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Saturday, 01 February 2014
Nisha Singh discusses Singapore’s implementation of FATCA and information exchange standards

The drive towards global transparency and automatic exchange of information has recently gained new impetus, and Singapore has not been left behind. Singapore has signalled that it will enter into a Model 1 FATCA agreement with the US. It has also significantly increased the number of countries it will exchange information with on an ‘upon request’ basis.


An increasing number of jurisdictions, including Singapore, have entered into negotiations with the US with a view to signing an intergovernmental agreement (IGA) to facilitate the implementation of the US Foreign Account Tax Compliance Act (FATCA) by financial institutions in their jurisdiction. FATCA imposes a 30 per cent withholding tax on payments to non-US financial institutions unless those institutions identify US account holders and provide the US Internal Revenue Service (IRS) with information on them. FATCA’s aim is to reduce US tax evasion by requiring foreign firms to provide the IRS with information about the offshore accounts of US persons, which includes US-owned foreign entities.

Singapore has stated that it will conclude a Model 1 IGA with the US. Under the Model 1 IGA, financial institutions in Singapore must register with the IRS and report information on US accounts to the Inland Revenue Authority of Singapore (IRAS). The IRAS will then exchange this information with the IRS.

The Model 1 IGA has been cited as preferable to the Model 2 IGA, since financial institutions will not have to enter into an agreement directly with the IRS. Furthermore, financial institutions:

  • will not be subject to FATCA withholding;
  • will not have to impose FATCA withholding on any payments to any other non-US financial institutions (even non-FATCA-compliant financial institutions) or any non-financial non-US entities or account holders that fail to provide the financial institution with sufficient information to determine the status of the account holder (recalcitrant account holders); and
  • do not have to close accounts of recalcitrant account holders.

Exchange of information

In May 2013, the G5 agreed to pilot a multilateral agreement for the automatic exchange of a wide range of financial information and, at the G20 summit in September 2013, the G20 endorsed the development of a new global tax standard: automatic exchange of information. The proposed new standard will be presented at the G20 meeting in February 2014. While committed to this new global standard, the G20 accepts that the standard must ensure confidentiality and the proper use of information exchanged. G20 members aim to begin exchanging information automatically on tax matters by the end of 2015.

Singapore endorsed the current internationally agreed standard for exchange of information – exchange upon request – in April 2009 and has, since then, renegotiated numerous tax agreements to incorporate this standard. In May 2013, Singapore announced that it would exchange information in accordance with the current internationally agreed standard with all the countries with which it has tax agreements, without the need to renegotiate the individual agreements. It also signed the Convention on Mutual Administrative Assistance in Tax Matters, increasing further the network of countries with which it will exchange information.

Currently, if a foreign tax authority requests bank or trust information, the IRAS must apply to court for an order to permit the release of such information if it is satisfied the request is valid and falls within the requirements set out in the Singapore Income Tax Act, s105J. The Singapore High Court handed down judgments in relation to exchange of information requests from two of Singapore’s treaty partners in September and October 2013. The first case, Comptroller of Income Tax v BJY and others (2013) MSTC 70-025, concerned an exchange of information request from the Department of Revenue of India; and the second, Comptroller of Income Tax v BLM (2013) MSTC 70-027, related to an exchange of information request from the Japanese tax authority. In both cases the court approved the IRAS decision to release the information, but the court process delayed the eventual release of information by six to seven months.

In a further move signalling Singapore’s commitment to assisting other countries’ tax investigations, a revision to the Singapore Income Tax Act has been proposed. The amending legislation, if passed, would mean that the IRAS could provide bank and trust information to foreign tax authorities in response to a request for such information without the need for a court order. Other safeguards will remain in place to ensure taxpayers’ rights continue to be observed.

Author block
Nisha Singh

Nisha Singh TEP is a Senior Associate at Berwin Leighton Paisner

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