SINGAPORE: Following a public consultation, the Inland Revenue Authority (IRAS) of Singapore has issued final regulations and an e-Tax Guide regarding the US Foreign Account Tax Compliance Act (FATCA) requirements for financial institutions (FIs) in Singapore.
FATCA requires all FIs outside of the United States to submit regular information on financial accounts held by US persons to the Internal Revenue Service (IRS), or otherwise face a 30 percent withholding tax on certain payments of US-sourced income.
To ease FATCA compliance for its FIs, Singapore concluded a Model 1 Intergovernmental Agreement (IGA) with the United States, which was signed on December 9, 2014, and entered into force on March 18 this year. Model 1 IGAs provide for FIs outside the United States to report account information relating to US persons to their relevant domestic tax authority – in Singapore’s case, IRAS – which, in turn, shares this information with the IRS.
Transmitting information under the terms of the IGA will therefore help to ease the compliance burden for Singaporean FIs, as their reporting obligations will be deemed to have been met once they have transmitted the required information to IRAS.
The new regulations set out the due diligence and reporting obligations of Singapore-based FIs in relation to the FATCA IGA, while the FATCA e-Tax Guide provides further explanation concerning those obligations.
The regulations and e-Tax Guide therefore include the information that FIs must report under the IGA and clarification about the account holders and financial accounts that are subject to reporting; the financial institutions, account holders, and financial accounts that are exempt from the reporting requirement; the due diligence procedures required to identify reportable accounts; and the timelines for reporting the requisite information to IRAS.
The regulations confirm that, in relation to all financial accounts that a reporting Singaporean FI maintains, the institution must establish and maintain arrangements that are designed to identify US reportable accounts.
A reporting FI must, in respect of 2014 report year (FATCA’s first) and in every following calendar year, prepare and provide to IRAS a return setting out the required information in relation to every US reportable account that is maintained by the FI at any time during the calendar year in question.
The deadline for information reporting to IRAS is May 31 annually starting from 2015, for the reporting year 2014.
By June 30, 2015, as part of the IGA’s requirements, reporting FIs should also complete due diligence procedures for preexisting high value individual accounts with balances or values that exceed USD1m as of June 30, 2014.
Then, by June 30, 2016, reporting FIs should complete due diligence procedures for preexisting entity accounts with balances or values that exceed USD250,000, and of all preexisting accounts held by individuals with balances or values between USD50,000 and USD1m, both as of June 30, 2014.
