Category Archives: BEPS

Singapore To Sign The Multilateral Convention To Implement Tax Treaty Related Measures To Prevent BEPS

On 7 June 2017, Singapore has signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“MLI”), with over 60 other jurisdictions.

The signing of this MLI represents Singapore’s commitment to upholding the principles behind BEPS, i.e.  profits should be attributable to the jurisdictions where the substantial economic activities giving rise to such profits are conducted.

The Finance Minister, Mr. Heng Swee Keat said

“Singapore strongly supports the principle that profits should be attributable to the jurisdiction where substantive economic activities generating the profits are based.  Signing the Multilateral Instrument allows Singapore to swiftly update its wide network of Avoidance of Double Taxation Agreements to internationally agreed standards. Singapore’s signing of the Multilateral Instrument reaffirms Singapore’s commitment and support to the BEPS Project.”

What is the impact on Singapore’s DTA network when Singapore signs the MLI?

The MLI provides flexibility for a jurisdiction to

  • determine which of its DTAs it would like to amend using the MLI; and
  • indicate which provisions in the MLI it would like to adopt and how such provisions should be adopted.

For example, if both Singapore and Jurisdiction A have signed the MLI, the bilateral DTA between Singapore and Jurisdiction A will be amended only if both Singapore and Jurisdiction A indicate that they would like to amend their bilateral DTA using the MLI.

In the MLI context, such a bilateral DTA is referred to as a “Covered Tax Agreement (CTA)”.  A provision in the DTA between Singapore and Jurisdiction A (i.e. the CTA) will be amended by an MLI provision only if both Singapore and Jurisdiction A have taken the same position regarding that provision in the MLI.

At the point of signing the MLI in June 2017, Singapore has provided a provisional list of the DTAs that it would like to amend using the MLI, as well as its provisional positions on the MLI provisions. This provisional list may be amended and will only be confirmed upon ratification of the MLI.  Singapore has included 68 of its 82 comprehensive DTAs after considering various factors, such as our DTA partners’ commitment to the BEPS Project. These DTAs will be amended by the MLI only if the respective DTA partners also sign the MLI and have included the respective DTAs under the scope of the MLI.

How did Singapore determine its positions on the MLI?

The MLI allows jurisdictions to swiftly implement the tax treaty related BEPS recommendations, which include both mandatory provisions (i.e. the minimum standards under the BEPS Project) as well as non-mandatory provisions.

Singapore will be adopting these mandatory provisions in the MLI,

(i) Article 6 (Purpose of a covered tax agreement) – To include a statement of intent in the preamble of the covered tax agreement that the DTA is to eliminate double taxation without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance

(ii) Article 7 (Preventing treaty abuse) – To include a general anti-abuse rule in the covered tax agreement, commonly known as the Principal Purpose Test (PPT).

(iii) Article 16 (Mutual Agreement Procedure) – To include a mechanism to allow a Singapore resident taxpayer to seek assistance from IRAS when the taxpayer encounters taxation in a DTA jurisdiction that is not in accordance with the intended application of the DTA.

Singapore will also be adopting a number of non-mandatory provisions in the MLI, which it believes will be beneficial for its taxpayers.  One such example is the adoption of the mandatory binding arbitration provision in our DTAs. This provision will provide an alternative dispute resolution mechanism if the competent authorities are unable to reach agreement or are unable to do so in a timely manner.  The mandatory binding arbitration provision will be included in our DTAs if the respective DTA partners also choose to adopt the provision.

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Income Tax – Country-by-Country Reporting

The IRAS issued the  e-Tax Guide on Country-by-Country Reporting (“CbCR’) on 10 October 2016 to provide taxpayers with guidance on the purpose of CbCR and the obligation to provide a CbC Report; and also how to complete and submit a CbC Report to IRAS.

As previously mentioned by IRAS, CbCR is compulsory to Singapore MNE group with international operations and annual group revenue of at least S$1,125 million (i.e. EUR750m).

1 Singapore will be introducing legislation for CbCR. The public consultation on draft Income Tax (Amendment) (No. 3) Bill 2016 was carried out from 8 July to 29 July 2016. The Bill will be introduced to parliament in 2016. This e-Tax guide provides administrative guidance for the implementation of CbCR.

IRAS’ Transfer Pricing Guidelines require taxpayers to organise their transfer pricing documentation at Group level and Entity level.

4.2 CbC Reports are supplementary to such transfer pricing documentation.


4.3 A CbC Report requires aggregate tax jurisdiction-wide information relating to the global allocation of the income, the taxes paid, and certain indicators of the location of economic activity among tax jurisdictions in which the reporting MNE group operates. The report also requires a listing of all the entities (including permanent establishments) for which financial information is reported, including the tax jurisdiction of incorporation, where different from the tax jurisdiction of residence, as well as the nature of the main business activities carried out.

What is a CbC Report?

A CbC Report is used for high-level transfer pricing risk assessment purposes by tax authorities in evaluating other BEPS related risks and where appropriate for economic and statistical analysis.  IRAS has clarified that the information in the CbC Report

  • should not be used as a substitute for a detailed transfer pricing analysis of individual transactions and prices based on a full functional analysis and a full comparability analysis;
  • on its own does not constitute conclusive evidence that transfer prices are or are not appropriate; and
  • should not be used by tax administrations to propose transfer pricing adjustments.

What is the format of a CbC Report?

IRAS has stated that a CbC Report must be submitted in accordance with the template in the Annex to the e-Tax Guide.  It comprises three tables:

The first table

  • provides an overview of income, taxes, employees and assets of the MNE group allocated to the different tax jurisdictions that the group operates in, i.e. each line reports the aggregated numbers relating to a particular tax jurisdiction.  For example, if an MNE group has income arising from three jurisdictions, this table will show three lines – one for each jurisdiction.

The second table

  • provides an overview of the entities (including permanent establishments) of the MNE group, again organized according to the tax jurisdictions that the entities are tax resident in. The main business activities of each entity are also indicated. Dormant entities must also be included in this table.

The third table

  • allows the MNE group to provide any additional information that it feels would be relevant and useful to interpret or understand the data provided in the CbC Report.

Submission of CbC Reports

IRAS is currently developing e-services for receiving and sending CbC Reports with a sufficient level of encryption. As the first CbC Reports will be required for data for FY 2017, and a Reporting Entity will have 12 months from the end of a financial year to submit the CbC Report for that financial year, the earliest CbC Report required to be submitted to IRAS would be due by 31 December 2018 (for a financial year ending on 31 December 2017).

Based on available information, IRAS will identify taxpayers affected by CbCR and provide further information on the submission of CbC Reports in the first half of 2018.  Any taxpayer who believes that it will be required to file a CbC Report may also contact IRAS to find out more about CbCR. In the event that the taxpayers did not submit the CbC report, they may be penalized under Section 105M of the ITA.

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Income Tax – UK is the second country who has entered into a Competent Authority of Agreement with Singapore

It was announced on IRAS’ website that on 16 September 2016, IRAS and the UK Tax Authorities signed a Competent Authority Agreement (“Agreement“) on the automatic exchange of financial account information (“AEOI“) based on the Common Reporting Standard (“CRS“).


Singapore and the UK will commence AEOI under the CRS by September 2018. Under this Agreement, IRAS will automatically exchange with the UK Tax Authorities, financial account information of accounts in Singapore held by UK tax residents while the UK Tax Authorities will automatically exchange with IRAS, financial account information of accounts in the United Kingdom held by Singapore tax residents.

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Income Tax – Australia is the first country who has entered into a Competent Authority of Agreement with Singapore

6 September 2016 marked another milestone in the history of Singapore income tax regime. as the Singapore tax authorities have entered into a Competent Authority Agreement with the Australian tax authorities on the Automatic Exchange of Financial Account Information (“AEOI“) based on the Common Reporting Standard (“CRS“)

The CRS is an  internationally agreed standard for AEOI, endorsed by OECD and Global Forum for Transparency and Exchange of Information for Tax Purposes (“GF”).  More than 100 jurisdictions have endorsed the CRS and will commence AEOI in either 2017 or 2018.

Singapore and Australia will commence AEOI under the CRS by September 2018. Under this Agreement, the Singapore tax authorities will automatically exchange with the Australian tax authorities, financial account information of accounts in Singapore held by Australian tax residents while the Australian tax authorities will automatically exchange with the Singapore tax authorities, financial account information of accounts in Australia held by Singapore tax residents.  Both jurisdictions are satisfied with the confidentiality rules and data safeguards that are in place in the other jurisdiction to ensure the confidentiality of information exchanged and prevent its unauthorised use.

With the conclusion of this Agreement, Singapore and Australia have taken another step in enhancing cooperation to support greater tax transparency and fight against tax evasion.  Both jurisdictions seek to work toward implementing AEOI with other major financial centres to ensure a level playing field.

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Income Tax – at last, Country-by-Country Reporting in Singapore

On 16 June 2016, IRAS announced that Singapore will commit to implement Country-by-Country Reporting (CbCR) for the financial years beginning on or after 1 Jan 2017 for Multinational Enterprises  (MNEs) whose ultimate parent entities are in Singapore and group turnover exceed S$1.125 million.

Applicable MNEs are required to file their Country-by-Country (CbC) report with IRAS within 12 months from the last day of their financial year.  IRAS will then exchange CbC reports with jurisdictions which Singapore has entered into bilateral agreements with for automatic exchange of CbCR information when it is satisfied that the following conditions are met:

  •  These jurisdictions have a strong rule of law and can ensure the confidentiality of the information exchanged and prevent its unauthorised use.
  • Second, there must be reciprocity in terms of the information exchanged.

IRAS will consult Singapore-headquartered multinational enterprises further on the implementation details of CbCR, and release these details by September 2016.

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