Singapore to Significantly Strengthen Framework for International Tax Cooperation
1 Singapore is significantly strengthening its framework for international cooperation to combat cross-border tax offences.
2 This follows a comprehensive review of the current Exchange of Information (EOI) framework, and represents a further, major step to enhance cooperation following the changes made in 2009. Singapore had then endorsed the internationally agreed Standard for EOI for tax purposes (hereafter referred to as the “Standard”). Since then, we had amended our laws to implement the Standard and started renegotiating our tax agreements to incorporate the Standard. The Global Forum on Transparency and Exchange of Information for Tax Purposes (“the Global Forum”) has recently affirmed that Singapore’s practice of EOI has been in line with the Standard.
3 Singapore will take four key steps that will further strengthen its EOI framework:
a) Extend EOI assistance in accordance with the Standard to all our existing tax agreement partners, without having to update individually our bilateral tax agreements with them. The current approach of updating individual agreements is no longer necessary, as most countries have adopted the Standard and have similar EOI requirements. This extension of EOI assistance will be subject to reciprocity.
b) Sign the Convention on Mutual Administrative Assistance in Tax Matters. This was first developed as an OECD-Council of Europe agreement, and has recently been promoted as an international agreement for bilateral tax cooperation among the Convention’s signatories. There are currently 45 signatories to the Convention. Based on these current signatories, the Convention will expand Singapore’s network of EOI partners by 11 jurisdictions, including Brazil and the United States.
Taken together, the above two changes will more than double the number of jurisdictions - from 41 to 83 - that Singapore will be able to exchange information with under the Standard.
c) Allow IRAS to obtain bank and trust information from financial institutions without having to seek a Court Order. While Singapore has been able to respond promptly to most requests for information from its foreign partners, removing the requirement for a Court Order will further streamline the administration of EOI under the Standard. It will not undermine the basic safeguards to taxpayers. IRAS will continue to assess whether the requests are in line with the Standard, and taxpayers will continue to have the right of appeal.
d) Conclude with the United States an Inter-Governmental Agreement (IGA) that will facilitate financial institutions in Singapore to comply with the Foreign Account Tax Compliance Act (FATCA). FATCA is a US law which requires all financial institutions outside of the US to pass information about financial accounts held by US persons to the US Inland Revenue Service (US IRS) on a regular basis. The IGA will be in the form of Model 1, under which information is exchanged between Singapore and US agencies1. The Model 1 IGA will help ease the compliance burden of financial institutions in Singapore with FATCA.
4 Singapore’s Deputy Prime Minister and Minister for Finance, Mr Tharman Shanmugaratnam said: “These changes we are now making are a major enhancement, in step with the strengthening of international standards for exchange of information. But new standards can only work if all jurisdictions subscribe to them. Singapore will work with our international partners to achieve just that, and ensure there is no room for regulatory arbitrage. "
5 DPM Tharman, who is also Chairman of the Monetary Authority of Singapore, added, “There is no conflict between high standards of financial integrity and keeping our strengths as a centre for managing wealth. Singapore will continue to be a vibrant wealth management centre, with laws and rules that safeguard legitimate funds and reject tainted money.”
6 Singapore will make the legislative amendments necessary to effect the above changes, before the end of this year.
7 The above changes are part of the progressive steps Singapore is taking to enhance our EOI framework, since endorsing the Standard in 2009. The changes also come after measures introduced by the Monetary Authority of Singapore since 20112 to ensure that Singapore’s financial system is not used to harbour illegitimate funds or as a conduit for the flow of undeclared assets. From 1 July 2013, Singapore will criminalise the laundering of proceeds from serious tax offences3.
8 Singapore is fully committed to working with our international partners to combat cross-border tax offences. This includes assistance in connection with the recent disclosure that the tax authorities of Australia, UK and US are investigating complex offshore structures that may be involved in wrongdoing. Our current laws and tax agreements already allow for assistance, in connection with such wrongdoings if any.
MINISTRY OF FINANCE
MONETARY AUTHORITY OF SINGAPORE
INLAND REVENUE AUTHORITY OF SINGAPORE
14 MAY 2013
(a) Extend EOI assistance in accordance with the Standard to all our tax agreement partners, subject to reciprocity
Singapore will extend the EOI Standard to all our existing tax agreement partners. This is a change from the current approach of updating tax agreements individually, which was intended to cater to unique needs of different countries. Such an approach is no longer necessary as Singapore’s experience has shown that most countries have similar EOI requirements. With this change, Singapore can cooperate fully under the international EOI Standard with all our tax agreement partners.
(b) Sign the Convention on Mutual Administrative Assistance in Tax Matters (Convention)
Singapore will join jurisdictions like US, UK and France in signing the Convention on Mutual Administrative Assistance on Tax Matters. There are now 45 signatories to the Convention. Based on these current signatories, the Convention will expand Singapore’s network of EOI partners by 11 jurisdictions4, such as Brazil, and the United States. The Convention allows Singapore to extend EOI assistance under the Standard to these 11 new partners. Singapore echoes the G20’s call for all jurisdictions to sign the Convention.
Changes a) and b) above will significantly increase the total number of Singapore’s EOI partners from 415 to 836 jurisdictions.
(c) Allow IRAS to obtain bank and trust information from financial institutions without having to seek a Court Order
To streamline the EOI administrative workflow, we will enable the Inland Revenue Authority of Singapore (IRAS), having decided to respond to an EOI request from our tax agreement partners, to directly obtain bank and trust information from financial institutions without seeking an Order from the High Court. Having had three years of experience in implementing the international Standard, IRAS is well-placed now to evaluate and assist on requests in line with the international Standard. Taxpayer rights of appeal will continue to remain.
(d) Conclude a Model 1 IGA on the FATCA with the US
The Singapore Government intends to conclude a Model I IGA on the FATCA with the US Department of the Treasury. The IGA will help financial institutions in Singapore achieve compliance with the US’ FATCA regulation which is being applied on a global basis. Financial institutions in Singapore have given feedback to the Monetary Authority of Singapore that Model I offers stronger operational efficiencies and has a lower implementation cost.
FATCA is a US law which targets US tax non-compliance by US taxpayers using overseas accounts. FATCA requires financial institutions outside of the US to pass information about financial accounts held by U.S. persons to the US tax administration, the Inland Revenue Service (IRS).
The US has developed two Model IGAs to overcome legal issues and simplify the implementation of FATCA. Model I establishes a framework of reporting account information of US persons by financial institutions to the relevant domestic Authority which in turn provides the information to the US IRS. Model II establishes a framework of direct reporting by financial institutions to the US IRS supplemented by information exchange between both governments upon request.
About the Global Forum
The Global Forum is a 120-member international organisation that assesses jurisdictions on their implementation of the EOI Standard through a two-phase peer review process. The first phase assesses if jurisdictions have the legislation including legal powers in place to implement the Standard. The second phase assesses if in practice, jurisdictions implement the Standard effectively.1 Model I establishes a framework of reporting account information of US persons by financial institutions to the
relevant domestic Authority which in turn provides the information to the US Inland Revenue Service. Please refer to Annex for more details.
2 In Sep 2011, in response to withholding tax treaties being negotiated and signed in Europe, MAS had pre-emptively directed FIs in Singapore to guard against possible inflows of illicit funds arising from such developments.
3 This is in line with global standards against money laundering and terrorism financing. FIs have been alerted since October 2011 on this new requirement. They have been directed by MAS to review their existing client and asset pools to ensure compliance with this requirement. FIs must reject prospective clients where there are reasonable grounds to suspect that the client’s assets are the proceeds of serious crimes, including wilful and fraudulent tax evasion.
4 These 11 jurisdictions are (1) Argentina, (2) Brazil, (3) Colombia, (4) Costa Rica, (5) Ghana, (6) Greece, (7) Guatemala, (8) Iceland, (9) Moldova, (10) Tunisia, (11) United States of America.
5 These EOI partners have already signed the EOI Standard with Singapore: (1) Albania, (2) Australia, (3) Austria, (4) Bahrain, (5) Belarus; (6) Belgium; (7) Bermuda, (8) Brunei, (9) Canada, (10) China, (11) Denmark, (12) Estonia, (13) Finland, (14) France, (15) Georgia, (16) Guernsey (17) India, (18) Ireland, (19) Isle of Man, (20) Italy, (21) Japan, (22) Jersey, (23) Kazakhstan, (24) Malta, (25) Mexico, (26) Netherlands, (27) New Zealand, (28) Norway, (29) Panama, (30) Poland, (31) Portugal, (32) Qatar, (33) Saudi Arabia, (34) Slovenia, (35) South Korea, (36) Spain, (37) Switzerland, (38) Turkey, (39) United Kingdom, (40) Uzbekistan, (41) Vietnam.
6 The 42 additional jurisdictions that will enjoy the EOI Standard under changes a and b are: (1) Argentina, (2) Brazil, (3) Bulgaria, (4) Colombia, (5) Cyprus, (6) Czech Republic, (7) Costa Rica, (8) Fiji, (9) Ghana, (10) Germany, (11) Greece, (12) Guatemala, (13) Hungary, (14) Iceland, (15) Indonesia, (16) Israel, (17) Kuwait, (18) Latvia, (19) Libya, (20) Lithuania, (21) Luxembourg, (22) Malaysia, (23) Mauritius, (24) Moldova, (25) Mongolia, (26) Morocco, (27) Myanmar, (28) Oman, (29) Pakistan, (30) The Philippines, (31) Romania, (32) Russian Federation, (33) Slovak Republic, (34) South Africa, (35) Sri Lanka, (36) Sweden, (37) Taiwan, (38) Thailand, (39) Tunisia, (40) Ukraine, (41) United Arab Emirates, and (42) United States of America.