§ 24 — Top‑up tax for investment entities and insurance investment entities

24.—(1) In this Part, the top‑up tax for a financial year for a relevant entity of a chargeable entity that is an investment entity or insurance investment entity, is the top‑up amount of the entity for the financial year.(2) In this Part, an investment entity or insurance investment entity has a top‑up amount for a financial year if the amount determined under subsection (3) or (4) is a positive amount.

Computation of Top‑up amount: General

(3) If the sum of the allocable GloBE income or loss for a financial year of all constituent entities of an MNE group that are investment entities or insurance investment entities located in a single jurisdiction is a positive amount, the top‑up amount for that financial year of each of those entities is determined by the formula where —(a)

A is the jurisdictional top‑up amount (as determined in accordance with subsection (5)) for all those entities for that financial year;

(b)

B is the allocable GloBE income or loss of the entity for that financial year if the entity has a positive amount of allocable GloBE income or loss for that financial year, otherwise B is nil; and

(c)

C is the sum of the allocable GloBE income or loss for that financial year of each of those entities that has a positive amount of allocable GloBE income or loss for that financial year.

(4) If the sum of the allocable GloBE income or loss for a financial year of all constituent entities of an MNE group that are investment entities or insurance investment entities located in a jurisdiction is nil or a negative amount, the top‑up amount for that financial year of each of those entities is determined by any of the following formulae (whichever is applicable):(a)

if the jurisdiction has an additional current top‑up amount under section 21(1) (as applied by subsection (13)) but not under section 21(4) (as applied by subsection (13)): where —(i)

A has the meaning given by subsection (3)(a);

(ii)

D is nil if the allocable GloBE income or loss of the entity for that financial year is a positive amount or the adjusted covered taxes for that entity for that financial year is nil or a positive amount, otherwise D is the amount determined by multiplying the allocable GloBE income or loss (being nil or a negative amount) of that entity for that financial year by 15% and then deducting the adjusted covered taxes (being a negative amount) for that entity for that financial year, except that if the resulting amount is negative, D is nil; and

(iii)

E is the sum of D for each of those entities;

(b)

if the jurisdiction has an additional current top‑up amount under section 21(4) (as applied by subsection (13)) but not under section 21(1) (as applied by subsection (13)) and the recalculation in section 21(4) is only made for one previous financial year: where —(i)

A has the meaning given by subsection (3)(a);

(ii)

F is the allocable GloBE income or loss of that entity for the previous financial year, except that if the allocable GloBE income or loss for the previous financial year is a negative amount, F is nil; and

(iii)

G is the sum of F for each of those entities;

(c)

in any other case, in accordance with the applicable formula prescribed in the regulations.

Jurisdictional Top‑Up Amount

(5) In subsection (3), the jurisdictional top‑up amount for all constituent entities of an MNE group that are investment entities or insurance investment entities located in a jurisdiction for a financial year is determined by the formula (H × I) + J – K, where —(a)

H is the top‑up tax percentage for those entities for that financial year as determined in accordance with subsection (6);

(b)

I is the excess profits of those entities for that financial year as determined in accordance with subsection (11);

(c)

J is the additional current top‑up amount as determined in accordance with section 21 (as applied by subsection (13)) for those entities for that financial year; and

(d)

K is the qualified domestic minimum top‑up tax imposed by the law of that jurisdiction in respect of those entities for that financial year, but —(i)

excluding any amount —(A)

contested in any judicial or administrative proceedings in that jurisdiction; or

(B)

determined by the tax authority of that jurisdiction to be not assessable or collectible,

on constitutional or similar grounds in that jurisdiction or any specific agreement with the government of that jurisdiction limiting the tax liability of those entities; and

(ii)

including any amount excluded by a previous application of sub‑paragraph (i) but determined to be payable for that financial year.

Top‑Up Tax Percentage

(6) In subsection (5), the top‑up tax percentage for constituent entities of an MNE group that are investment entities or insurance investment entities located in a jurisdiction for a financial year is determined by the formula L − M, where —(a)

L is the minimum rate; and

(b)

M is the effective tax rate for those entities for that financial year as determined in accordance with subsection (7),

and if the percentage so determined is nil or less, the top‑up tax percentage for those constituent entities for that financial year is nil.

Effective Tax Rate

(7) Subject to subsections (8), (9) and (10), the effective tax rate for constituent entities of an MNE group that are investment entities or insurance investment entities located in a jurisdiction for a financial year is determined by the formula where —(a)

N is the sum of the allocable adjusted covered taxes (including any negative amount of allocable adjusted covered taxes) for that financial year of those entities; and

(b)

O is the sum of the allocable GloBE income or loss for that financial year of those entities.

(8) In subsection (7), if O is nil or a negative amount, the effective tax rate for those entities for that financial year is 15%.

(9) In subsection (7), if N is a negative amount and O is a positive amount —(a)

the effective tax rate for those entities for that financial year is nil; and

(b)

N is treated as negative tax carried forward for those entities.

(10) Where, because of subsection (9) or (14), an MNE group has an amount of negative tax carried forward for its constituent entities that are investment entities or insurance investment entities located in a jurisdiction that has not been deducted under this subsection —(a)

to the extent possible, the amount of negative tax is deducted against N in subsection (7) for the next financial year in which the MNE group has a positive amount of both N and O for that jurisdiction;

(b)

N for the MNE group for that jurisdiction for that financial year is reduced accordingly (but not below nil); and

(c)

any amount remaining undeducted is to be carried forward to the financial year following that financial year, and paragraphs (a) and (b) apply with the necessary modifications in relation to that amount.

Excess Profits

(11) In subsection (5), the excess profits of constituent entities of an MNE group that are investment entities or insurance investment entities located in a jurisdiction for a financial year is determined by the formula P − Q, where —(a)

P is the sum of the allocable GloBE income or loss for that financial year of those entities; and

(b)

Q is the substance‑based income exclusion for that financial year for those entities determined in accordance with subsection (12),

and if the amount so determined is nil or less, the excess profits of those constituent entities for that financial year is nil.

(12) In subsection (11)(b), the substance‑based income exclusion for constituent entities of an MNE group that are investment entities or insurance investment entities located in a jurisdiction for a financial year is determined by applying section 18 to the MNE group for the jurisdiction with the following modifications:(a)

references to a constituent entity (not being a special entity) are references to a constituent entity that is an investment entity or insurance investment entity;

(b)

the eligible payroll cost of a constituent entity for the financial year is adjusted by S in the definition of “allocable GloBE income or loss” in subsection (16);

(c)

the carrying value of the eligible tangible assets of a constituent entity for the financial year is adjusted by S as mentioned in paragraph (b).

Additional Current Top‑Up Amount

(13) Section 21(1) and (4) applies to determine any additional current top‑up amount for constituent entities of an MNE group that are investment entities or insurance investment entities located in a jurisdiction for a financial year with the following modifications:(a)

references to a constituent entity (not being a special entity) are references to a constituent entity that is an investment entity or an insurance investment entity;

(b)

references to the GloBE income or loss of a constituent entity (not being a special entity) are references to the allocable GloBE income or loss of a constituent entity that is an investment entity or an insurance investment entity;

(c)

references to the adjusted covered taxes of a constituent entity (not being a special entity) are references to the allocable adjusted covered taxes of a constituent entity that is an investment entity or insurance investment entity;

(d)

references to the effective tax rate for the constituent entities (not being special entities) are references to the effective tax rate for constituent entities that are investment entities or insurance investment entities.

(14) Where the filing entity of an MNE group so elects in a GloBE information return (whether filed in Singapore or another jurisdiction) —(a)

any additional current top‑up amount computed under section 21(1) (as applied by subsection (13)) that applies to constituent entities of the MNE group that are investment entities or insurance investment entities located in a jurisdiction for a financial year, that is not attributable (in accordance with the regulations) to the carry back of losses, is treated as negative tax carried forward for those entities; and

(b)

the amount that is so attributable to the carry back of losses is treated as an additional current top‑up amount under section 21(1) (as applied by subsection (13)) that applies to those entities for that financial year.

(15) Subsection (10) applies to the amount of negative tax carried forward under subsection (14)(a).

Definitions

(16) In this section —“allocable adjusted covered taxes”, in relation to an investment entity or insurance investment entity, means the adjusted covered taxes of the entity (determined in accordance with paragraph 1 of the First Schedule) that is attributable to its allocable GloBE income or loss;

“allocable GloBE income or loss”, in relation to an investment entity or insurance investment entity, means the amount determined by the formula R × S, where —(a)

R is the GloBE income or loss of the entity determined in accordance with paragraph 6 of the First Schedule; and

(b)

S is the inclusion ratio determined in accordance with section 15 and any regulations mentioned in subsection (18) as if the ultimate parent entity of the MNE group were the chargeable entity in respect of the entity.

Regulations

(17) The Minister may make regulations under section 84 to modify the application of this Part in a case where an election is made in a GloBE information return (whether filed in Singapore or another jurisdiction) by a filing entity of an MNE group to —(a)

treat a constituent entity that is an investment entity or insurance investment entity as a flow‑through entity; or

(b)

make adjustments to the GloBE income or loss for a financial year of a constituent entity that is an investment entity or insurance investment entity (T), and one or more other constituent entities (not being investment entities or insurance investment entities) that hold a direct ownership interest in T, based on the distributions made by T in the financial year.

(18) The Minister may also make regulations under section 84 to provide for —(a)

the recalculation, in a subsequent financial year, of the effective tax rate for constituent entities of an MNE group that are investment entities or insurance investment entities located in a jurisdiction for a financial year in accordance with the GloBE rules; and

(b)

the computation of S in the definition of “allocable GloBE income or loss” in subsection (16) in accordance with the GloBE rules.

—(1) In this Part, the top‑up tax for a financial year for a relevant entity of a chargeable entity that is an investment entity or insurance investment entity, is the top‑up amount of the entity for the financial year.

(2) In this Part, an investment entity or insurance investment entity has a top‑up amount for a financial year if the amount determined under subsection (3) or (4) is a positive amount.

(3) If the sum of the allocable GloBE income or loss for a financial year of all constituent entities of an MNE group that are investment entities or insurance investment entities located in a single jurisdiction is a positive amount, the top‑up amount for that financial year of each of those entities is determined by the formula where —(a)

A is the jurisdictional top‑up amount (as determined in accordance with subsection (5)) for all those entities for that financial year;

(b)

B is the allocable GloBE income or loss of the entity for that financial year if the entity has a positive amount of allocable GloBE income or loss for that financial year, otherwise B is nil; and

(c)

C is the sum of the allocable GloBE income or loss for that financial year of each of those entities that has a positive amount of allocable GloBE income or loss for that financial year.

(4) If the sum of the allocable GloBE income or loss for a financial year of all constituent entities of an MNE group that are investment entities or insurance investment entities located in a jurisdiction is nil or a negative amount, the top‑up amount for that financial year of each of those entities is determined by any of the following formulae (whichever is applicable):(a)

if the jurisdiction has an additional current top‑up amount under section 21(1) (as applied by subsection (13)) but not under section 21(4) (as applied by subsection (13)): where —(i)

A has the meaning given by subsection (3)(a);

(ii)

D is nil if the allocable GloBE income or loss of the entity for that financial year is a positive amount or the adjusted covered taxes for that entity for that financial year is nil or a positive amount, otherwise D is the amount determined by multiplying the allocable GloBE income or loss (being nil or a negative amount) of that entity for that financial year by 15% and then deducting the adjusted covered taxes (being a negative amount) for that entity for that financial year, except that if the resulting amount is negative, D is nil; and

(iii)

E is the sum of D for each of those entities;

(b)

if the jurisdiction has an additional current top‑up amount under section 21(4) (as applied by subsection (13)) but not under section 21(1) (as applied by subsection (13)) and the recalculation in section 21(4) is only made for one previous financial year: where —(i)

A has the meaning given by subsection (3)(a);

(ii)

F is the allocable GloBE income or loss of that entity for the previous financial year, except that if the allocable GloBE income or loss for the previous financial year is a negative amount, F is nil; and

(iii)

G is the sum of F for each of those entities;

(c)

in any other case, in accordance with the applicable formula prescribed in the regulations.

(5) In subsection (3), the jurisdictional top‑up amount for all constituent entities of an MNE group that are investment entities or insurance investment entities located in a jurisdiction for a financial year is determined by the formula (H × I) + J – K, where —(a)

H is the top‑up tax percentage for those entities for that financial year as determined in accordance with subsection (6);

(b)

I is the excess profits of those entities for that financial year as determined in accordance with subsection (11);

(c)

J is the additional current top‑up amount as determined in accordance with section 21 (as applied by subsection (13)) for those entities for that financial year; and

(d)

K is the qualified domestic minimum top‑up tax imposed by the law of that jurisdiction in respect of those entities for that financial year, but —(i)

excluding any amount —(A)

contested in any judicial or administrative proceedings in that jurisdiction; or

(B)

determined by the tax authority of that jurisdiction to be not assessable or collectible,

on constitutional or similar grounds in that jurisdiction or any specific agreement with the government of that jurisdiction limiting the tax liability of those entities; and

(ii)

including any amount excluded by a previous application of sub‑paragraph (i) but determined to be payable for that financial year.

(6) In subsection (5), the top‑up tax percentage for constituent entities of an MNE group that are investment entities or insurance investment entities located in a jurisdiction for a financial year is determined by the formula L − M, where —(a)

L is the minimum rate; and

(b)

M is the effective tax rate for those entities for that financial year as determined in accordance with subsection (7),

and if the percentage so determined is nil or less, the top‑up tax percentage for those constituent entities for that financial year is nil.

(7) Subject to subsections (8), (9) and (10), the effective tax rate for constituent entities of an MNE group that are investment entities or insurance investment entities located in a jurisdiction for a financial year is determined by the formula where —(a)

N is the sum of the allocable adjusted covered taxes (including any negative amount of allocable adjusted covered taxes) for that financial year of those entities; and

(b)

O is the sum of the allocable GloBE income or loss for that financial year of those entities.

(8) In subsection (7), if O is nil or a negative amount, the effective tax rate for those entities for that financial year is 15%.

(9) In subsection (7), if N is a negative amount and O is a positive amount —(a)

the effective tax rate for those entities for that financial year is nil; and

(b)

N is treated as negative tax carried forward for those entities.

(10) Where, because of subsection (9) or (14), an MNE group has an amount of negative tax carried forward for its constituent entities that are investment entities or insurance investment entities located in a jurisdiction that has not been deducted under this subsection —(a)

to the extent possible, the amount of negative tax is deducted against N in subsection (7) for the next financial year in which the MNE group has a positive amount of both N and O for that jurisdiction;

(b)

N for the MNE group for that jurisdiction for that financial year is reduced accordingly (but not below nil); and

(c)

any amount remaining undeducted is to be carried forward to the financial year following that financial year, and paragraphs (a) and (b) apply with the necessary modifications in relation to that amount.

(11) In subsection (5), the excess profits of constituent entities of an MNE group that are investment entities or insurance investment entities located in a jurisdiction for a financial year is determined by the formula P − Q, where —(a)

P is the sum of the allocable GloBE income or loss for that financial year of those entities; and

(b)

Q is the substance‑based income exclusion for that financial year for those entities determined in accordance with subsection (12),

and if the amount so determined is nil or less, the excess profits of those constituent entities for that financial year is nil.

(12) In subsection (11)(b), the substance‑based income exclusion for constituent entities of an MNE group that are investment entities or insurance investment entities located in a jurisdiction for a financial year is determined by applying section 18 to the MNE group for the jurisdiction with the following modifications:(a)

references to a constituent entity (not being a special entity) are references to a constituent entity that is an investment entity or insurance investment entity;

(b)

the eligible payroll cost of a constituent entity for the financial year is adjusted by S in the definition of “allocable GloBE income or loss” in subsection (16);

(c)

the carrying value of the eligible tangible assets of a constituent entity for the financial year is adjusted by S as mentioned in paragraph (b).

(13) Section 21(1) and (4) applies to determine any additional current top‑up amount for constituent entities of an MNE group that are investment entities or insurance investment entities located in a jurisdiction for a financial year with the following modifications:(a)

references to a constituent entity (not being a special entity) are references to a constituent entity that is an investment entity or an insurance investment entity;

(b)

references to the GloBE income or loss of a constituent entity (not being a special entity) are references to the allocable GloBE income or loss of a constituent entity that is an investment entity or an insurance investment entity;

(c)

references to the adjusted covered taxes of a constituent entity (not being a special entity) are references to the allocable adjusted covered taxes of a constituent entity that is an investment entity or insurance investment entity;

(d)

references to the effective tax rate for the constituent entities (not being special entities) are references to the effective tax rate for constituent entities that are investment entities or insurance investment entities.

(14) Where the filing entity of an MNE group so elects in a GloBE information return (whether filed in Singapore or another jurisdiction) —(a)

any additional current top‑up amount computed under section 21(1) (as applied by subsection (13)) that applies to constituent entities of the MNE group that are investment entities or insurance investment entities located in a jurisdiction for a financial year, that is not attributable (in accordance with the regulations) to the carry back of losses, is treated as negative tax carried forward for those entities; and

(b)

the amount that is so attributable to the carry back of losses is treated as an additional current top‑up amount under section 21(1) (as applied by subsection (13)) that applies to those entities for that financial year.

(15) Subsection (10) applies to the amount of negative tax carried forward under subsection (14)(a).

(16) In this section —“allocable adjusted covered taxes”, in relation to an investment entity or insurance investment entity, means the adjusted covered taxes of the entity (determined in accordance with paragraph 1 of the First Schedule) that is attributable to its allocable GloBE income or loss;

“allocable GloBE income or loss”, in relation to an investment entity or insurance investment entity, means the amount determined by the formula R × S, where —(a)

R is the GloBE income or loss of the entity determined in accordance with paragraph 6 of the First Schedule; and

(b)

S is the inclusion ratio determined in accordance with section 15 and any regulations mentioned in subsection (18) as if the ultimate parent entity of the MNE group were the chargeable entity in respect of the entity.

(17) The Minister may make regulations under section 84 to modify the application of this Part in a case where an election is made in a GloBE information return (whether filed in Singapore or another jurisdiction) by a filing entity of an MNE group to —(a)

treat a constituent entity that is an investment entity or insurance investment entity as a flow‑through entity; or

(b)

make adjustments to the GloBE income or loss for a financial year of a constituent entity that is an investment entity or insurance investment entity (T), and one or more other constituent entities (not being investment entities or insurance investment entities) that hold a direct ownership interest in T, based on the distributions made by T in the financial year.

(18) The Minister may also make regulations under section 84 to provide for —(a)

the recalculation, in a subsequent financial year, of the effective tax rate for constituent entities of an MNE group that are investment entities or insurance investment entities located in a jurisdiction for a financial year in accordance with the GloBE rules; and

(b)

the computation of S in the definition of “allocable GloBE income or loss” in subsection (16) in accordance with the GloBE rules.