Chester Wee’s Post

BEPS 2.0 Pillar 2 (global minimum tax) is a new law which has been or will be implemented domestically. Putting together the Model Rules, Combined Commentary (2023), June 2024 Administrative Guidance, GIR and Examples, there are easily over 600 pages of readings for appreciation of the rules. Pillar 2 is already live. But there are still plenty of unanswered questions. For example: What happens if there’s a change in holding jurisdiction from Jurisdiction A to Jurisdiction B in the middle of the fiscal year? Do we need to time apportion the income inclusion rule (IIR) top-up tax between Jurisdiction A and B to be fair and equitable? What happens if Constituent Entity (CE) X relocates from a jurisdiction that is subject to Pillar 2 rules to a jurisdiction that is not yet subject to Pillar 2 rules? Do we reset the transition year for CE X since transition year is referenced to jurisdiction? It will just be impossible for OECD/G20 Inclusive Framework on BEPS to consider all scenarios when drafting these documents. This often results in tax uncertainty and sometimes unreasonable outcomes from literal reading of the Model Rules. Hey, OECD Model Tax Convention has been around since 1963 and we are still having tax treaty disputes today on simple things like whether the percentage threshold for land-rich company should be determined using book value or fair market value. Whether it will be literal or purposeful reading of the Pillar 2 legislation, tax positions need to be taken with the basis carefully documented. Next five years will be chaotic as we deal with transitions. We perhaps need to find beauty in complexity like this Genshin advertisement on this bus. James Choo Ying Quan Teo (Dody) Ying Yeo Jasmine Chu Hwee Leng Aw Johanes Candra Tracy Tham Wai Sandie Wun Melissa Siew Wai Ling Low

Science tells us that “greater the temperature, faster the evaporation”, “the atmosphere will contain more moisture, and the rain gets more intense”. https://lnkd.in/gaCkgEsr

At EY, we team together, have fun together. On 4 October (Children’s Day), the Singapore practice gathered at Sentosa for our annual dinner & dance. It was an evening filled with great music, fireworks, food & drinks, energy and enjoyment with friends and colleagues. This year’s theme, #AllInParadise2024, ties in with our new global strategy. Our People indeed showed up and glowed up, with or without the luminous sticks. I observed our strong ITTS Advisory team with a sense of pride and gratefulness. 🙏🏼 It is a bunch of energetic, committed, fun-loving individuals who learn fast on the job in today’s complex international tax world. Importantly, the partners and managers are working well as one team. The bonds are strong (and getting even stronger) and the newbies are blending in nicely. 🫶🏻Thank you! Yeah, with a few drinks, I started dancing 🕺 like I used to do as a teenager and a young adult when hanging out at Fire, Sparks, Chaplin, Madam Wong, Canto, etc. (note: older Singaporeans will find these places familiar 😉). I managed to burn off several calories. 😬 Some naughty ones took the opportunity to capture a few photos and videos of the “dancing king” - I know who you are! 🤨 It was fun, really fun! It was also meaningful with funds raised for charities. Kudos to our wonderful organisers! 👏🏼 Sandie Wun Melissa Siew James Choo Ying Yeo Ying Quan Teo (Dody) Jasmine Chu Hwee Leng Aw Wai Ling Low Johanes Candra Tracy Tham

I was staring at the expiry date (April 2025) of the first aid kit in a public bus. I wonder if public transportation companies replace the first aid kits before their expiry date and donate the old ones for use before they expire.

Singapore’s Multinational Enterprise (Minimum Tax) Bill, when passed into law, will implement the Global Anti-Base Erosion (GloBE) Model Rules (Pillar 2 or global minimum tax) in Singapore for financial year beginning on or after 1 January 2025. Under the GloBE Model Rules, the ultimate parent entity (UPE) of the MNE Group is determined based on accounting consolidation rules. In the absence of a consolidated financial statements (CFS) being prepared, the GloBE Model Rules will deem the CFS to have been prepared in determining who is the UPE. Under the proposed Bill, the financial year will be the calendar year for a MNE Group with a UPE that doesn’t prepare a CFS. Hence, even if the group entities follow a non-December year end (say 30 June), the financial year of the UPE’s CFS will be regarded as 31 December. Does that mean that local accounts cannot be used for QDMTT purposes since the group entities’ financial year will be different from that of the financial year of the UPE’s CFS? Additionally, does that mean Pillar 2 will be effective in Singapore for such a MNE Group for financial year beginning 1 January 2025 instead of financial year beginning 1 July 2025? Does your jurisdiction define “financial year” similarly? Would your UPE prepare CFS because of Pillar 2?

It can be refreshing to research and read something not BEPS related. 😬

In the midst of grappling with the complexity of BEPS 2.0 Pillar 2, let’s not forget about other international tax issue as such the risk of creating a permanent establishment (PE) through remote working arrangements. EY’s latest edition of PE Watch September 2024 outlines a ruling issued by the Danish Tax Board on this issue (https://lnkd.in/guqWc63d). Do remember that when there is a PE under Pillar 2 rules, there will be a separate Constituent Entity (CE) which requires an allocation of GloBE Income or Loss and Adjusted Covered Taxes for jurisdictional effective tax rate computation. (Photo taken at West Coast Park, Singapore)

Vietnam plans to adopt IFRS from 2025, a year after it has implemented the global minimum tax. Businesses are allowed voluntary adoption of IFRS since 2022. It is useful for late adopters to understand the differences between Vietnam FRS and IFRS, and the impact to the accounts and corresponding adjustments necessary under BEPS 2.0 Pillar 2. https://lnkd.in/gfmt2BWN

Policy disallowed expenses are adjusted in arriving at GloBE Income or Loss for Pillar 2 (global minimum tax) purposes. While reading the Commentary again, I saw an interesting guidance that referenced“illegal payment” not just to the laws applicable to the Constituent Entity but also laws applicable to the Ultimate Parent Entity (UPE). Interest is deemed riba, or an unjust, exploitative gain, and such practice is forbidden under Islamic laws. While charging interest may be illegal under Islamic laws, I hope paying interest is not. Else, if we have a UPE operating under Islamic law, all interest expenses of the MNE Group would have to be disallowed for Pillar 2 purposes. Are you aware of any unusual “illegal payments” beyond bribes and kickbacks in your country?

You may buy cupcakes from The Headless Baker. But would you buy services from a Headless Tax Advisor? 🤪