Singapore’s international tax policy is aimed at strengthening trade and investment flows, supporting Singapore-based businesses in their expansion overseas and supporting Singapore-based professionals to reach a wider pool of international clients.
As a responsible international tax jurisdiction, Singapore also has in place an active policy of international tax co-operation to prevent and tackle cross border tax evasion and profit shifting. Singapore’s international tax policy is conducted primarily through aspects of domestic law governing international taxation, avoidance of double taxation agreements and other agreements providing for international tax cooperation.
Tax treaties (DTAs) play a critical role in Singapore international tax policy
Singapore has an extensive network of DTAs with almost a hundred different countries.
A DTA is a bilateral agreement which provides clarity on the taxing rights of each contracting jurisdiction on all forms of bilateral income flows. The DTA also seeks to eliminate instances of double taxation which can arise from cross-border trade and investment activities. Usually, there would be provisions in the DTA for the reduction or exemption of tax at source on certain types of cross-border incomes such as interest and royalties. Generally it means if taxes are already paid in one jurisdiction and repatriated to the other contracting jurisdiction then there would be reduced or zero tax levied on such income.
International tax co-operation is diligently enacted by Singapore
- Singapore adopts internationally accepted transfer pricing guidelines. Businesses adopt these guidelines to ensure that profits are allocate as per their function, assets and risk. Records must be kept to evidence compliance with transfer pricing guidelines, including with to ensure accordance as per arms length pricing principles
- Singapore is a member of the inclusive framework on Base Erosion and Profit Shifting (BEPS). Singapore works actively with OECD and the G20 to counter BEPS
- Singapore abides by the internationally agreed standards for Exchange of Information (EOI) for tax transparency. Singapore is a member of the Global Forum on Transparency and Exchange of Information for Tax purposes (Global Forum), the multilateral body working on the effective implementation of internationally agreed standards for tax transparency.
- Singapore endorsed the internationally-agreed Standard for Exchange of Information (EOI Standard) in 2009. The EOI Standard sets out how tax jurisdictions should address cross-border tax evasion by entering into effective information sharing arrangements. Singapore’s exchange of information upon request regime has been rated as compliant with international tax transparency standards by the Global Forum. This is the highest overall rating a jurisdiction can receive.
- In 2014, Singapore, along with other major financial centers, committed to implement the Common Reporting Standard (CRS) for the automatic exchange of financial account information (AEOI) by 2018, after it has been endorsed by the G20 as a new global standard. 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 the FIs. In September 2018, Singapore commenced AEOI with over 60 jurisdictions, and has since activated AEOI relationships with more than 100 jurisdictions.
- Singapore also complies with the Foreign Account Tax Compliance Act (FATCA) (the Singapore-US FATCA Agreement). FATCA is a US law which targets non-compliance with tax laws by US persons using non-US accounts. Under FATCA, all financial institutions outside of the US are required to regularly submit information on financial accounts held by US persons to the US Internal Revenue Service (IRS) or be subject to withholding tax on certain payments. The Singapore-US FATCA Agreement facilitates Singapore-based financial institutions’ compliance with FATCA, by allowing them to fulfill their reporting obligations through the IRAS instead of reporting directly to the US IRS.
- Singapore is also a signatory of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (Convention). It was opened to non-members in 2010 and covers several areas of cooperation, including EOI upon request, spontaneous EOI and AEOI.