- signalled that it will enter into a Model 1 FATCA Agreement with the US; and
- significantly increased the number of countries it will exchange information with on an 'upon request' basis.
An increasing number of jurisdictions including Singapore have entered into negotiations with the US with a view to signing an intergovernmental agreement (IGA) to facilitate the implementation of FATCA (the US Foreign Account Tax Compliance Act) by financial institutions in their jurisdiction. FATCA imposes a 30% withholding tax on payments to non-US financial institutions unless those institutions identify US account holders and provide the US Internal Revenue Service (IRS) with information on them. FATCA’s aim is to reduce US tax evasion by requiring foreign firms to provide the IRS with information about the offshore accounts of US persons (which includes US owned foreign entities).
Singapore has stated that it will conclude a Model 1 IGA with the US. Under the Model 1 IGA, financial institutions in Singapore must register with the IRS and must report information on US accounts to IRAS who will then exchange this information with the IRS.
- will not have to enter into an Agreement directly with the IRS;
- will not be subject to FATCA withholding;
- do not have to impose FATCA withholding on any payments to any other non-US financial institutions (even non-FATCA compliant financial institutions), any non-financial non-US entities or account holders who fail to provide the financial institution with sufficient information to determine the status of the account holder (recalcitrant account holders); and
- do not have to close accounts of recalcitrant account holders.
Exchange of information
In May of this year, the G5 agreed to pilot a multilateral agreement for the automatic exchange of a wide range of financial information and at the G20 summit in September 2013, the G20 endorsed the development of a new global tax standard: to automatic exchange of information. The new standard for the exchange of information will be presented at the G20 meeting in February 2014. Whilst committed to this new global standard, the G20 accept that the standard must ensure confidentiality and the proper use of information exchanged. The G20 aim to begin to exchange information automatically on tax matters among G20 members by the end of 2015.
Singapore endorsed the current internationally agreed standard for exchange of information – exchange upon request – back in April 2009 and has, since then, renegotiated numerous tax agreements to incorporate this standard. Earlier this year Singapore announced that it would exchange information in accordance with the internationally agreed standard with all the countries with which it has tax agreements without the need to re-negotiate the individual agreements. It also signed the Convention on Mutual Administrative Assistance in Tax Matters increasing further the network of countries with which it will exchange information.
In a further move signalling Singapore’s commitment to assisting other countries fight tax evasion, the IRAS will in future be able to obtain bank and trust information, in response to a request for information from a foreign tax authority, without the need for a court order. Other safeguards will remain in place to ensure taxpayers' rights continue to be observed.