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Singapore – Key Issues For Your Business In 2015: Trade.

10 March, 2015

 

Legal News & Analysis – Asia Pacific – Singapore – International Trade

 

Permit Requirements For Strategic Goods & Voluntary Disclosure Programme

 
Companies that deal in strategic goods or high-tech and speciality materials must obtain the relevant strategic goods permit prior to the export, transhipment, bringing in transit, or brokering of strategic goods and technology. The Singapore Customs has been active on the enforcement front, and does from time to time conduct ad hoc checks at ports as well audits and investigations against companies to check for non-compliance. Failure to obtain the relevant permit from the Singapore Customs is an offence, carrying penal fines and imprisonment terms, as well as potentially substantial financial penalties.

 
The Singapore Customs has a Voluntary Disclosure Programme (“VDP”) which allows companies to voluntarily approach the Singapore Customs in good faith to disclose contraventions of the Customs Act, Regulation of Imports and Exports Act or Strategic Goods (Control) Act, in exchange for reduced penalties, or no penalties at all. Companies which are engaged in trade activities, or have substantial dealings in the import and export of goods should implement compliance policies and train the relevant employees to look out for red flags. While all trade-related offences may be disclosed under the VDP, it is essential to detect and confine non-compliance as early as possible, since eligibility for the VDP ceases once the Singapore Customs gives notice or commences audits/investigations against the company. The Singapore Customs is particularly vigilant in this regard and companies must take a more active interest.

 
Trade Sanctions

 
The Singapore Customs has identified several sanctioned countries, for which exports from and imports to Singapore are either prohibited outright or strictly regulated and require various permits. The list of prohibited and/or controlled exports and imports go beyond strategic goods, and even includes luxury items for some sanctioned countries. Companies in Singapore are also prohibited from providing financial services or transferring financial assets to these sanctioned countries. As such, businesses must be cognisant of how their goods are being shipped through, in or out of, Singapore, and be alert if customers or suppliers are requesting for funds to be indirectly routed through third parties.

 
Transfer Pricing

 
In January 2015, the Inland Revenue Authority of Singapore (“IRAS”) issued a second edition of its e-tax guide on Transfer Pricing Guidelines. Transfer pricing concerns prices charged in transactions between related parties. IRAS recognises that where related parties transact with each other, the prices charged may not reflect market conditions due to lack of independence in their commercial and financial relations. As a result, the profits and hence tax liabilities may be distorted.

 
IRAS has indicated that if transactions between related parties are not on an arms-length basis, IRAS (or another tax authority concerned) will adjust the parties’ profits upwards. However, before doing so, the relevant transactions may first be subject to review and audit. Taxpayers with high transfer pricing risks, such as those with many cross-border transactions with large values, especially involving intellectual property, proprietary knowledge or other intangibles, may be subject to audit.

 
Moving ahead, it is important that taxpayers who have, in the ordinary course of business, many related party transactions, have proper transfer pricing policies and documentation to be able to justify the related party transaction prices. IRAS has indicated that it expects a taxpayer’s transfer documentation to be submitted within 30 days of request, and non-compliance may be subject to penalties.

 

Rajah & Tann

 

For further information, please contact:

 

Kala Anandarajah, Partner, Rajah & Tann

kala.anandarajah@rajahtann.com

 

International Trade Law Firms in Singapore

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