Global Minimum Tax

Impact for multinational enterprise operations



  1. As of July 2021, 132 countries agreed on a new framework to set up global minimum corporate tax rate, targeting at 15% income.
  2. Low-tax countries below the target floor rate face the risk of losing their appeal for business investments as companies re-validate existing and future legal entity and business operational structures around this development.
  3. Beyond chasing for an effective low tax rate and tax incentives in business operations, multinational enterprises will re-weight and   re-position locations of choice across a wider list of other factors. Singapore remains attractive to multinational enterprises (MNEs) on other accounts, excellent infrastructure and workforce, geographical proximity to a growing key market, political stability etc.
  4. DBS Treasury Advisory and Solutioning can partner and assist businesses to review for opportunities for transforming or enhancing finance and treasury operations related to events like this.


Global minimum tax introduction

As of July 2021, 132 countries have joined an international tax reform to establish a minimum corporate tax rate of 15%. The technical framework is expected to be finalised by October 2021 with implementation targeted to start by 2023. The goal of the global minimum tax is to discourage Multinational Enterprises (MNEs) from shifting profits and tax revenues to low-tax countries by ensuring MNEs pay its fair share of tax in jurisdictions where they generate revenue.

The international tax reform relies on a two-pillared approach1 : (1) pillar 1 seeks to ensure a fairer distribution of taxing rights among countries and reallocate some taxing rights over MNEs (revenue ≥ USD 20 billion) from their home countries to wherever they operate and earn profits, even if they do not have a physical presence in the markets. ; (2) pillar 2 introduces global minimum tax (at least 15%) to MNEs (revenue ≥ EUR 750 million) on a country-to-country basis which will defer MNEs from shifting profits to the low tax environment for tax reduction purpose. 


Impact on low-tax countries and tax incentives

Once international tax reform is enacted, we can expect a significant impact3  on low-tax jurisdictions. Low tax incentives will be neutralised as a multinational cannot benefit from reduced rate of taxation (e.g. 12.5% in country B) and need to pay a “top-up tax” in home countries to meet at least 15% minimum level. If tax reduction is the major factor for a multinational to invest in low-tax countries, this will defer the multinational from further investment. While low-tax countries are at risk of losing overseas investments, we can expect these jurisdictions to consider other forms of incentives to retain or attract foreign investments.

Singapore’s new value proposition

Singapore provides tax incentives in a bid to attract, grow and support strategic economic areas of interests as a business hub for the region and the world.  One such incentive is as the Finance and Treasury Centre (FTC) incentive, aimed at encouraging multinationals to set up regional / global treasury centres. While the international tax reform will limit the effectiveness of the  use of tax  incentives, it is believed that Singapore will continue to attract investments on account of the crucial business location factors such as political stability, rich business ecosystem, bilingual talents, robust infrastructure, and strong connection to global trade markets. 


Considerations and implications for MNEs

As centralising business operations in low-tax countries is no longer a straight forward decision for multinationals, the challenges expected are : (1) how to rapidly adjust overall corporate legal and tax strategy to main response to changing landscape, and (2) how to restructure their business models in low-tax countries.

Multinationals will start to rethink their strategy on headquarter and hubs globally. Corporates might relocate their business hub operation away from low-tax jurisdiction to another location with more strategic value based on business operational considerations.  A framework shown below is presented to help multinationals to go through some major considerations in the strategic location re-think.


Based on the framework, multinationals can conduct a comprehensive analysis to assess overall suitability on the new business location: 

  • Nature of business: assess whether their nature of business is suitable to relocate business to another location. They should also re-evaluate their business scope (increase or eliminate functions) due to different location advantages and new business goals. 
  • Maturity and potential of market: an ideal location (target market / close to target markets) will accelerate their future business growth. 
  • Competitive workforce: conduct a cost-benefit analysis to understand potential labour cost and availability, before deciding to hire locals or transfer staff to the new location. 
  • Infrastructure: help corporates to build new business operation and expand their business rapidly. 
  • Business ecosystem: a thriving ecosystem is vital for corporates as they can leverage on the network to increase their market shares and identify new cooperation opportunities with various business partners.
  • Policies & regulations: transparent and stable governance will reduce uncertainty and unexpected disruptions in macro environment for corporates. As multinationals will have multi-currency structure and numerous cross-border transactions, they must be aware of local regulations and adjust their FX / transaction models accordingly. 

DBS as your strategic partner

Many multinationals with entrenched structures are adopting a wait-and-see approach as international tax reform remains far from a done deal. However, multinationals, especially those that are transforming at this time can take advantage of this development to extract potential opportunity and prepare for threats in the rapidly changing landscape. DBS Treasury Advisory and Solutioning team can partner your company to explore how to plan and manage the oncoming challenges and seize new opportunities.

About DBS Treasury Advisory and Solutioning
The DBS Treasury Advisory and Solutioning team offers comprehensive Treasury Advisory services across Cash and Liquidity Management, Trade and Working Capital Financing, Risk management as well as Treasury and Digitalisation transformation. Power your business growth in Asia by leveraging our team’s extensive expertise from over 30 years’ of experience in business, finance, treasury and organisational transformational operations across different industries and financial institutions.

Get in touch with us at [email protected]


Joseph Lee
Group Head
Treasury Advisory &

Lisa Tung
Senior Associate
Treasury Advisory &



[1] OECD, 2021: 130 countries and jurisdictions join bold new framework for international tax reform

2 (1) Wall Street Journal, 2021: G-7 Tax Plan: What We Know About the Global Corporate Tax Deal ; (2) Guardian, 2021: G7 tax reform: what has been agreed and which companies will it affect? ; (3) CNBC, 2021: Biden and G-7 leaders will endorse a global minimum corporate tax of at least 15%

3 (1) KPMG, 2021: Global minimum tax: An easy fix? ; (2) Reuters, 2021: Explainer: What is a global minimum tax and what will it mean?

4(1) CNA, 2021: Still too early to work out exact impact' of global corporate tax reform: Lawrence Wong ; (2) The straits times, 2021 : G-7's global minimum corporate tax rate: What will it mean for Singapore?



3.    Additional information links on Singapore’s competitive edge in the region