Out-Law News | 13 May 2016 | 10:49 am | 2 min. read
Business Times reported that the Singapore parliament has now approved the changes to the tax laws necessary for the city state to implement the Common Reporting Standard (CRS), the global standard for automatic exchange of financial account information agreed by members of the Organisation for Economic Cooperation and Development (OECD). Singapore intends to begin exchanging information in 2018, but only with those jurisdictions with which it has signed a 'competent authority agreement', according to the report.
Separately, the OECD announced that five more countries and territories have committed to share financial account information automatically with other countries, bringing the total number of participating jurisdictions up to 101. Panama, whose financial secrecy laws made global headlines recently following the leak of millions of documents reportedly detailing the use of offshore tax structures by some prominent public figures, has now committed to implementing the CRS; along with Bahrain, Lebanon, Nauru and Vanuatu.
Tax expert Valerie Wu of Pinsent Masons MPillay, the Singapore joint venture partner of Pinsent Masons, the law firm behind Out-Law.com, said that it was not yet clear whether Singapore would fully or partially adopt the OECD standards into its own laws.
"We are working closely with the banks and trust companies in Singapore to monitor how the implementation rules will be introduced in Singapore," she said. "In particular, it will be interesting to see whether the OECD's CRS definitions and options for reporting requirements are fully incorporated or partially adapted under Singapore laws."
The CRS provides a framework for jurisdictions to obtain information from their financial institutions and then automatically exchange that information with other jurisdictions on an annual basis, in an attempt to crack down on tax evasion using offshore accounts. Information covered by the standard includes balances, interest, dividends and sales proceeds from financial assets, and it will apply to accounts held by both individuals and entities, including trusts and foundations.
The legal changes approved by the parliament in Singapore will allow its tax authority to exchange information bilaterally with partners that can demonstrate strong rule of law and ensure confidentiality, provided that the agreement is reciprocal, according to Business Times. Singapore will also demand "a level playing field among all major financial centres", Business Times said.
Banks and other financial institutions will now be able to install the processes and systems that they need in order to collect CRS information from 1 January 2017, ahead of the first exchange of information in 2018. Institutions will be able to collect and retain CRS information for all foreign account holders, not just those from jurisdictions with which Singapore has a reciprocal agreement; but will only need to report information about those from jurisdictions with which Singapore has reciprocal agreements to the national tax authorities, according to Business Times.
Tax expert Jason Collins of Pinsent Masons said that although the automatic exchange of information would help to "stamp out tax evasion and corruption", the next stop was to ensure that it was "implemented effectively".
"The participating countries need to commit resources to making sure that it is not easy to beat the system through deception and providing false information," he said.
"The host country gets no upside financially out of collecting what is data to help other countries to collect tax, so there is little financial incentive for the host country to make sure the data is accurate. Peer to peer review, and heavy sanctions for non-compliance, are going to be key to making it work. This is intended to be a 'common' reporting standard, so the expectation is that each country will implement it in full so that arbitrage opportunities do not arise," he said.