The Ministry of Finance is conducting a public consultation on the draft Income Tax (Amendment No. 2) Bill 2016 from 1 to 18 March 2016, and invites the public to give feedback on the draft Bill. The proposed amendments to the Income Tax Act (“ITA”) allow Singapore to implement the Common Reporting Standard (“CRS”) with effect from 1 Jan 2017. This is necessary before Singapore can carry out her international commitment to commence automatic exchange of financial account information (“AEOI”)[1] under the CRS in 2018.

Background

The CRS is an internationally agreed standard for AEOI, endorsed by OECD and Global Forum for Transparency and Exchange of Information for Tax Purposes (“GF”).  The CRS sets out the financial account information to be exchanged, the financial institutions (“FIs”) required to report, the different types of accounts and taxpayers covered, as well as the customer due diligence procedures to be followed by FIs. More than 90 jurisdictions, including major financial centres such as Dubai, Hong Kong, Luxembourg and Switzerland, have endorsed the CRS and will commence AEOI in either 2017 or 2018.

As conveyed on 3 Nov 2014[2], Singapore will commence AEOI under the CRS in 2018. Such information exchanges will be carried out on a bilateral basis with jurisdictions which Singapore has signed Competent Authority Agreements (CAAs)[3] with.  This will be subject to the following conditions:

1. There is a level playing field among all major financial centres, including Dubai, Hong Kong, Luxembourg and Switzerland, to minimise regulatory arbitrage.
2. Our CRS partners having strong rule of law, the ability to ensure the confidentiality of information exchanged and prevent its unauthorised use.
3. There is full reciprocity with AEOI partners in terms of information exchanged.

In this regard, Singapore will prioritise the AEOI of CRS information with jurisdictions with strong rule of law, such as UK and France.

Proposed Amendments

In line with our 2018 international commitment to commence AEOI under the CRS, the Ministry of Finance has proposed amendments to the ITA. Salient aspects of the draft legislative amendments are as follows:

1. The draft Bill makes clear that existing AEOI provisions in the ITA, which were earlier introduced to implement the Singapore-United States Foreign Account Tax Compliance Act Intergovernmental Agreement (“FATCA IGA”)[4], are applicable to any other AEOI agreement that is in accordance with the CRS. This will enable Singapore to sign CAAs with other jurisdictions to implement AEOI under the CRS. 
2. The draft Bill requires and empowers all FIs to collect and retain the CRS information for all non-Singapore-tax-residents, instead of only from tax residents of jurisdictions with which Singapore has a CAA.  This is known as the “Wider Approach”. This approach is cost efficient for the industry since FIs would not need to repeatedly review the same accounts to re-establish whether the accounts are reportable each time Singapore enters into a new CAA. The Wider Approach has also been adopted by many jurisdictions such as the UK, Sweden, Japan and Korea. FIs will only need to transmit to IRAS the information relating to tax residents of Singapore’s CAA partners, for IRAS to implement AEOI under the CRS accordingly.
3. The draft Bill vests in IRAS the necessary powers, which include mandating the electronic filing of returns and information, to implement AEOI under the CRS effectively.  

Other than amending the ITA, IRAS and the Monetary Authority of Singapore (“MAS”) will be introducing draft regulations for public consultation by the second quarter of 2016. The regulations will include the proposed list of Non-Reporting Financial Institutions and Excluded Accounts, the due diligence and reporting requirements to implement the CRS.

Consultation Details

Ministry of Finance

[1] AEOI refers to the regular exchange of information between jurisdictions for tax purposes, with the objective of detecting and deterring tax evasion by taxpayers.

[2]  https://www.mof.gov.sg/news-publications/parliamentary-replies

[3] A CAA, which can be either a bilateral or multilateral agreement, specifies the information to be exchanged and deals with administrative arrangements such as the time and format of the information exchange.

[4] FATCA is a US law that requires Foreign Financial Institutions worldwide to report to US Internal Revenue Service information on bank accounts maintained by US Persons.  Singapore and the US signed a FATCA Model 1 IGA on 9 December 2014.