The United States and Singapore agreement on Tax Evasion

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usaUS and Singapore close the loops
In an attempt to close more loop holes of tax evaders the US and Singapore have finalized their discussion on an agreement designed for tax information sharing regarding US citizens, permanent residents and entities. The agreement known as an Intergovernmental Agreement (IGA), requires all Singapore based financial institutes to conform and submit information to IRAS US Foreign Account Tax Compliance Act (FATCA). The act that took effect from yesterday stipulates that all financial institutions outside of the United States should regularly submit financial information on accounts held by US citizens to the US Internal Revenue Service (IRS).
Who’s on board?
Back at the beginning of May a statement was released from the Ministry of Finance (MOF), Monetary Authority of Singapore (MAS) and the Inland Revenue Authority of Singapore (IRAS) saying that all financial institutions within Singapore will comply with the US IRS and hand over information on US account holders, it also added ‘transmitting this information through IRAS helps to ease the compliance burden for our financial institutions as their reporting obligations would be deemed met once they have transmitted the information to IRAS.’ This is all part of a larger crack down on cross border tax evasion on a global scale however this agreement is specifically for Singapore and the US citizens, which is estimated to make up only one tenth of the total Singapore market.
US punish non complaints
For any financial institutions that do not act in accordance with FATCA may face a 30% withholding tax on some payments made to them from the United States. FATCA plans to release guidance on regulations sometime in this half of the year. In another step Singapore based financial institutions have until the end of the year to register as a foreign financial institution within a Model 1 IGA jurisdiction in order to obtain their Global Intermediary Identification Number at the US IRS’ online FATCA registration portal, which will avoid any FATCA related withholding tax.
Singapore banks
When speaking to the banks they seem to be more than happy with the moves and already making plans to proceed. Loretta Yuen, head of Legal and Regulatory Compliance at OCBC Bank, said: ‘Over the past 18 months, OCBC and Bank of Singapore have taken various steps in preparation of the requirements set out under FATCA. These include system enhancements for additional activity monitoring and reporting, process re-engineering to strengthen due diligence, and staff training. Invariably, these measures and others, translate to compliance costs. We believe however that the regulation promotes transparency and adds to Singapore’s standing as an international financial center. This will benefit us as we continue to grow our leading wealth management business in the region and beyond.’ And DBS Bank have stated that they have ‘already taken steps to put in place the systems and processes by the stipulated deadlines’
Eltoma Corporate Services
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