(Bloomberg) -- Singapore intends to raise its effective tax rate for multinational firms to 15% starting 2025, in line with a global agreement to increase the floor rate.

The city-state will join the broader international move, and implement a ‘Domestic Top-up Tax’ to bring the city-state’s effective corporate tax rate to that level, Finance Minister Lawrence Wong said Tuesday in his annual budget speech, referring to the so-called BEPS 2.0 agreement signed by more than over 135 countries in 2021.

Singapore, which hosts world-renowned multinationals such as BMW AG, Apple Inc., Sony Group Corp. and Amazon.com Inc., currently has a headline corporate tax rate of 17%. Still, many companies currently enjoy exemptions and are taxed at significantly lower effective rates. 

While the move to align rates with the global floor is expected to boost tax collections for Singapore, it is likely to weigh on multiple members of the country’s benchmark Straits Times Index, if they qualify as MNCs under local laws. 

Major banks enjoying effective rates lower than 15% include DBS Group Holdings Ltd. and Oversea-Chinese Banking Corp., according to data compiled by Bloomberg.

Still, Wong said Singapore will monitor international developments and will “adjust” its implementation timeline if there are additional delays in implementing the global agreement.

The timeline being laid out give authorities time to observe how implementation pans out elsewhere and wiggle room to delay the tax changes if needed, said David Sandison, the head of tax and Singapore practice leader at Grant Thornton.

“What it really means is Singapore falling back on the other attributes,” it has used to attract multinationals like political stability and its education system, he said.

--With assistance from Aradhana Aravindan, Natalie Choy and Abhishek Vishnoi.

(Updates throughout with more context)

©2023 Bloomberg L.P.