On 9 December 2014, Singapore and the US signed an Intergovernmental Agreement (“IGA”) that will facilitate compliance with the US Foreign Account Tax Compliance Act (the “FATCA”) by Singapore-based financial institutions (“SGFIs”). The IGA took effect from 18 March 2015.
The FATCA affects financial institutions worldwide and requires those outside of the US to submit information on financial accounts held by US persons to the US Internal Revenue Service (the “IRS”) on a regular basis. Financial institutions that fail to comply will face a 30% FATCA-related withholding tax on certain payments made from the US to them.
Under the IGA, SGFIs will report information on financial accounts held by US persons to the Inland Revenue Authority of Singapore (the “IRAS”), which will in turn provide the information to the US IRS. Transmitting this information through the IRAS helps to ease the compliance burden for SGFIsunder the FATCA as their reporting obligations would be deemed met once they have transmitted the information to the IRAS.
The Income Tax (International Tax Compliance Agreements)(United States of America) Regulations 2015 (the “Regulations”) have been enacted on 17 March 2015 and similarly come into force on 18 March 2015. The Regulations set out the due diligence and reporting obligations of SGFIs in relation to the IGA.
On the same day, the IRAS issued the e-Tax Guide on Compliance Requirements of the Singapore-US Intergovernmental Agreement on Foreign Account Tax Compliance Act (the “e-Tax Guide”). The e-Tax Guide covers the main aspects of the due diligence and reporting requirements under the Agreement by explaining:
- The financial institutions that must report;
- The account holders and US reportable accounts;
- Exempt financial institutions and excluded financial accounts;
- The due diligence procedures required to be performed by Reporting SGFIs to identify the US reportable accounts;
- The information to be reported; and
- The timeline for such reporting.
Response to public consultation
From 22 September 2014 to 17 October 2014, the Ministry of Finance (the “MOF”), Monetary Authority of Singapore (the “MAS”) and the IRAS conducted a public consultation on draft versions of the Regulations and the e-Tax Guide. On 17 March 2015, the MOF, MAS and IRAS issued their responses to feedback from the public consultation.