S'pore set to sign US tax compliance deal

By Mok Fei Fei, The Straits Times, 7 May 2014

THE long arm of a United States financial reporting law aimed at clamping down on tax evasion by Americans using overseas accounts will soon be extended to Singapore's shores.

The law, the Foreign Account Tax Compliance Act (FATCA), which takes effect on July 1, will require financial institutions around the world to regularly submit financial information about their US clients to the US taxman.

In Singapore's case, banks here will provide the information to the Inland Revenue Authority of Singapore (Iras), which will then pass it to its US counterpart, the Internal Revenue Service (IRS).

Singapore and US regulators announced yesterday that they have substantially concluded discussions on an inter-governmental agreement that will facilitate compliance with FATCA.

Banks here will have to provide information on all US persons with accounts exceeding US$50,000 (S$62,500).

Failure to comply with the reporting requirements will result in the US government imposing a 30 per cent withholding tax on US payments made to the banks that breach the American rules.

Singapore has opted for one of two models designed by the US for the supply of this banking information to the authorities.

This involves foreign financial institutions providing the account information to their relevant domestic authority - Iras, in Singapore's case - which will in turn pass on the information to the IRS.

The other financial reporting model requires the financial institution to report the account information of Americans directly to the IRS.

The Finance Ministry, Monetary Authority of Singapore and Iras said in a joint statement yesterday: "Transmitting this information through Iras helps to ease the compliance burden for our financial institutions as their reporting obligations would be deemed met once they have transmitted the information to Iras."

Singapore is expected to sign the agreement later this year, while banks have until Dec 31 to register with the US authorities. Banks would have to backdate their submission of data to July 1.

Countries that have already signed on to the deal include Australia, Canada and Britain.

Mr Jim Calvin, Asia-Pacific financial services industry tax leader for Deloitte South-east and Asia Pacific, said: "Singapore is likely to be one of the only jurisdictions in South-east Asia to have an inter-governmental agreement with the US before July 1.

"This is a clear competitive advantage and Singapore will be recognised as one of the - if not the - most mature and nimble financial centres in Asia."

Banks here are preparing for the change.

A United Overseas Bank spokesman said: "We are monitoring the developments on FATCA very closely and are reviewing the bank's processes such as client on-boarding, management and reporting of client information."

A DBS Bank spokesman said one top priority is to minimise the impact on customers: "Our staff are also being trained on FATCA requirements and the new procedures to ensure that they are able to assist where they can with customers' queries."

OCBC head of legal and regulatory compliance Loretta Yuen said: "Invariably, these measures and others translate to compliance costs.

"We believe, however, that the regulation promotes transparency and adds to Singapore's standing as an international financial centre."

US tax deal lifts S'pore as financial hub
Industry players back govt move to comply with US law
By Mok Fei Fei, The Straits Times, 8 May 2014

INDUSTRY players say the Government's move to comply with a tough United States financial reporting law will enhance Singapore's status as a financial hub.

The controversial law, known as the Foreign Account Tax Compliance Act (FATCA), will require financial institutions outside of the US to regularly send financial information about American clients to the US taxman from July.

Singapore and the US announced on Tuesday that they have substantially concluded discussions on an inter-governmental agreement that will facilitate compliance with FATCA.

EY financial services tax partner Desmond Teo said that embracing the deal is essential for Singapore.

"To uphold Singapore's reputation as a leading financial centre, Singapore recognises the need to be a good global citizen and cooperate with the United States in combating harmful tax practices," Mr Teo said.

Foreign banks here back the deal even though they are likely to be more affected by the law given that they likely have a bigger proportion of American clients than local institutions.

A Standard Chartered spokesman said the agreement further cements Singapore's reputation as an internationally recognised financial centre.

"We will ensure that we are FATCA compliant and, at the same time, minimise any inconvenience and impact on our clients," he added.

An HSBC spokesman said: "The bank fully supports US efforts to promote the appropriate payment of taxes by taxpayers."

While FATCA could mean extra work for the banks, Mr Teo said the deal will give them more certainty in knowing how to proceed and comply with the law.

"The inter-governmental agreement is expected to be tailored to the local legal and regulatory environment and, with the anticipation of the implementation guidance, it should make it easier for banks in Singapore to comply with FATCA," Mr Teo said.

"FATCA compliance adds to the banks' costs and regulatory compliance burden though the extent of the burden may vary from one financial institution to another."

Not all are happy with FATCA, though.

Investment guru Jim Rogers, a US citizen who is now based in Singapore, is outraged over the law itself, saying FATCA essentially compels other governments to be record keepers for the US.

"It's a gigantic hassle for all American citizens outside the US. It's just horrendous and a huge expense," he told The Straits Times.

The law could prompt some financial institutions to avoid opening accounts with US citizens or permanent residents so as to bypass the reporting hassle, he noted.

Mr Rogers is also concerned about potential breaches of privacy, saying that "the US is no longer the land of the free".

"If somebody had something to hide, you would not want to come to Singapore anyway; you'd go somewhere else," he said.

Separately, Singapore has joined other countries in agreeing to share tax information in a bid to weed out evasion.

The Organisation for Economic Cooperation and Development announced on Tuesday that 47 countries, including Singapore and Switzerland, have signed up to share all financial information between governments.

Under the pledge, the nations will provide information such as a taxpayer's bank balances, dividends, interest income and sales proceeds used to calculate capital gains tax.

Singapore and Switzerland's participation was seen as a key breakthrough, as both are major financial hubs.

Switzerland, in particular, has always placed much emphasis on banking secrecy, helping to secure many wealthy, private banking clients.

It is the world's biggest offshore financial centre with US$2 trillion (S$2.5 trillion) in assets.