singapore joins inclusive framework for implementing ... · singapore joins inclusive framework for...
TRANSCRIPT
17 June 2016
Overview
On 16 June 2016, Singapore announced that it will join the inclusiveframework for the global implementation of the BEPS Project. By joining thisframework (as a BEPS Associate), Singapore will work with otherparticipating jurisdictions to facilitate consistent implementation of measuresunder the BEPS Project and a level playing field across jurisdictions.
As a BEPS Associate, Singapore is committed to implementing the fourminimum standards under the BEPS Project, namely:
► Action 5: Countering harmful tax practices
► Action 6: Preventing treaty abuse
► Action 13: Transfer pricing documentation
► Action 14: Enhancing dispute resolution
Commenting on Singapore’s implementation of the BEPS measures, DeputyPrime Minister, Coordinating Minister for Economic and Social Policies &Minister for Finance (MoF) Mr. Tharman Shanmugaratnam said, “Singapore iscommitted to working with the international community to counter artificialshifting of profits and continues to welcome substantive economicactivities”1.
1 http://www.mof.gov.sg/news-reader/articleid/1659/parentid/59/year/2016?category=Press%20Release
Singapore joins inclusiveframework forimplementing measuresagainst Base Erosion andProfit Shifting (BEPS)
International tax andtransfer pricing alert
Singapore joins Inclusive framework for implementing measures against Base Erosion and Profit Shifting (BEPS) 2
Background
On 23 February 2016, the Organisation forEconomic Co-operation and Development (OECD)announced a new framework that allows allinterested countries and jurisdictions to join effortsto update the international tax rules for the 21stCentury. The proposal for broadening participationin the OECD/G20 BEPS Project was presented toG20 Finance Ministers between 26 and 27February 2016 in Shanghai, China and waswelcomed by the G20 Finance Ministers andCentral Bank Governors at their meeting between14 and 15 April 2016 in Washington D.C.
This new forum will provide for all interestedcountries and jurisdictions to participate as BEPSAssociates in an extension of the OECD’sCommittee on Fiscal Affairs (CFA). As BEPSAssociates, the participating countries will work onan equal footing with the OECD and G20 memberson the remaining standard-setting under the BEPSProject, as well as the review and monitoring of theimplementation of the BEPS package. BEPSAssociates will also access capacity-buildingsupport for the implementation process, includingguidance on developing Action Plans for BEPSimplementation.
The framework’s mandate plans to focus on thereview of implementation of the four BEPSminimum standards, in the areas of harmful taxpractices, tax treaty abuse, transfer pricingdocumentation and improvements in cross bordertax dispute resolution.
The first meeting of the Committee on FiscalAffairs including the new BEPS Associates will beheld in Kyoto, Japan, on 30 June and 1 July 2016.
Singapore’s position
Singapore’s MoF has announced that it will join theinclusive framework for the global implementationof the BEPS Project and work with otherjurisdictions to help develop the implementationand monitoring phase of the BEPS Project.Singapore is committed to implementing the fourminimum standards under the BEPS Project asmentioned in the above paragraphs. Singapore hasbeen a participant at the OECD’s CFA since 2013and has been active in providing input to the designof the BEPS Project. Singapore has also workedwith the OECD and G20 to facilitate such that the
new framework for implementing BEPS Project isinclusive.
Details of Singapore’s position on the fourBEPS minimum standards
► Countering harmful tax practices. Singapore usestax incentives to promote investment in certainareas of the economy, where tax incentives arelegislated and granted for defined periods of timeon qualifying activities. These tax incentives arereviewed regularly such that they remain relevantand competitive. Incentive recipients would have toanchor substantive operations in Singapore andcontribute meaningfully to the growth of the overalleconomy.
It is worth noting that the work on counteringharmful tax practices has also focused onimproving transparency through the compulsoryspontaneous exchange of certain rulings in thefollowing five clearly defined risk categoriespursuant to agreed deadlines and in an agreedformat:
► Rulings on preferential regimes
► Unilateral advance pricing agreements or crossborder unilateral rulings in respect of transferpricing
► Cross border rulings providing for a downwardadjustment of taxable profits
► Permanent establishment rulings
► Related party conduit rulings
► Preventing treaty abuse. Singapore does notcondone treaty shopping. Singapore has a numberof bilateral tax treaties that contain anti-treatyshopping provisions to prevent abuse. Singapore iscurrently part of a group of jurisdictions workingtogether under the aegis of the OECD and G20 todevelop a multilateral instrument for incorporatingBEPS measures into existing bilateral treaties tocounter treaty abuse. Singapore will considerwhether to join the instrument after it is finalisedand ready for jurisdictions to sign.
The Ad Hoc Group (which now includes 96jurisdictions) that is developing the multilateralinstrument aims to conclude its work and have themultilateral instrument ready for signature by 31December 2016.
Singapore joins Inclusive framework for implementing measures against Base Erosion and Profit Shifting (BEPS) 3
► Transfer pricing documentation. Singaporeadheres to the internationally agreed arm’s lengthprinciple. Singapore commits to implement country-by-country (CbC) reporting for financial yearsbeginning on or after 1 January 2017 formultinational enterprises whose ultimate parententities are in Singapore and whose group turnoverexceed S$1,125m (equivalent to €750m). Theselarge enterprises are required to file the CbCreports with the Inland Revenue Authority ofSingapore (IRAS) within 12 months from the lastday of their financial year. The IRAS will exchangeCbC reports with jurisdictions that Singapore hasentered into bilateral agreements with forautomatic exchange of CbC reporting information,provided the following conditions are met:
► These jurisdictions should have a strong rule oflaw and can facilitate the confidentiality of theinformation exchanged and prevent itsunauthorised use
► There must be reciprocity in terms of theinformation exchanged
The IRAS will consult Singapore-headquarteredmultinational enterprises further on theimplementation details of CbC reporting, andrelease these details by September 2016.
► Enhancing dispute resolution. The IRAS has beenactive in engaging foreign tax authorities to resolvecross border tax disputes via the mutual agreementprocedure provided in its bilateral tax treaties. As aBEPS Associate, Singapore will work closely withother jurisdictions to monitor the implementation ofminimum standards on dispute resolutiondeveloped under the BEPS Project. This willcomplement the other BEPS minimum standardsand facilitate that taxpayers have access toeffective and expedient dispute resolutionmechanisms under bilateral tax treaties.
ConclusionSingapore’s announcement on joining the inclusiveframework has been broadly welcomed by thetaxpayers. This provides the much needed clarityto many taxpayers adopting the “wait-and-see”approach on Singapore’s tax policies in relation tothe implementation of the BEPS measures in thecountry.
By joining the inclusive framework, Singapore hascommitted to adopting the minimum standardsunder the aforesaid four BEPS measures. OtherBEPS measures concerning transfer pricing underBEPS Action Plans 8, 9, 10 and 13 have recentlybeen approved on 23 May 2016 by the OECDCouncil for incorporation into the revised OECDTransfer Pricing Guidelines, formally elevating thestatus of these BEPS measures. Notwithstandingthe above, further refinements to the Singapore’stax system may still be needed for it to fully adhereto the BEPS recommendations. It remains to beseen whether and how Singapore will adopt theremaining BEPS measures.
As a BEPS Associate, Singapore can work withother participating jurisdictions to facilitate theconsistent implementation of measures under theBEPS Project, and a level playing field acrossparticipating jurisdictions.
As one of the first movers to join this inclusiveframework, this reiterates Singapore’scommitment to the key principles underlying theBEPS project, which is important in retaining thestatus of Singapore as a robust business locationand a jurisdiction that does not condone treatyabuse. With these BEPS changes (particularlyaround transparency), there will inevitably beadditional burden placed on taxpayers aroundreporting and indeed reviewing their operatingmodels to facilitate compliance with the newinternational standard. However, this should beseen as a small price to pay. In a world nowcharacterised by greater transparency, Singaporeadopting internationally-accepted standards of taxpolicy, in addition to an attractive tax regime,should result in less scrutiny by other taxauthorities when Singapore appears on the otherside of the transaction.
Taxpayers should be reminded that BEPS is not justabout tax. The new global tax environment, beingdriven by the focus on BEPS, touches every aspectof the business organisation, including holdingstructures, operating models, IT infrastructure,human resource mobility, financing arrangements,etc. Any taxpayers with international operations,whether large or small, need to navigate the BEPSjourney carefully in addressing the competingbusiness and tax pressures.
Singapore joins Inclusive framework for implementing measures against Base Erosion and Profit Shifting (BEPS) 4
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