Singapore: Adhering to Global Standards

By Chee Fang Theng, Director, Pan Asia Law LLC, Singapore (01/10/2016)

Base Erosion Profit Shifting (BEPS) Project

On 16 June 2016, Singapore announced that it will join the inclusive framework for the global implementation of the base erosion profits shifting (BEPS) project, and support the key principle underlying the BEPS project, namely that profits should be taxed where the value is created.  Therefore a position aimed at base erosion and profit shifting will not be condoned.

Singapore’s position on the four minimum standards under the BEPS project are as follows:  

(i) Countering harmful tax practices

Singapore uses tax incentives to promote investment in certain areas of the economy.  Incentive recipients are expected to anchor substantive operations in Singapore and contribute meaningfully to the growth of the Singapore economy.  Tax incentives are legislated and granted for defined time periods for qualifying activities.  They are also regularly reviewed to ensure relevance and competitiveness.  Non-qualifying activities of incentivised companies are taxed at the prevailing corporate tax rate.  

(ii) Preventing treaty abuse

Singapore does not condone treaty shopping.  Some bilateral tax treaties already contain anti-treaty shopping provisions to counter abuse.  Singapore is presently part of a group working under the OECD and G20 to develop a multilateral instrument incorporating BEPS measures into existing bilateral treaties.  Singapore will be considering whether to adopt the instrument when it is finalized.

 (iii) Transfer pricing documentation

Singapore has had transfer-pricing rules since 2009 and adheres to the internationally agreed arm’s length principle.  Implementation of country-by-country reporting for financial years beginning on or after 1 January 2017 for multinational enterprises whose ultimate parent entities are in Singapore and whose group turnover exceed S$1,125 million.  These enterprises are required to file the country-by-country reports with the Inland Revenue Authority of Singapore (IRAS) within 12 months of the last day of their financial year.  The IRAS will exchange reports with jurisdictions that Singapore has entered into bilateral agreements for the automatic exchange of such information, where it has been established that they meet the following conditions: (1) strong rule of law and can ensure the confidentiality of the information exchanged; and (2) there must be reciprocity in terms of the information exchanged.  Consultation details are expected to be released in September 2016.

(iv) Enhancing dispute resolution

The IRAS actively engages foreign tax authorities to resolve cross-border tax disputes via mutual agreement procedures in the double tax treaties.  Singapore will also be working closely with other jurisdictions to monitor the implementation of minimum standards on dispute resolution developed under the BEPS project.  This is to ensure that taxpayers will have access to effective and expedient dispute resolution.

Common Reporting Standards (CRS)

Prior to the implementation of Common Reporting Standard (CRS) in Singapore, most information is shared only on request.  Singapore will also be entering agreements with other jurisdictions for the automatic exchange of information, where the jurisdictions have a strong rule of law and the ability to ensure confidentiality of the information exchanged.  

On 9 May 2016, Singapore passed the Income Tax (Amendment No 2) Bill 2016, for the purposes of implementation of CRS with effect from 1 January 2017, in line with Singapore’s international commitment to commence automatic exchange of financial account information (AEOI) under the CRS in 2018.  Financial institutions (FIs) in Singapore will therefore have to put in place systems to collect CRS data from 1 January 2017, and the automatic exchange of information is intended to commence in 2018.  The amendments are as follows:


a. The existing AEOI provisions in the Income Tax Act (ITA) which were earlier introduced to implement the Singapore-United States Foreign Account Tax Compliance Act Intergovernmental Agreement are applicable to any other AEOI agreement that is in accordance with CRS.  This will enable Singapore to sign competent authority agreements to implement AEOI under the CRS.


b. All financial institutions (FIs) are required and empowered to collect and retain CRS information for all non-Singapore-tax-residents.  FIs will however only need to transmit to the Inland Revenue Authority of Singapore (IRAS) the information relating to tax residents of Singapore’s competent authority agreement partners, for the IRAS to implement AEOI under the CRS.  


c. The IRAS is empowered to mandate the electronic filing of returns and information to implement AEOI under CRS effectively.


The Monetary Authority of Singapore (MAS) will also be introducing draft regulations for public consultation, expected to be out around the second quarter of 2016.  The regulations will include the proposed list of Non-Reporting Financial Institutions and Excluded Accounts, due diligence and reporting requirements to implement CRS.