SINGAPORE can consider allowing businesses to pay upcoming domestic and multinational top-up taxes in interest-free instalments, to better support multinationals in navigating the minimum tax framework under Global Anti-Base Erosion Model Rules.
This was one of the proposals put forth by professional services firm Deloitte in its Budget 2025 wish list issued on Thursday (Dec 26), along with suggestions to enhance the Refundable Investment Credit (RIC) incentive scheme.
From 2025, qualifying multinational enterprises (MNEs) operating in Singapore will have to pay a minimum effective tax rate of 15 per cent on their groups’ profits, in line with Pillar 2 of the Base Erosion and Profit Shifting (BEPS) 2.0 framework.
This will apply to MNEs with consolidated annual revenues of at least 750 million euros (S$1.1 billion) over two of the preceding four financial years.
Singapore will do this through a multinational enterprise top-up tax (MTT) and a domestic top-up tax (DTT), which will bridge gaps where an MNE’s effective tax rate falls below 15 per cent, either internationally or domestically.
The DTT will ensure that Singapore-based entities meet the global minimum effective tax rate of 15 per cent, while the MTT will apply to Singapore-based companies that hold ownership interests in entities located in lower-tax jurisdictions.
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Providing MNEs the option to make payments in instalments would help them to manage cash flow during the transition, said Liew Li Mei, Deloitte Singapore’s international tax leader.
Strengthening incentives
Singapore introduced the RIC during Budget 2024 to encourage companies to make sizeable investments that bring substantive economic activities to the Republic.
The RIC is a tax credit with a refundable cash feature. To enhance its impact, Deloitte recommends that it be expanded to include offshore and regional decarbonisation projects initiated from Singapore.
The government can also consider broadening the qualifying cost categories to include cost-sharing agreements, intangible assets and depreciation of existing assets. This would provide businesses with greater flexibility to scale up impactful projects, said Yvaine Gan, Deloitte Singapore’s global investment and innovation incentives leader.
The firm also proposed raising the support rate to up to 70 per cent and allowing the RIC to be offset against other taxes payable in addition to corporate income tax, such as property and carbon taxes.
The RIC could also be tweaked to have a volume-based component, where credits are linked to production volumes. This would ensure that it is adaptable to diverse business models, added Gan.
Other proposals
Separately, Deloitte also made recommendations to streamline Singapore’s other corporate tax policies.
For instance, it proposed easing restrictions on the disposal of shares in property-holding companies to provide businesses with greater flexibility to restructure their assets.
“Current rules, such as requiring proof of no property development for an extended period, could slow down strategic decisions and limit the ability of businesses to pivot quickly in response to market conditions,” it said.
“Simplifying these requirements can enable companies to streamline operations, redeploy capital more efficiently, and manage resources effectively during periods of economic uncertainty.”
To support Singapore’s sustainability ambitions, Deloitte recommended extending the Energy Efficient Grant – which co-funds investments in energy-efficient equipment – to include a wider range of equipment and services.
It also recommended extending the Sustainability Reporting Grant – which assists large companies and small and medium enterprises with initial climate-related reporting – beyond the initial reporting year, as well as to expand eligibility.
To better attract top talent, Deloitte proposed that the employment eligibility of those with a Dependant’s Pass be broadened to beyond just spouses of holders of the Overseas Networks and Expertise Pass.
The current restrictions on eligibility limits the options for many skilled professionals, said Deloitte. Expanding the eligibility criteria would allow spouses of Employment Pass holders to work without a separate work pass, which would enhance Singapore’s appeal to foreign professionals.
