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Singapore – Inclusion In List Of Jurisdictions Treated As Having A Model 1 IGA With The United States.

13 May, 2014

 

Legal News & Analysis – Asia Pacific – Singapore – Tax

 

Under the US Foreign Account Tax Compliance Act (“FATCA”), foreign financial institutions (“FFIs”) are required to provide the United States (“US”) Internal Revenue Services (“IRS”) with information about financial accounts held by certain US persons, or will otherwise be subject to a punitive 30% withholding tax on US-source Fixed, Determinable, Annual, or Periodical (“FDAP”) income and the gross sales proceeds from the disposal of US assets.

 
On 6 May 2014, the Singapore Ministry of Finance (“MOF”), the Monetary Authority of Singapore (“MAS”) and the Inland Revenue Authority of Singapore (“IRAS”) jointly issued a press release (“Press Release”) announcing that Singapore and the US have substantially concluded discussions on the long-awaited Model 1 Intergovernmental Agreement (“IGA”) that will facilitate compliance with FATCA by financial institutions in Singapore. Under the IGA, FFIs in Singapore are not required to enter into individual FFI agreements with the IRS, but will instead report information on US account holders directly to IRAS. IRAS will in turn provide the information directly to the IRS.

 
Although it is expected that the IGA will only be signed in the second half of 2014, Singapore has been included in the list of jurisdictions treated as having a Model 1 IGA with the US with effect from 5 May 2014. With the inclusion of Singapore in this list , FFIs in Singapore can now (and in any case, not later than 31 December 2014) register with the IRS on its FATCA registration portal1 as a “Registered Deemed-Compliant FFI” and will, upon approval, obtain a Global Intermediary Identification Number (“GIIN”). The purpose of the GIIN is to enable an FFI to identify itself to withholding agents and the IRS that it is a registered and approved FFI, so as to avoid any withholding tax on payments made to the FFI under FATCA. Withholding agents may verify an FFI’s GIIN by checking against the IRS published list or by using the FFI list search and download tool.

 
The IGA is also expected to contain simplified due diligence requirements for FFIs, as well as a list of financial institutions, products and accounts that are exempt or deemed compliant, which reduces some of the remediation work for FFIs. The full text of the IGA as well as guidance to FFIs in Singapore on how to comply with their FATCA obligations will be made available by MOF, MAS and IRAS in the second half of 2014 after the signing of the IGA. MOF will also hold a public consultation on the draft guidance before it is finalized.

 

End Notes:

 

1 https://sa2.www4.irs.gov/fatca-rup/

 

Rajah & Tann

 

For further information, please contact:

 

Irving Aw, Partner, Rajah & Tann
irving.aw@rajahtann.com

 
Arnold Tan, Partner, Rajah & Tann
arnold.tan@rajahtann.com

 

Regina Liew, Partner, Rajah & Tann
regina.liew@rajahtann.com

 

Rajah & Tann Tax Practice Profile in Singapore

 

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