BEPS explainer
As a responsible international tax jurisdiction, Singapore works with global partners such as the Organisation for Economic Co-operation and Development (OECD)/G20 Base Erosion and Profit Shifting (BEPS) Project to address tax avoidance by multinational enterprises.
Last updated 14 November 2025
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What is the OECD/G20 BEPS Project?
BEPS refers to tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to locations with no/low tax rates and no/little economic activity. Since 2013, there have been coordinated efforts to strengthen international cooperation in taxation matters, to tackle harmful practices and combat tax avoidance by multinational enterprises (MNEs). The G20 had tasked the OECD to study and deal with the issue of BEPS by MNEs. In 2015, the OECD published its study and action plan on BEPS.
To ensure a consistent and co-ordinated implementation of the BEPS recommendations and greater inclusivity, OECD/G20 broadened its BEPS discussion to include more jurisdictions through the Inclusive Framework (IF) on BEPS.
Singapore was one of the first few non-G20 and non-OECD countries to join the IF, and has been actively involved in these international discussions. In October 2021, the IF released a Statement on a Two-Pillar solution to address the tax challenges arising from the digitalisation of the economy commonly known as BEPS 2.0.
Why does BEPS matter for Singapore?
As a small, open economy, Singapore depends on global trade and investment flows. Clear, fair tax rules support businesses based here and protect jobs.
At the same time, Singapore must play its role as a responsible international financial business centre—helping prevent tax evasion while keeping our system competitive.
What are the two Pillars under BEPS 2.0?
Pillar One – Reallocating profits and taxes
Currently, jurisdictions where MNEs conduct their economic activities (e.g. manufacturing, strategic decision making) have the right to tax MNEs on the profits attributable to these activities. To ensure the right level of profits are allocated to their jurisdiction, many jurisdictions (including Singapore) have transfer pricing rules on cross-border transactions between related parties.
Pillar One seeks to re-allocate some profits and in turn, taxes, from where the economic activities are conducted to where the markets (i.e. the customers) are. This is the case even if profits are currently allocated in line with transfer pricing rules.
Affected MNE groups are required to re-allocate 25% of their residual profits (i.e. profits in excess of 10% of their global revenue) to the jurisdictions where the markets are.
Some jurisdictions may have to give up taxing rights over more than 25% of their residual profits. This can happen because the method used to determine the amount to be re-allocated may lead to certain jurisdictions having to surrender more.
Pillar Two – A global minimum effective tax rate
MNEs pay different effective tax rates (ETRs) in the different jurisdictions that they operate in, depending on the types of economic activities conducted and the domestic corporate tax regime.
Pillar Two introduces a minimum ETR of 15% via the Global Anti-Base Erosion (GloBE) Model Rules, for large MNE groups.
If an MNE has an ETR of less than 15% in any jurisdiction at the group level, other implementing jurisdictions can collect the difference of up to 15%.
Pillar Two also includes a Subject-to-Tax Rule (STTR), which allows one jurisdiction, under certain circumstances, to impose additional tax of up to 9% on certain payments (such as interest and royalty) that an entity makes from the jurisdiction to related entities in another jurisdiction, if that payment is taxed at less than 9% in the other jurisdiction.
How is Singapore implementing BEPS 2.0?
Singapore has implemented the Domestic Top-up Tax (DTT) and the Multinational Enterprise Top-up Tax (MTT - which implements the Income Inclusion Rule (IIR)).
Imposes a minimum ETR of 15% on large MNE groups from businesses’ financial years starting on or after 1 January 2025.
Applies to MNE groups with annual group revenue of 750 million euros or more in at least two of the four preceding financial years.
These measures ensure that large MNEs operating in Singapore do not have to pay Pillar Two taxes in respect of their Singapore operations to other jurisdictions that have implemented Pillar Two regimes.
💡 What are DTT and IIR?
DTT: Allows a jurisdiction to top up the tax collected from MNE groups operating in its jurisdiction to 15%.
IIR: Allows the parent or intermediate parent jurisdiction of an MNE group to collect top-up tax, if the minimum ETR in the subsidiary jurisdiction is less than 15%.
What does BEPS 2.0 mean for Singapore’s economy?
It is difficult to assess the revenue impact of BEPS 2.0:
Pillar One will result in a loss of revenue, as Singapore will have to give up some taxing rights over profits from economic activities conducted here, but will receive very little in return due to our small domestic market.
Pillar Two may yield some additional revenue from FY2027 onwards, but how sustainable this is is largely dependent on whether MNEs continue to find it attractive to remain invested in Singapore. Globally, MNEs are re-evaluating their plans and strategies, while other governments are also enhancing and refreshing their promotion toolkits to attract investments.
Investment environment:
Tax competition may be reduced, but not competition for investments.
In an environment where companies are subject to a minimum level of tax wherever they operate, ecosystem factors will become increasingly important for companies’ business decisions.
Therefore, Singapore will refresh our investment promotion toolkit, and invest significantly to enhance our overall business environment, in areas such as upskilling our workforce, growing a vibrant innovation ecosystem and providing quality infrastructure and connectivity, to ensure that we remain competitive in a post-BEPS 2.0 world.