Extract B: Corporate taxation and investment in Singapore

Singapore has long relied on attractive fiscal policies to draw foreign direct investment (FDI). However, the city-state is transitioning to the OECD's Pillar Two global minimum tax framework starting in 2025. This framework imposes a 15% minimum effective tax rate on multinational enterprises (MNEs) with annual global revenues exceeding €750 million.

Historically, Singapore has offered generous concessionary tax rates of between 5% and 10% to entice major international companies—such as Dyson, Sony, and global semiconductor giants—to establish their regional headquarters there. While the headline corporate tax rate is officially 17%, the actual effective rate paid by these massive firms has often been much lower due to these targeted development incentives. It is estimated that around 1,800 multinational groups operating in Singapore will be affected by the new top-up tax to meet the 15% floor.

MNEs play an outsized role in Singapore's highly open economy. They account for approximately 26% of domestic employment, contribute over 50% of the nation's total output (GDP), and generate a significant portion of corporate income tax revenues. Analysts debate whether the loss of tax competitiveness will trigger corporate flight to other jurisdictions, or if Singapore's non-tax advantages, such as political stability and a highly skilled workforce, will be enough to retain global investment.