Singapore VCC insights

Domestic Top-up Tax Singapore: Pillar Two for Family Groups, the UAE and Hong Kong

By VCC Editorial Team · Published 18 October 2026

Short answer: Singapore’s domestic top-up tax applies from financial years starting on or after 1 January 2025 to multinational groups with consolidated revenue of EUR 750 million or more, topping Singapore profits up to 15%. The UAE and Hong Kong apply equivalent domestic taxes on the same threshold, so where the family office sits rarely changes the operating group’s bill.

This article is general information only and is not legal, tax or investment advice. For matters needing legal advice, we work with a panel of experienced Singapore law firms.

The domestic top-up tax in Singapore is the part of the Pillar Two rules that most family-owned business groups will actually meet, because it is charged on the group’s Singapore entities whether the family’s headquarters is in Singapore, Dubai or Hong Kong. This note is for families whose operating businesses cross the EUR 750 million revenue line and the advisers who run their family offices: who is in scope, how family vehicles are treated, how Singapore compares with the UAE and Hong Kong, and when the family office hub changes the answer. All sources were checked on 18 October 2026, and statements about what is in force are as at that date.

What is the domestic top-up tax in Singapore and when did it start?

It is a tax that brings the effective tax rate of a large multinational group’s Singapore entities up to 15%, and it applies to financial years starting on or after 1 January 2025. It sits in Part 3 of the Multinational Enterprise (Minimum Tax) Act 2024, passed on 15 October 2024 and in force for sections 2 to 84 and both Schedules from 1 January 2025.

The Act also implements the Income Inclusion Rule (IIR), called the multinational enterprise top-up tax (MTT), under which a Singapore parent pays top-up tax on low-taxed profits of group entities abroad. IRAS states that the implementation of the Undertaxed Profits Rule (UTPR), the backstop rule in the Global Anti-Base Erosion (GloBE) Model Rules, “will be considered at a later stage”. The IRAS e-Tax Guide (second edition, 7 January 2026) records that the Act obtained transitional qualified status from 1 January 2025, so DTT paid reduces top-up tax that a foreign IIR would otherwise collect.

Which family-owned groups fall within Pillar Two?

A family group is in scope only if it is a group in the accounting sense, has an entity or permanent establishment outside the parent’s jurisdiction, and reached EUR 750 million of consolidated revenue in two of the four preceding years.

1. Find the ultimate parent entity. Under the First Schedule to the Act, an “entity” is a legal person “but not a natural person”, a partnership, a trust, or another arrangement that prepares separate financial statements. Individuals are not entities, so businesses held personally do not form one group. A family holding company or trust can be the ultimate parent entity, and paragraph 2(d) tests the consolidated accounts it would have been required to prepare.
2. Test whether the group is multinational. IRAS states that the DTT “does not apply to a wholly domestic group”.
3. Apply the revenue test. Section 8 pro-rates the threshold for short years (EUR 562.5 million for nine months, per IRAS), revenue includes net investment gains, and the revenue of excluded entities “is still taken into account”.
4. Register on time. The ultimate parent must register within six months after the first financial year end to which the Act applies; returns and the GloBE information return (GIR) are due 15 months after each year end (18 for the transition year).

Whether separate family groups are measured together turns on control and consolidation, not kinship.

Are family offices, VCCs and family funds excluded from top-up tax?

Usually not. A vehicle run for one family will often fail the definition of an investment fund.

Paragraph 4(1) of the First Schedule excludes governmental entities, international organisations, non-profit organisations, pension funds and certain subsidiaries of those bodies. Paragraph 4(2) adds an investment fund or real estate investment vehicle, but only where it is the ultimate parent entity of a group. The paragraph 7(2) definition of “investment fund” has seven conditions, starting with a requirement that the entity “is designed to pool assets” from “a number of investors (who are not all connected with one another)”. It must also be regulated (or have a regulated manager) and be run by investment fund management professionals.

A single-family office vehicle, whether a Singapore company or a Variable Capital Company (VCC) under the Variable Capital Companies Act 2018, typically holds the money of one connected family, so the pooling condition is hard to meet. If it sits inside the consolidated group, it is an ordinary constituent entity and its income counts in the Singapore effective tax rate.

Where a vehicle does qualify, IRAS’s e-Tax Guide states that for DTT purposes the top-up amount of investment entities located in Singapore “is treated as nil”, although the MTT still applies to them through a parent’s IIR. The family’s non-profit foundation or charity, if it meets the paragraph 4(6) conditions, is an excluded entity.

How do 13O and 13U exemptions interact with the 15% minimum?

They are not protected by Pillar Two. Fund income that is exempt under sections 13O or 13U of the Income Tax Act 1947 and that falls inside an in-scope group’s Singapore effective tax rate can lower that rate and produce DTT.

Two features reduce the exposure. First, “excluded dividends” and “excluded equity gain or loss” are kept out of GloBE income. Under section 2(1) of the Act, dividends are excluded unless they come from a portfolio shareholding (an interest below 10%) held for less than one year, while fair value changes and disposal gains are excluded only for holdings that are not portfolio shareholdings. A vehicle trading listed equities or earning bond interest produces income that counts; one holding long-term stakes of 10% or more largely does not. Second, the substance-based income exclusion removes a formulaic return on eligible payroll and tangible assets.

The tax incentive safe harbour does not cover income exemptions. IRAS states that a qualified tax incentive (QTI) is calculated by reference to expenditure or to tangible production, and that “QTIs do not include income-based tax incentives”. The fund exemptions under sections 13O and 13U are not on IRAS’s published list of QTIs.

On the incentive conditions, see our comparison of Hong Kong’s FIHV regime and Singapore’s 13O and 13U schemes.

What did IRAS’s 13 October 2026 update say about tax incentives and safe harbours?

IRAS’s GloBE and DTT page, last updated 13 October 2026, explains how Singapore implements the Side-by-Side package agreed by the OECD/G20 Inclusive Framework on 5 January 2026, and lists the incentives that count as QTIs. Singapore will:

• extend the Transitional Country-by-Country Reporting (CbCR) Safe Harbour to financial years beginning on or before 31 December 2027, excluding any year ending after 30 June 2029;
• adopt the Substance-based Tax Incentive Safe Harbour and the Side-by-Side Safe Harbour for financial years commencing on or after 1 January 2026 (it does not need the UPE Safe Harbour because it has no UTPR);
• implement the Simplified Effective Tax Rate (ETR) Safe Harbour from financial years commencing on or after 31 December 2026.

QTIs are added to a jurisdiction’s adjusted covered taxes, capped at 5.5% of the greater of eligible payroll costs or depreciation of eligible tangible assets (or, by a five-year election, 1% of the carrying value of eligible tangible assets).

The IRAS list includes research and development deductions (sections 14C and 14D), the mergers and acquisitions allowance (section 37O), the investment allowance and donation deductions under sections 37(3) and (3A). It also lists the base deduction under the Philanthropy Tax Incentive Scheme for Family Offices (section 37AA), so that deduction keeps its value inside a Pillar Two calculation. Our note on Singapore philanthropy and family office planning covers the scheme itself.

How do the UAE DMTT and Hong Kong’s minimum tax compare with Singapore?

The three regimes share the EUR 750 million test, the 15% rate and the 1 January 2025 start. They differ on the IIR and on investment entities.

Feature	Singapore	UAE	Hong Kong
Legal basis	Multinational Enterprise (Minimum Tax) Act 2024	Cabinet Decision No. 142 of 2024 on the imposition of top-up tax on multinational enterprises	Inland Revenue (Amendment) (Minimum Tax for Multinational Enterprise Groups) Ordinance 2025; Part 4AA and Schedules 61 to 64 of the Inland Revenue Ordinance
Domestic top-up tax	DTT, financial years from 1 January 2025	UAE DMTT, financial years starting on or after 1 January 2025	Hong Kong minimum top-up tax (HKMTT), fiscal years beginning on or after 1 January 2025
Income Inclusion Rule	Yes (MTT)	No; the Ministry of Finance says it will keep this under review	Yes, fiscal years beginning on or after 1 January 2025
UTPR	Not implemented	Not stated on the Ministry page	Commencement date to be specified later
Investment entities	Top-up amount treated as nil for DTT; MTT still applies	Not subject to the UAE DMTT	Excluded from HKMTT “to preserve their tax neutrality”
Headline corporate rate outside Pillar Two	17%	9% above AED 375,000; 0% on qualifying income of a qualifying free zone person	Not compared here

The UAE Ministry of Finance also says the UAE DMTT does not apply to multinational groups “in the initial phase of international activity” where no IIR is applied to any UAE entity in the group. For an in-scope group, the free zone 0% rate does not shelter UAE profits from top-up tax. Hong Kong requires a top-up tax notification within six months and a return within 15 months (18 for the first transition year), much like Singapore.

For the wider hub comparison, see Singapore vs Dubai for a family office and Singapore vs Hong Kong for a family office.

When does the family office location change the group’s top-up tax?

Rarely, because each hub collects its own domestic top-up tax on profits booked there, whoever owns the group. Moving the family office does not move the factories, the staff or the profits.

The location matters in four narrower situations:

• Where the ultimate parent sits. A Singapore or Hong Kong parent applies the IIR to low-taxed subsidiaries in countries that have no qualified domestic top-up tax. A UAE parent does not, because the UAE has no IIR, but that does not make the profits safe; another jurisdiction’s IIR or UTPR may collect instead. Moving the top holding company has its own tax costs.
• Where the family vehicle is inside the consolidated group. A Singapore investment company or VCC that is consolidated by the operating group and is not an investment fund adds its low-taxed portfolio income to the Singapore ETR. Holding the liquid portfolio outside the operating group changes the analysis, but that is a fact-specific accounting and control question.
• Where the group already has substance. The QTI list rewards research, innovation and capital spending in Singapore; a family office alone gains little from it.
• Where the vehicle qualifies as an investment entity. A pooled, regulated fund meeting all seven paragraph 7(2) conditions is treated more favourably for domestic top-up tax in all three hubs.

Treaty access and substance for the holding company are a separate question; see Singapore’s tax treaty network for family offices.

What should a family group review before its first Singapore filing?

Start with the group chart and consolidated accounts, then work down to each Singapore entity.

1. Confirm the ultimate parent entity and whether the family’s investment and philanthropic vehicles are consolidated into it.
2. Test four years of consolidated revenue against EUR 750 million, using the euro conversion rules in the Act and the e-Tax Guide.
3. Classify each Singapore vehicle: constituent entity, investment entity (all seven conditions) or excluded entity (for example a qualifying non-profit organisation).
4. For each fund or investment company, separate portfolio holdings below 10% from holdings of 10% or more, since gains on portfolio holdings, and dividends on portfolio shares held for less than a year, stay inside GloBE income.
5. Map Singapore incentives against the IRAS QTI list, noting that income-based exemptions are not QTIs.
6. Diarise the six-month registration and the 15-month (or 18-month) return deadlines, and appoint the designated local filing entity.

Up-to-date registers of members and controllers, which Singapore Secretary Services maintains, speed up steps 1 and 3. For the holding-company layer, see our BVI holding company vs Singapore note.

Frequently asked questions

Does Pillar Two apply to a family office that only manages family money?

Only if the family office entity belongs to a group that meets the EUR 750 million threshold and has entities in more than one jurisdiction. A family office company owned directly by individuals is not part of a group.

Is a Singapore VCC automatically an investment entity for Pillar Two?

No. Legal form is irrelevant; the vehicle must meet every condition in paragraph 7(2) of the First Schedule, including pooling assets from investors who are not all connected.

Does the UAE free zone 0% rate survive Pillar Two?

Below the threshold, yes. For in-scope groups, the UAE DMTT tops UAE profits up to 15% from financial years starting on or after 1 January 2025.

Does Singapore apply the UTPR?

Not as at 18 October 2026. IRAS states that implementation of the UTPR “will be considered at a later stage”.

Which Singapore incentives count under the substance-based tax incentive safe harbour?

Those on IRAS’s QTI list of expenditure-based deductions and allowances, including the section 37AA family office philanthropy deduction, for financial years commencing on or after 1 January 2026.

Sources

• Multinational Enterprise (Minimum Tax) Act 2024, Singapore Statutes Online
• IRAS: Global Anti-Base Erosion (GloBE) Rules and Domestic Top-up Tax (DTT), last updated 13 October 2026
• IRAS e-Tax Guide: Multinational Enterprise Top-up Tax and Domestic Top-up Tax (Second Edition), 7 January 2026
• UAE Ministry of Finance: Top-up Tax
• Hong Kong Inland Revenue Department: Global minimum tax and Hong Kong minimum top-up tax

Raffles Corporate Services helps family offices and fund managers with VCC incorporation, family office set-up and ongoing compliance, and works with the group’s tax advisers when a family office or VCC sits inside a Pillar Two group. Email hello@rafflescorporateservices.com or Call/SMS/WhatsApp +65 8501 7133, or visit Raffles Corporate Services.

Last reviewed: 18 October 2026. The Editorial Team, Variable Capital Companies Act.