Legal Updates for June 2024 MOF Launches Two Consultations on Implementation of BEPS 2.0 Pillar Two, Amendments to Income Tax Act
In February 2024, a suite of tax measures was announced in Singapore's Budget 2024, including the upcoming implementation of Pillar Two of the Base Erosion and Profit Shifting 2.0 ("BEPS 2.0") on 1 January 2025.
On 10 June 2024, the Ministry of Finance ("MOF") launched two public consultations on two Bills to implement the tax measures from Budget 2024:
- Consultation on the Multinational Enterprise (Minimum Tax) Bill ("MNE Bill") and the Multinational Enterprise (Minimum Tax) Regulations 2025, regarding the implementation of BEPS 2.0 Pillar Two; and
- Consultation on the Income Tax (Amendment) Bill 2024 ("ITA Bill"), which proposes 15 amendments to the Income Tax Act 1947 ("ITA") to effect measures announced in Budget 2024 and seven amendments arising from MOF's periodic review of Singapore’s income tax regime.
The MNE Bill, in particular, signals a major change to Singapore's tax regime by introducing a minimum effective tax rate of 15% for large multinational entity (MNE) groups pursuant to the Global Anti-Base Erosion Model Rules (GloBE Rules).
The consultations will run from 10 June 2024 to 5 July 2024, with MOF to provide a summary of responses in September 2024.
In this Update, we provide an overview of the two Bills.
The Significant Investments Review Act – Balancing National Security and Investment Opportunities
The Significant Investments Review Act 2024 ("Act"), which came into force on 28 March 2024, sets out a new investment management regime that applies to both local and foreign investors for entities that are critical to Singapore's national security interests. The Act reflects Singapore's proactive and adaptive approach to economic and security challenges, positioning the nation as a global leader in responsible and secure investment practices. It also follows the growing trend worldwide for governments to carefully screen foreign investments in sensitive sectors.
On 31 May 2024, the list of the first entities to be designated under the Act was published in the Government Gazette and on the Office of Significant Investments Review website. The nine entities are ST Logistics Pte. Ltd, Sembcorp Specialised Construction Pte. Ltd. ST Engineering Marine Ltd, ST Engineering Land Systems Ltd, ST Engineering Defence Aviation Services Pte. Ltd, ST Engineering Digital Systems Pte. Ltd., ExxonMobil Asia Pacific Pte. Ltd, Shell Singapore Pte, Ltd and Singapore Refining Company Private Limited.
In this Update, we first consider key requirements of the Act and then consider the current list of entities designated under the Act.
On the Cutting Edge of AI Governance - Singapore Launches Model AI Governance Framework for Generative AI, Develops Digital Forum of Small States AI Governance Playbook
As a regional leader in the field of artificial intelligence ("AI"), Singapore has played an active role in setting the course for the development and deployment of AI systems while managing its associated risks. In line with this, Singapore has launched the Model AI Governance Framework for Generative AI ("MGF-Gen AI"), which aims to establish a systematic and balanced approach to address generative AI risks while continuing to facilitate innovation.
Singapore will also be working with Rwanda to lead the development of a Digital Forum of Small States AI Governance Playbook ("Digital FOSS Playbook"), which seeks to enable small states to harness AI positively. The playbook is expected to be available at the end of 2024.
This Update highlights the key features of the MGF-Gen AI and what parties looking to develop or deploy generative AI solutions should be aware of, as well as the anticipated features of the Digital FOSS Playbook.
The Rise of Johor as a Data Centre Hub
Data centres have seen a boom due the world’s growing reliance on cloud-based technology and consumption of online content. More recently, data centre investments have become a strategic imperative for the Artificial Intelligence ("AI") era, given the massive amounts of compute and data involved in the training, testing and deployment of AI solutions and applications. The escalating strategic competition between the United States and China has motivated companies from both China and the West to broaden their horizons and grow their presence in Southeast Asia, particularly in the semiconductor and digital infrastructure sectors. This trend has triggered a surge in the establishment of data centres across the Southeast Asian region, in particular Johor, Malaysia.
In this update, we will delve into the factors that drive the growing interest for data centre investments in Johor, and provide a brief overview on some of the issues that organisations should consider as they contemplate shifting to set up data centre operations in Johor.
Vietnam Supreme Court Upholds Recognition and Enforcement of ICC Arbitral Award in Landmark Decision
In its landmark decision in Decision 03/2023/KN-KDTM, the Supreme People's Court of Vietnam ("Supreme Court"), the country's apex court, recognised and enforced an arbitral award issued under the 2017 Rules of Arbitration of the International Chamber of Commerce ("ICC Rules").
The proceedings before the Supreme Court concerned interesting, and important, questions on the interaction between the ICC Rules and the 2010 Law on Commercial Arbitration ("LCA"), the relevant legislation governing arbitration in Vietnam. Article 61 of the LCA requires an arbitral award to be issued within 30 days after the end of the last hearing date. However, is this deadline mandatory or is it subject to modification by the timelines in the ICC Rules?
In a decision reflecting the pro-arbitration stance of the Vietnamese courts, the Supreme Court held that the ICC Rules takes precedence. This decision has provided much needed clarity and certainty on the recognition and enforcement of ICC awards in Vietnam.
The successful award creditor was represented in the ICC arbitration and the Vietnamese court proceedings by Dr Chau Huy Quang (Managing Partner), Logan Leung (Deputy Managing Partner), Quach Vu An Khoa (Senior Associate), Luong Hoang Quy (Associate), Nguyen Dang Ngoc (Associate) of Rajah & Tann LCT, and Sim Chee Siong (Head, Construction & Projects) of Rajah & Tann Singapore.
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MAS Requires All Financial Institutions to Apply Fair Dealing Guidelines to All Products & Services
On 30 May 2024, the Monetary Authority of Singapore ("MAS") updated the "Guidelines on Fair Dealing – Board and Senior Management Responsibilities for Delivering Fair Dealing Outcomes to Customers" ("Revised Fair Dealing Guidelines"). With immediate effect, the Revised Fair Dealing Guidelines has an expanded scope to cover all financial institutions ("FIs") and all of the products and services (including incidental services) offered by such FIs to any customers (not limited to retail customers). They are expected to incorporate key principles and guidance on the fair treatment of customers into various stages of the product life cycle or provision of service by the FIs.
The Revised Fair Dealing Guidelines set out the following five fair dealing outcomes for FIs:
- Outcome 1: Customers have confidence that they deal with FIs where fair dealing is central to the corporate culture.
- Outcome 2: FIs offer products and services that are suitable for their target customer segments.
- Outcome 3: Customers are served by competent representatives.
- Outcome 4: Customers receive clear, relevant, and timely information that accurately represent the products and services offered and delivered.
- Outcome 5: FIs handle customer complaints in an independent, effective and prompt manner.
This Update discusses some of the principles and guidance under the fair dealing outcomes and highlights some key changes introduced in the Revised Fair Dealing Guidelines.
Singapore's Green Data Centre Roadmap – Carving a Route for a Sustainable Digital Future
On 30 May 2024, at the ATxSummit, Deputy Prime Minister Mr Heng Swee Keat launched the Green Data Centre ("DCs") Roadmap ("Roadmap") to guide digital sustainability and to chart green growth pathways for DCs. Under the Roadmap, at least 300 megawatts ("MW") of additional DC capacity will be provided, with the possibility of achieving additional capacity through the use of green energy. The possible 300-and-more MW is expected to significantly add to the existing 1.4 gigawatts of computing capacity in Singapore, with an added emphasis on energy efficiency, use of green (low-carbon) energy and water usage targets, and an emphasis on industry partnerships as catalysts.
The challenge of managing DCs' resource footprint, while a global one, is augmented within Singapore as a compact microcosm. The ability to expand DCs' capacity in a sustainable manner will depend on the ability to make DCs green. Singapore, applying its advantage as a regional data centre hub and a dynamic international business hub, is taking the lead in crafting innovative strategies for the long-term sustainable growth of DCs through the Roadmap.
This Update highlights (i) the Roadmap's key recommendations; (ii) the steps that players in the DC ecosystem should start implementing to achieve the energy efficiency and water usage targets that will become applicable over the next 10 years; and (iii) the Government grants and other assistance available to support the move to a sustainable digital future.
Amendments to Licensed Builder Framework to Come into Operation on 15 June 2024
Amendments to the licensed general builder and licensed specialist builder framework are set to come into operation on 15 June 2024. These amendments are aimed at improving and clarifying the builder licensing scheme and to facilitate the Building and Construction Authority's operations.
The amendments are part of a series of changes to the Building Control Act 1989 introduced in the Building Control (Amendment) Act 2020. The changes therein have been implemented progressively from 2021. This Update provides a summary of the key amendments set to come into force in this latest round of implementation.
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