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The GloBE Rules provide for a co-ordinated system of taxation intended to ensure large multinational enterprise (MNE) groups pay a minimum level of tax on the income arising in each of the jurisdictions where they operate. It does so by imposing a top-up tax on profits arising in a jurisdiction whenever the effective tax rate (ETR), determined on a jurisdictional basis, is below the minimum rate of 15%.
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Introduction to the GloBE Rules

Under the Organisation for Economic Co-operation and Development (“OECD”)/ G20’s Inclusive Framework on Base Erosion and Profit Shifting (“BEPS”), jurisdictions are collaborating on the implementation of measures to tackle tax avoidance, improve the coherence of international tax rules and ensure a more transparent tax environment. 

Singapore is a member of the Inclusive Framework (“IF”) and was among more than 135 jurisdictions which joined a multilateral consensus reached on 8 October 2021 to reform international taxation rules and ensure that MNEs pay a fair share of tax wherever they operate. A two-pillar solution (commonly known as BEPS 2.0) under the consensus seeks to address the tax challenges arising from the digitalisation of the economy. 

Pillar 2 comprises two components – GloBE rules and Subject To Tax (“STTR”) Rule. As part of Pillar Two under BEPS 2.0, the GloBE Model Rules (also known as GloBE Rules) and its Commentary were released on 20 December 2021 and 14 March 2022, respectively.

What are the GloBE Rules?

The GloBE Rules are designed to ensure that large MNE groups operating in more than one jurisdiction pay a minimum level of tax on the income arising in each jurisdiction where they operate in. This is achieved by applying a system of top-up taxes that brings the total amount of taxes paid on an MNE group’s excess profits in a jurisdiction up to the minimum rate of 15%.

The GloBE Rules comprise two rules - the Income Inclusion Rule (“IIR”) and the Undertaxed Profits Rule (“UTPR”). The IIR is the primary rule. It imposes a top-up tax on a relevant parent entity of an MNE group with respect to its ownership interests in a low-taxed constituent entity (“LTCE”) that has an ETR (determined for the MNE Group on a jurisdictional basis) below 15%. The UTPR serves as a backstop to the IIR, where a top-up tax would be collected in the jurisdictions which the MNE group operates and where UTPR has been adopted, if no top-up tax is collected from the parent entity under the IIR (as the parent entity jurisdiction does not implement an IIR). This is done by way of denying deductions or by imposing tax in the form of an equivalent adjustment.

The GloBE Rules also recognise that jurisdictions may introduce domestic minimum top-up taxes to bring the ETR of LTCEs operating in those jurisdictions up to 15%. Where such taxes are regarded as a Qualified Domestic Minimum Top-up Tax under the GloBE rules, they would reduce the top-up tax in respect of those LTCEs that would otherwise be brought into charge under the IIR or UTPR.

Implementation of the IIR and DTT in Singapore

In Budget 2024, Singapore announced that it will implement the IIR and a domestic minimum top-up tax (known as “DTT” in Singapore) from businesses’ financial years starting on or after 1 January 2025. The implementation of the UTPR will be considered at a later stage.

The IIR and DTT will apply to MNE groups with annual revenues of at least €750 million in the consolidated financial statements of the ultimate parent entity (“UPE”) in at least two out of the four financial years immediately preceding the financial year in which the IIR and DTT would apply. For example, in determining whether IIR and DTT would apply to an MNE group in the financial year 2025, the relevant financial years for purposes of applying the revenue threshold would be 2021 – 2024.

You can refer here for more information on the GloBE Rules and DTT. Businesses are also encouraged to refer to the GloBE Model Rules, Commentary and accompanying administrative guidance released by the OECD for further information and guidance.

Implementation of the Side-by-Side package in Singapore

On 5 January 2026, the IF agreed on a Side-by-Side package comprising the following:

  1. A Simplified ETR Safe Harbour;
  2. An extension of the Transitional Country-by-Country Reporting (“CbCR”) Safe Harbour to financial years beginning on or before 31 December 2027 but not including a financial year that ends after 30 June 2029;
  3. A Substance-based Tax Incentive Safe Harbour; and
  4. A Side-by-Side system comprising a Side-by-Side Safe Harbour and a UPE Safe Harbour.

Singapore will implement the Side-by-Side package in accordance with the IF’s agreement. Singapore will extend the Transitional CbCR Safe Harbour as per the IF’s agreed extended timeline and adopt, with effect for financial years commencing on or after 1 January 2026, the Substance-based Tax Incentive Safe Harbour and the Side-by-Side Safe Harbour under the Side-by-Side system. As Singapore has not implemented the UTPR, there is no need for Singapore to adopt the UPE Safe Harbour.

Singapore will implement the Simplified ETR Safe Harbour from financial years commencing on or after 31 December 2026, per the applicability date provided under the Side-by-Side package. For DTT purposes, MNE groups may elect to use either Singapore’s local financial accounting standards or an Acceptable Financial Accounting Standard (as defined in the GloBE Model Rules) that is used in the preparation of their consolidated financial statements (“CFS”), subject to the requirements for the election under the Simplified ETR Safe Harbour.


Substance-based Tax Incentive Safe Harbour

The Substance-based Tax Incentive Safe Harbour allows an MNE group to treat qualified tax incentives (“QTIs”) as an addition to the adjusted covered taxes of its constituent entities located in a jurisdiction, for the purposes of calculating the ETR for that jurisdiction. The adjustment is limited by a substance cap, which is equal to 5.5% of the greater of the MNE group’s eligible payroll costs or depreciation of its eligible tangible assets with respect to the jurisdiction. On an elective basis for at least five consecutive financial years, the MNE group can use an alternative cap which is equal to 1% of the carrying value of eligible tangible assets in the jurisdiction. 

A QTI is a generally available tax incentive where the amount of tax incentive is calculated based on the expenditure incurred or on the volume of tangible property produced in the jurisdiction. QTIs do not include income-based tax incentives. In addition, an MNE group may elect to treat a Qualified Refundable Tax Credit (“QRTC”) or a Marketable Transferable Tax Credit (“MTTC”), in the financial year when the QRTC or MTTC accrues in the financial statements, as a tax incentive. 

 

QTIs in Singapore 

Under the Administrative Guidance on the Substance-based Tax Incentive Safe Harbour, enhanced deductions (including enhanced allowances), as well as investment allowances that operate as a tax exemption of an amount of income calculated directly by reference to the amount of capital expenditure incurred, can qualify as QTIs.

The Administrative Guidance also provides that a deduction of the expenditure incurred (“base deduction”) can qualify as a QTI when the expenditure would otherwise be non-deductible under the domestic tax law. Under Singapore’s Income Tax Act 1947, expenditures are generally non-deductible under section 14 or 15 if they are capital in nature or are not wholly and exclusively incurred in the production of income. Therefore, a base deduction allowed for such non-deductible expenditures can qualify as a QTI where the deduction has been specifically allowed in tax legislation with a policy intent to nudge or incentivise desirable behaviour or activity that advances Singapore’s economic development or social objectives. Allowing a deduction for such expenditures goes beyond recognising the cost of doing business as it encourages desirable activities that would otherwise not occur at the same level without the base deduction.

Please refer to the list of QTIs determined based on the Administrative Guidance and above principles.

Useful documents and materials

The GloBE Model Rules and its Commentary were released by the OECD on 20 December 2021 and 14 March 2022, respectively. Some other relevant documents published by the OECD have also been listed below for reference. As discussions at the IF are still ongoing, please refer to OECD’s website for the release of any future internationally agreed documents and guidance.

If you have any questions on the GloBE Rules or DTT, please contact us at IRAS_Pillar_Two@iras.gov.sg.

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