Singapore: Singapore became the first country in Southeast Asia to sign an Intergovernmental Agreement (IGA) on tax information sharing with the United States in December 2014. The signing follows an in substance agreement reached between Singapore and the US in May 2014.
Most countries around the world have been entering into IGAs with the US government since the US introduced a complex reporting and withholding regime through the passage of the Foreign Accounts Tax Compliance Act (Fatca) in March 2010.
Fatca requires all financial institutions outside of the US to periodically transmit information on financial accounts held by US persons to the US Internal Revenue Service (IRS), or face a 30 per cent withholding tax on payments made from the US.
Original Fatca regulations created a reporting regime under which all foreign financial institutions would have to sign individual agreements to disclose their US clients to the IRS. This regime was modified by introducing IGAs, which were intended to increase compliance and impose a heavier legal burden on financial institutions by integrating Fatca into local law.
As of December 31, 2014, the Fatca information sharing regime has grown to encompass 52 countries that have formally signed an IGA with the United States and 60 countries that have reached agreement in substance to sign the agreements.
The type of negotiated IGA tends to differ depending on the country. Among the Asian countries that have formally signed IGAs, Hong Kong and Japan have agreed to a Model 2 IGA. Under this model, financial institutions in these countries have to directly register with the IRS.
Singapore has negotiated a Model 1 IGA under which Singaporean financial institutions will report information on US accounts to their local tax authority, the Inland Revenue Authority of Singapore
