Proactive tax strategy in a shifting global landscape

THE global tax landscape is undergoing its most significant transformation in a century, and the reverberations are being felt keenly in Singapore’s boardrooms.

The Organisation for Economic Co-operation and Development’s (OECD) Pillar Two framework, which sets a global minimum effective tax rate of 15 per cent for large multinational enterprises (MNEs), is rewriting the playbook for international tax planning. 

According to OECD rules, MNEs are considered in scope if their annual consolidated revenue exceeds 750 million euros (S$1.1 billion).

For Singapore, which has strategically leveraged a competitive tax regime for years, this shift is leading to a fundamental recalibration.

The business imperative is evolving from reactive reporting to proactive and value-driven strategy, placing tax leaders at the forefront of organisational resilience.

Strategic recalibration

For many Singapore-based MNEs, particularly those utilising incentive schemes, Pillar Two is fuelling a fresh audit of their global footprint.

“The global minimum tax of 15 per cent for large MNEs has a significant impact on affected businesses in Singapore, as the country offers a wide range of tax incentives to attract foreign investments,” said Tay Hong Beng, chairman of Singapore Chartered Tax Professionals (SCTP).

“A good understanding of the new rules is therefore critical, as tax-viable structures may not deliver optimal investment and operational efficiencies, and could create new challenges to business regulations beyond tax in different jurisdictions,” he added.

While Singapore’s headline corporate tax rate is 17 per cent, the focus is on entities that have pushed their effective tax rate (ETR) lower through incentives.

Koh Puay Hoon, partner and head of tax at RSM Singapore, said for most in-scope MNEs, the difference of two percentage points may not trigger major changes in tax or operating structures. 

“For businesses currently enjoying concessionary rates… we do not think the introduction of global minimum tax will fundamentally alter their location decisions,” she said.

One possible strategic response is to bank on substance, such as real people, assets and decision-making.

“For in-scope MNEs, more focus should be put on building substance in the lower ETR countries,” said Koh. This means centralising key functions and ensuring robust, commercially aligned transfer pricing policies.

This tax recalibration also aligns with broader trends in supply-chain diversification.

Edwin Leow, co-advisory leader at CLA Global TS Tax Services, said supply-chain realignment is “no longer just about cost optimisation; it now includes tax predictability and regulatory stability”.

“Strategic tax planning now requires a holistic view of operational requirements and footprints, balancing tax efficiency with resilience and sustainability,” he added.

Singapore’s extensive network of free trade agreements (FTAs) remains a powerful buffer.

Koh noted that while the impact of US tariffs “cannot be discounted, these FTAs provide significant advantage in reducing tariffs and customs duties which, in turn, lower operational costs and improve market access”.

The strategic consideration extends beyond corporate income tax to encompass indirect taxes and the stability offered by a well-connected business hub.

Strategic value proposition

A central question is how Singapore retains its edge, as the effectiveness of pure tax incentives is diluted. The answer lies in doubling down on foundational strengths.

“Tax incentives are only one way of attracting foreign investments into Singapore,” said Tay.

“Singapore should position itself as a destination where foreign investors choose to establish operations because of its strong business ecosystem, skilled talent pool and connectivity to the region.”

This view is shared across the industry.

RSM’s Koh suggested a shift towards capability-based incentives focusing on de-risking long-term innovation, research and development, and technology adoption.

“Singapore’s well-established legal and regulatory system, strong intellectual property protection, extensive treaty and FTA network, as well as its neutral political stance provide advantages that are difficult for regional competitors to replicate,” she said.

CLA’s Leow framed it as a move from leveraging tax benefits to trust benefits. “Singapore’s competitiveness will increasingly hinge on its reputation for stability, transparency and innovation, rather than tax incentives alone.”

This complexity requires tax leaders to evolve from being technical advisers into strategic partners at the board level. 

SCTP’s Tay said boards “must understand and recognise the importance and fluid nature of tax collections”.

Tax leaders should have a seat at the strategy table, he added. “To be effective, boards should regard tax leaders as important strategic partners for their organisations who play a more involved role in boardrooms alongside key management executives.”

This involves proactive communication.

“Tax leaders,” said Koh, “should support boards and senior management by bringing structure and clarity to long-term planning amid global tax uncertainty.” She recommended the integration of tax into cross-functional processes.

Concurring, Leow said tax leaders must “shift from a compliance-centric role to a strategic advisory position”.

“This involves translating complex global tax developments into business implications that resonate with boards,” he said.

Agility in risk and opportunity

In efforts to comply with evolving tax rules, other risks can be missed, while novel opportunities remain untapped.

Koh said the risks often overlooked include Pillar Two exposures where low substance entities trigger unexpected top-up tax, permanent establishment exposures from global mobility, and the increased information exchange between tax authorities. “Businesses can be blindsided if their structures are not agile.”

On the opportunity side, Leow pointed to the convergence of tax with environmental, social and governance (ESG) goals.

“Aligning tax strategy with ESG goals, such as sustainable supply chains, can unlock incentives and reputational benefits.”

Tay underscored the need for agility and expert guidance.

“It is important to have trusted international tax advisers who know your business well,” he said, adding there is no single cross-border tax strategy that businesses can apply.

“Tax risks, such as rule changes, are often overlooked in a highly volatile and fast-moving market, but having a good and inquisitive tax team that can understand tax trends and identify restructuring opportunities early can help eliminate them.”

The era when companies could use fixed structures purely for tax efficiency is ending. 

Industry experts say effective tax planning must be grounded in genuine commercial activity based on where key decisions are made, where value is created and where operations truly take place.

Singapore’s economic model has also evolved. The country is no longer seen solely as a destination for tax incentives, but is now recognised for its strong connectivity, stability and talented workforce.

These strengths underpin real and substantive business operations.

For businesses, this means tax can no longer be an afterthought; it must be part of strategic planning from the start. 

As Tay put it, global tax changes will “lead to higher compliance costs, including investments in digital solutions to capture accurate information and manage administrative time for reporting purposes”.

“Through proper planning and structuring of investments and business arrangements, tax costs can be managed legitimately.”

The writer is CEO of Singapore Chartered Tax Professionals, the national institute that benchmarks tax expertise through accreditation and drives excellence in professional standards and technical competency. This series shares insights on the tax issues shaping business today.