On 6 May 2014, the Monetary Authority of Singapore (the “MAS”) issued a press release stating that Singapore and the US have substantially concluded discussions on an Intergovernmental Agreement (“IGA”) that will facilitate compliance with the US Foreign Account Tax Compliance Act (the “FATCA”) by Singapore-based financial institutions (“SGFIs”).
Singapore and the US will conclude a Model 1 IGA. The Singapore-US IGA is expected to be signed in the second half of 2014 and will be published on the Inland Revenue Authority of Singapore’s (the “IRAS”) website thereafter.
In the meantime, the IRAS has updated the FATCA webpage on its website to explain that under the Model 1 IGA, SGFIs are to comply with subsidiary legislation, which will be issued pursuant to the Income Tax Act after the Singapore-US IGA is concluded.
Under the proposed subsidiary legislation, SGFIs will be required to perform due diligence procedures in relation to New Individual Accounts and New Entity Accounts (i.e. accounts opened on or after 1 July 2014) as set out in Section III and Section V respectively of Annex I to Model 1 IGA template (“Annex I”).
It is stated on the IRAS website that pending the conclusion of the Singapore-US IGA, SGFIs may apply a set of alternative due diligence procedures on certain New Individual Accounts and New Entity Accounts, instead of those specified in Sections III and V of Annex I. These alternative procedures are set out in Section VI(G) and Section VI(H) of Annex I.
For New Individual Accounts opened prior to the date of entry into force of the Singapore-US IGA, Section VI(G) of Annex I provides that SGFIs must perform the due diligence as specified in Section III of Annex I within one year after the date of entry into force of the Singapore-US IGA.
For New Entity Accounts opened before 1 January 2015, Section VI(H) of Annex I provides that such accounts may be treated as Pre-existing Entity Accounts, as defined in Section IV of Annex I. SGFIs may apply the due diligence procedures related to Pre-existing Entity Accounts specified in Section IV in lieu of those specified in Section V.
To read Annex I to Model 1 IGA, please click here.