Global Tax Alert | 8 July 2013

Singapore takes significant measures to strengthen its international tax cooperation

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Currently, Singapore may provide assistance to foreign jurisdictions under its income tax treaties (treaties) which incorporate the internationally agreed OECD Standard for the effective Exchange of Information (EOI) through treaties (EOI Standard).1 To-date, Singapore has incorporated the EOI Standard in 40 of its treaties and signed one Tax Information Exchange Agreement with Bermuda.

Since the adoption of the EOI Standard in March 2009,2 Singapore continues to take progressive steps to improve its EOI framework. Besides introducing measures to ensure that Singapore’s financial system is not used to harbor illegitimate funds or as a conduit for the flow of undeclared assets, effective 1 July 2013, Singapore will criminalize the laundering of proceeds from serious tax offenses. Four key steps were announced in May 2013 to further strengthen its current EOI framework.

Extend EOI assistance to all of Singapore’s existing treaty partners

This new measure will extend the EOI Standard to all existing treaty partners, subject to reciprocity, without the need to amend and update individual treaties to incorporate the EOI Standard.

Sign the Convention on Mutual Administrative Assistance in Tax Matters

On 29 May 2013, Singapore signed the Convention3 which is promoted as an international agreement for bilateral tax cooperation among the Convention’s signatories. This will expand Singapore’s network of EOI partners by 13 new jurisdictions (including Brazil and the US).

Allow the Inland Revenue Authority of Singapore (IRAS) to obtain bank and trust information from financial institutions without the need for a court order

This move is meant to further streamline the administration of EOI under the EOI Standard and allow the IRAS to respond to an EOI request for bank and trust information without having to seek a court order. The IRAS has indicated that it will not undermine the basic safeguards to taxpayers and will continue to assess whether the requests are in line with the EOI Standard before acceding to them. Taxpayers will still have the right of appeal against the IRAS’ decisions.

Conclude a Foreign Account Tax Compliance Act (FATCA) Inter-Governmental Agreement (IGA) with the US

By entering into a Model 1 IGA with the US, it will facilitate financial institutions in Singapore in their compliance with the FATCA without the need for financial institutions to enter into agreements with the US Internal Revenue Service (IRS) individually.

The Model 1 IGA establishes a framework of reporting account information of US persons by financial institutions outside of the US to the relevant domestic authority which in turn provides the information to the IRS.

The necessary amendments to the Singapore Income Tax Act to effect the above changes are expected to be made before the end of this year.

Endnotes

1. Essentially, the EOI Standard enhances the scope of information exchange with treaty partners by lifting the domestic interest condition and allowing for access of information from banks and trust companies under certain conditions as well as allowing exchange of information for other taxes in addition to income tax.

2. For more details, see EY International Tax Alert, Singapore publishes draft legislation to implement OECD information exchange standard, dated 15 July 2009.

3. The Convention is a multilateral agreement originally drawn up by the OECD and the Council of Europe to enable each Party to the Convention to combat international tax evasion and better enforce its national tax laws, while respecting the rights of taxpayers. The scope of the Convention covers a wide range of taxes and goes beyond exchange of information on request. It provides for other forms of assistance such as spontaneous exchanges of information, simultaneous examinations, performance of tax examinations abroad, service of documents, assistance in recovery of tax claims and measures of conservancy.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Solutions LLP, Singapore
  • Chung-Sim Siew Moon
    +65 6309 8807
    siew-moon.sim@sg.ey.com
  • Russell Aubrey
    +65 6309 8690
    russell.aubrey@sg.ey.com
  • Chong Lee Siang
    +65 6309 8202
    lee.siang.chong@sg.ey.com
  • Stephen Bruce
    +65 6309 8898
    stephen.bruce@sg.ey.com
Ernst & Young LLP, Asia Pacific Business Group, New York
  • Chris Finnerty
    +1 212 773 7479
    chris.finnerty@ey.com
  • Jeff Hongo
    +1 212 773 6143
    jeff.hongo@ey.com
  • Kaz Parsch
    +1 212 773 7201
    kazuyo.parsch@ey.com
  • Bee-Khun Yap
    +1 212 773 1816
    bee-khun.yap@ey.com

EYG no. CM3612