June 2026 module and Singapore’s implementation
This article explains Part B of IRAS Module One, second edition, June 2026. Singapore implements the Income Inclusion Rule (IIR) as Multinational Enterprise Top-Up Tax (MTT), and the Qualified Domestic Minimum Top-Up Tax (QDMTT) as Domestic Top-Up Tax (DTT), for financial years starting on or after 1 January 2025. The slides say implementation of the Undertaxed Profits Rule (UTPR) will be considered later; they do not say Singapore has already imposed it.
The Multinational Enterprise (Minimum Tax) Act, its regulations and administration regulations provide Singapore’s legal framework. The module records transitional qualified status for Singapore’s MTT and DTT from 1 January 2025. These taxes are imposed under Singapore law and collected by the Comptroller of Income Tax, even when an MTT calculation concerns foreign income.
MTT, DTT and corporate income tax do different jobs
MTT is charged on an eligible Singapore parent for foreign constituent entities’ top-up amounts, including relevant stateless entities, subject to the parent-rule ordering. DTT concerns Singapore constituent entities and certain Singapore-created stateless reverse hybrids; a designated local entity generally computes and pays it.
Corporate income tax under the Income Tax Act applies first. MTT and DTT under the minimum-tax legislation are additional obligations, not substitutes for an ordinary income-tax return or payment. The module’s diagrams show domestic income tax and QDMTT ahead of parent-country IIR and foreign UTPR. A Singapore entity may also be affected by another jurisdiction’s controlled-foreign-company rules. Paying ordinary corporate income tax therefore does not establish that no top-up tax can arise.
The six-stage assessment and jurisdictional calculation
The assessment starts with group scope, then locates constituent entities, considers safe harbours and de minimis rules, determines each entity’s GloBE income or loss and adjusted covered taxes, calculates jurisdictional effective tax rates and top-up amounts, and applies the relevant charging rule.
Jurisdictional ETR uses the jurisdiction’s adjusted covered taxes divided by its GloBE income. Excess profit deducts the substance-based income exclusion from GloBE income. The top-up percentage is the minimum rate less ETR where a positive top-up percentage arises. The jurisdictional top-up amount combines that percentage times excess profit, additional current top-up amounts and a deduction for QDMTT. The ordinary allocation goes to entities with positive GloBE income in proportion to that income. These are GloBE measures, so statutory tax rates or accounting tax expense alone cannot replace the calculation.
The EUR 750 million test uses prior group financial years
An MNE group is within scope for a tested financial year beginning on or after 1 January 2025 if consolidated revenue reaches EUR 750 million in at least two of the four immediately preceding financial years. The financial year is that of the ultimate parent entity’s consolidated financial statements, not necessarily the accounting year of a Singapore subsidiary.
The threshold is tested at consolidated group level. It is neither a threshold for each company nor a sum confined to Singapore entities. For a financial year other than twelve months, the module gives a proportionate threshold: EUR 750 million multiplied by the number of months divided by twelve. A nine-month year therefore has a EUR 562.5 million threshold. Reaching the threshold in the tested year itself does not replace the required preceding-year test.
What counts as an MNE group and an entity
A multinational group has at least one entity or permanent establishment outside the ultimate parent’s jurisdiction. An entirely domestic group is not an MNE group for this module. A group consists of related entities consolidated by ownership or control, and also includes entities omitted solely for size, materiality or held-for-sale reasons. It can consist of a main entity and its foreign permanent establishments when the main entity is not part of another group.
An entity may be a legal person other than an individual, a general or limited partnership, a trust or another arrangement with separate financial statements, such as a permanent establishment. The definition excludes national, regional or local government itself, parts of government and arrangements carrying out a government function as specified in the legislation. Legal form alone is therefore insufficient to identify every constituent entity.
Ultimate parent and consolidated financial statements
The ultimate parent normally controls another entity directly or indirectly without itself being controlled by another entity. The standalone main entity of a cross-border permanent-establishment group can also be the UPE. A governmental entity principally managing or investing government assets is excluded from being the UPE; a non-governmental entity directly controlled by such a governmental investor can nevertheless be included in the UPE concept.
Consolidated statements ordinarily present the group as one economic unit under an acceptable accounting standard; SFRS is an example. Main-entity/PE statements are included. Statements under a non-acceptable standard require adjustments to prevent material competitive distortion. If the UPE prepares no relevant statements, the rules consider statements it would have prepared under an authorised standard. Not producing consolidated accounts is therefore not automatically an escape from group scope.
Revenue adjustments and the rolling-year examples
The revenue measure includes ordinary-activity revenue, adds back cost of sales and other operating expenses where necessary, and includes net investment gains appearing in consolidated profit or loss and extraordinary or non-recurring income or gains. Merger and demerger adjustments are dealt with in the separate seventh module.
The table demonstrates the rolling test. A new group with no accounts in 2021–2023 and revenues of EUR 600, 750 and 900 million in 2024–2026 is outside scope for 2025 and 2026 but inside for 2027. A group with 2021–2026 revenues of 550, 800, 300, 850, 450 and 500 million is inside for 2025 and 2026, but outside for 2027. With revenues of 400, 800, 300, 800, 900 and 750 million, the third group is inside all three tested years. The first tested years for March, June and September year-ends begin on 1 April, 1 July and 1 October 2025 respectively, rather than during 2024.
Excluded entities: tax exclusion is not revenue exclusion
An excluded entity is not subject to MTT or DTT, has no administration obligations under those regimes, and contributes no profits, losses, accrued taxes, tangible assets or payroll to their calculations. Its revenue remains relevant to the consolidated group revenue threshold, however.
The categories are governmental entities, international organisations, non-profit organisations, pension funds, qualifying non-profit subsidiaries, qualifying service entities and qualifying exempt-income entities. An investment fund or real-estate investment vehicle can be excluded if it is the group’s UPE, or would be the UPE but for not preparing consolidated statements including its ownership holdings. That qualification matters: the course does not exclude every subsidiary merely because it is called an investment fund or property vehicle.
The 95% service-entity and 85% exempt-income tests
A qualifying service entity requires at least 95% of ownership value to be held directly, or indirectly through excluded entities, by qualifying excluded owners. Its activities must either be ancillary to those owners or almost entirely hold assets or invest funds for their benefit. Any permanent-establishment activity is considered together with the main entity.
A qualifying exempt-income entity uses an 85% ownership-value threshold through the prescribed excluded-entity chain, and almost all income must be excluded dividends, excluded equity gains or losses, or both. Permanent-establishment income is combined with the main entity. In both tests, the permitted owners do not include the specified pension-fund category under First Schedule paragraph 4(7)(b), qualifying non-profit subsidiaries, qualifying service entities or qualifying exempt-income entities. Meeting the tests gives exclusion unless an election is made not to be excluded.
Wholly owned non-profit subsidiaries and the revenue proxy
A qualifying non-profit subsidiary is wholly owned, directly or through a chain of non-profit organisations, by a non-profit organisation. It must not already be a qualifying service or exempt-income entity. The commercial-revenue proxy compares the group’s revenue after ignoring revenues of non-profit organisations, qualifying service entities and qualifying exempt-income entities with the lower of EUR 750 million and 25% of total group revenue.
The remaining revenue must not exceed that lower amount. The proxy recognises commercial fundraising activities ancillary to the non-profit purpose, but it is not an unconditional exclusion for every charity-controlled trading company. A qualifying subsidiary can also elect not to be treated as excluded.
Who can be charged with Singapore MTT
Under the module’s section 12 explanation, the chargeable entity is a Singapore parent that is a responsible member of an in-scope MNE group at any time during the financial year and holds an ownership interest in another constituent entity. That relevant entity must be foreign or stateless and have a top-up amount for the year.
A responsible parent is not selected just because it appears in a Singapore company register. The UPE, intermediate-parent and partially-owned-parent rules determine which parent has the relevant responsibility, and entity-location rules determine whether the Singapore charge applies. The amount then depends on the parent's income-inclusion share rather than on a simple assumption that every foreign subsidiary’s entire tax belongs to the Singapore parent.
Location rules for ordinary entities, flow-through entities and PEs
A non-flow-through entity is located in Singapore if it is Singapore tax resident, or, where resident nowhere, is established, formed, incorporated or registered under Singapore law. The foreign-jurisdiction equivalent looks to residence through management, formation or similar criteria, or creation there where resident nowhere.
A flow-through entity that is a UPE or responsible member is located where it is created or registered; otherwise it is stateless. A PE is located where recognised and taxed under a treaty, where subject to net-basis taxation by business presence in a non-treaty jurisdiction, or where situated if the jurisdiction has no corporate income-tax system. A PE failing those routes may be stateless if the additional statutory conditions are met. Those conditions cover operations outside the main entity’s jurisdiction through an actual or deemed place of business whose attributable income the main jurisdiction exempts.
Top-down responsibility and the POPE exception
A non-excluded UPE is responsible if located in Singapore or subject to a qualified IIR where it is located overseas. An intermediate parent becomes responsible where the UPE is not responsible, no constituent entity controlling that intermediate parent is in Singapore or subject to a qualified foreign IIR, and the intermediate parent itself is in Singapore or subject to such an IIR.
A partially-owned parent entity (POPE) has an interest in another group constituent entity and more than 20% of its profit ownership held by persons outside the constituent-entity group. It cannot be a UPE, PE, investment entity or insurance investment entity. A POPE in Singapore or subject to qualified foreign IIR can be responsible unless wholly owned by another POPE that is itself in Singapore or subject to qualified IIR. Its exception means a responsible POPE can apply IIR even where an upper UPE also applies it; an offset then prevents duplicate tax on the upper parent’s share.
Three parent-order diagrams explained
The first diagram places a Singapore UPE above a wholly owned intermediate parent in a qualified-IIR jurisdiction and then a low-taxed foreign subsidiary. The Singapore UPE applies MTT under the top-down rule. In the second, the foreign UPE’s jurisdiction has no qualified IIR, while its wholly owned Singapore intermediate parent owns the foreign subsidiary: that Singapore intermediate parent applies MTT.
The third gives an overseas UPE 70% of a Singapore POPE, with an outside non-constituent entity holding 30%; the POPE wholly owns the low-taxed foreign subsidiary. The Singapore POPE applies MTT. The qualified-IIR UPE also has a charge, but gives an IIR offset for its 70% share of the top-up tax charged on the POPE. This diagram is not a rule allowing the 30% outside ownership to escape the POPE-level tax.
Inclusion ratio and the S$560-style arithmetic example
For each relevant entity, the inclusion ratio is (A − B) ÷ A: A is that entity’s GloBE income or loss, and B is the amount attributable to persons other than the chargeable parent. Its allocated top-up tax equals its top-up amount multiplied by this inclusion ratio. The parent’s MTT adds the amounts for all relevant entities, subject to applicable IIR offsets.
The diagram uses a UPE with inclusion ratios of 90%, 85% and 100% for entities with top-up amounts of 100, 200 and 300. The respective amounts are 90, 170 and 300, producing total MTT of 560. Those numerical ratios match the diagram’s ownership pattern; actual inclusion is based on GloBE income attribution, so multiplying a share-register percentage is not universally sufficient.
IIR offsets through intermediate and partially-owned parents
If an upper chargeable entity holds a relevant entity indirectly through another responsible member, the upper charge is reduced by the lower member’s MTT or qualified IIR attributable to the upper member’s indirect interest. The reduction concerns the overlapping share, not necessarily the lower member’s whole tax.
The module illustrates both UPE/POPE overlap and two further structures. Where the UPE has no qualified IIR, a Singapore intermediate parent can hold a non-controlling interest in another intermediate parent that applies qualified IIR and owns the low-taxed entity; both may charge, with an upper-level offset. Similarly, one POPE may hold a non-controlling stake in a second POPE, both applying qualified IIR. This differs from the wholly-owned-POPE exception that can remove the lower-tier duplication at the responsibility stage.
DTT includes local JVs, minority groups and certain reverse hybrids
DTT scope includes Singapore group members, including partially owned entities; Singapore joint ventures and their subsidiaries; Singapore minority-owned subgroup members and minority-owned constituent entities; and reverse hybrid entities created or registered in Singapore even when they are not located there for ordinary GloBE purposes.
A reverse hybrid is a flow-through entity whose reference owner’s jurisdiction does not regard the entity, or an intervening flow-through entity, as fiscally transparent for the income, expenditure, profit or loss attributable to that owner. The module links this to the statutory definitions of reference entity and fiscal transparency. It should not be equated with every foreign-owned partnership: the mismatch in treatment and the particular attributable income are central.
DTT exclusions and transparent-entity income at owner level
Foreign constituent entities, excluded entities, stateless permanent establishments and tax-transparent entities are outside DTT entity scope. The transparent-entity exclusion does not necessarily exclude its income altogether: a constituent-entity owner that is itself within DTT scope is subject to DTT, if any, on the transparent entity’s GloBE income attributable to that owner.
The special-entity definition also includes investment entities, insurance investment entities, minority-owned constituent entities and stateless PEs, plus joint ventures and their subsidiaries that are connected to the group without being its constituent entities. This classification controls separate calculations; it must not be mistaken for a single blanket DTT exemption for every special entity.
DTT payment, the 15% illustration and separate components
The module illustrates a Singapore group with 10% effective taxation and a 5-percentage-point top-up to the 15% minimum, compared with a group at 17% requiring no ordinary DTT top-up. This is an introductory illustration: actual DTT follows GloBE income, covered-tax, exclusion and adjustment rules rather than simply 5% of ordinary taxable profit.
A designated Singapore entity generally computes and pays for the other local constituents. Under section 45 and its conditions, a group may elect for the DTT attributable to a particular entity to be paid by that entity. The section 29 diagram adds the top-up amounts for ordinary Singapore constituents, Singapore JVs and subsidiaries, Singapore minority subgroups/MOCEs, and relevant Singapore-created reverse hybrids. Keeping those components distinct avoids blending special groups incorrectly. Singapore DTT is recognised as QDMTT from 1 January 2025 and can be deducted against top-up tax imposed under foreign IIR or UTPR.
Official source
This article independently explains the substantive contents of the official PDF, including the relevant conditions, procedures and annexes. The linked document remains the authoritative source for its original wording, and later changes should be checked separately.
Read the official PDF ↗