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 Domestic Top-up Tax (“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. In this regard, the Multinational Enterprise (Minimum Tax) Act 2024 and the Multinational Enterprise (Minimum Tax) Regulations 2024 will be amended by end-2026, subject to the Singapore Parliament’s approval. The amendments will extend the Transitional CbCR Safe Harbour 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. Amendments will be made to the Multinational Enterprise (Minimum Tax) Regulations 2024 to implement the Safe Harbour. 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.

Further guidance on the implementation of the Substance-based Tax Incentive Safe Harbour will be provided in the 2nd half of 2026.

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 [email protected].

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