tax) Act to incorporate updates to the Pillar Two rules under the international Base Erosion and Profit Shifting (BEPS) 2.0 initiative. The amendments were passed in the House on Nov 6.

The Multinational Enterprise (Minimum Tax) Act came into effect in January in line with the international initiative to combat BEPS, which refers to tax-planning strategies that multinational companies use to exploit gaps and mismatches in tax rules to artificially shift profits to low- or no-tax jurisdictions.

“The provisions in the Bill will update our tax regime to strengthen our economic competitiveness, provide more clarity to businesses, and give more support to companies and individuals,” said Mr Siow.

In 2024, Singapore’s Parliament approved the implementation of the Domestic Top-up Tax

and the Multinational Enterprise Top-up Tax under the Pillar Two rules of the Organisation for Economic Cooperation and Development (OECD).

The rules require large multinational enterprises to pay a minimum effective tax rate of 15 per cent, wherever they operate.

“Our implementation of the Pillar Two rules is aligned with the global implementation of these rules. Major economies such as the EU, the UK and Japan have already implemented them,” said Mr Siow.

Both top-up taxes apply to businesses’ financial years commencing on or after Jan 1, 2025.

The Bill will also incorporate new technical clarifications issued by the OECD.

“This will provide certainty to businesses, ease their compliance burdens, and most importantly, relieve them from having to pay Pillar Two taxes elsewhere in respect of their Singapore operations.”

Mr Siow said the Government is closely monitoring international developments regarding the global tax regime, and if necessary, will review its approach.

Such monitoring is needed after negotiations on the parameters of Pillar Two have reopened following the June 2025 Group of Seven statement on the development of a “side-by-side” system that will exempt US-parented multinational enterprises from specific Pillar Two rules.

“At this point, discussions at the OECD Inclusive Framework are ongoing. It is unclear what the final outcome will be, and how other jurisdictions and affected businesses will respond,” said Mr Siow.

However, he said that for now, Singapore’s considerations for the implementation of the Domestic Top-up Tax and the Multinational Enterprise Top-up Tax remain valid.

“We are, therefore, proceeding with the implementation of Pillar Two taxes so that we do not cede tax revenue to other Pillar Two-implementing jurisdictions, and at the same time, we provide tax certainty for multinational enterprises to plan their investments,” he noted.

The Finance (Income Taxes) Bill will also bring into legal effect several tax measures announced in the 2025 Budget, as well as other changes to Singapore’s tax system following close consultations with the industry, Mr Siow said.

These tax measures include incentives recommended by the Equities Market Review Group, established by the Monetary Authority of Singapore, to strengthen the competitiveness of Singapore’s stock market.

They also include amendments to personal income tax that provide stronger support to Singapore workers, such as a 60 per cent tax rebate for all tax-resident individuals for the Year of Assessment 2025, capped at $200 per taxpayer.

This measure was announced in Budget 2025 as part of the SG60 package, and is granted automatically to eligible taxpayers.

For businesses, amendments to corporate income tax rules will provide a 100 per cent tax deduction for expenses incurred on green certificates or credits that are surrendered or retired.

Mr Siow said the corporate income tax amendments ensure that Singapore’s tax system remains responsive to business needs and practices.

He said the tax deductions on green certificates were in response to feedback from businesses for more support for their sustainability journeys.