Three strategies to mitigate BEPS 2.0's tax impact for MNEs

Should the directive be implemented, selected MNES will be subject to a global minimum tax of 15%.

Multinational enterprises (MNEs) with revenues exceeding US$1.1b (€750m) are confronted with challenges due to the implementation of the Base Erosion and Profit Shifting (BEPS) 2.0 framework, particularly the introduction of a 15% global minimum tax rate. This rate is aimed at preventing tax base erosion and profit shifting by ensuring MNEs pay a minimum amount of tax on their earnings, regardless of where they choose to locate their profits.

In anticipation of further global tax reforms, Singapore plans to adopt the BEPS 2.0, or the second phase of rules for business financial years starting on or after 1 January 2025, according to the Ministry of Finance. This next phase is anticipated to influence at least 1,800 MNEs operating in the country.

To navigate the challenges of the new tax directive and mitigate its impact, KPMG experts Harvey Koenig and Yong Jiahao propose three strategies.

QRTC Scheme

One way for Singapore to offset the effects of the tax directive is to introduce a Qualified Refundable Tax Credits (QRTC) scheme.