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Opportunities and Challenges in Asia-Pacific Tax Planning (Singapore)

 

30 September, 2011
 
The last 12 months have seen taxpayers across Asia-Pacific re-enter the transaction market after a nervous few years. But with cautious steps being taken and greater scrutiny from a revenue-hungry and litigious tax authorities, Jack Grocott asks the region’s advisers what tax planning opportunities are available and how best to manage risk. 
 
Singapore
 
Ong Sim Ho, Drew & Napier
 
Singapore will remain the jurisdiction of choice for global businesses keen on establishing an Asian hub. On the domestic front, the 2011 budget enhanced the existing fiscal measures to strengthen Singapore’s value proposition as an Asian base for corporate headquarters and other high-value activities. The measures announced included a blanket exemption from withholding tax for all interest payments made by banks and similar financial institutions. 
 
It is also timely that the High Court in Comptroller of Income Tax v. ACC clarified that payments under interest rate swap agreements (on the facts in ACC, the swaps were entered into pursuant to the terms of an ISDA master agreement) are not subject to withholding tax. 
 
Singapore has further developed its extensive network of tax treaties with a 65th treaty coming into force last month. 
 
The initiative announced in the budget to allow foreign tax credit pooling to allow greater flexibility in the use of foreign tax credits will allow businesses to further reduce taxes payable in Singapore. 
 
It is without doubt that Singapore is an attractive investment destination but investors should exercise caution in planning their tax affairs: With the High Court in ABB v Comptroller of Income Tax throwing out the longstanding common law principle that tax statutes should be interpreted strictly in favour of the taxpayer and adopting a purposive construction, a taxpayer will need to look beyond the plain words of the taxing statute in certain situations. 
 
Further, with the introduction of the generous tax incentives, the Inland Revenue Authority of Singapore has correspondingly stepped up the scrutiny of claims to counter abuse.
 
In recent high profile prosecutions, companies and their advisers have been charged for evading tax through the abuse of tax exemption schemes. 
 
The tax authorities have also displayed a new resolve in invoking its powers under the general antiavoidance provisions. 
 
This article was first published by International Tax Review, May 2011. 
 
 

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