Singapore tax and FATCA updates · Wage Credit Scheme (WCS): Overview The Singapore Government will...
Transcript of Singapore tax and FATCA updates · Wage Credit Scheme (WCS): Overview The Singapore Government will...
IMAS Lunchtime Talk Series 2013Page 1
IMAS Lunchtime Talk Series 2013
Singapore tax and FATCA updates
21 March 2013
IMAS Lunchtime Talk Series 2013Page 2
Singapore tax and FATCA updates – what do they mean to you?► Budget 2013 updates
► Tax updates on the fund management industry
► FATCA – what next?
IMAS Lunchtime Talk Series 2013Page 3
IMAS Lunchtime Talk Series 2013
Budget 2013 updates
Presented by Amy Ang
Partner, Financial Services and Corporate Tax
21 March 2013
IMAS Lunchtime Talk Series 2013Page 4
Monthly salary increase
Wage Credit Scheme (WCS): Overview
► The Singapore Government will co-fund 40% of wage increases for Singaporean employees earning up to a gross monthly wage of S$4,000. Wage increases that are given in 2013 to 2015 will be eligible for the WCS
200 200
200
200
200
200Co-funding ceiling of S$4,000 (monthly salary)
Monthly co-fundingby Government: 80 160 240
2013 2014 2015
IMAS Lunchtime Talk Series 2013Page 5
WCS: Qualifying employees
► Singapore citizen► Earns a gross monthly wage of up to and including
S$4,000► Minimum increment to be supported is S$50► Was employed for at least three months in preceding year
with the same employer► On employer’s payroll for at least three months in
qualifying year► Qualifying monthly salary includes basic salary and
additional wages like overtime pay and bonuses, and excludes employer CPF contributions
IMAS Lunchtime Talk Series 2013Page 6
WCS: Qualifying criteria
► Employer must have paid the employee CPF contributions for at least three months in the qualifying year. Owners of companies or businesses do not qualify as employees even if they make CPF contributions
► All employers will be automatically covered ► Government-related entities and entities not registered in
Singapore are excluded from receiving the Wage Credit► Public companies limited by guarantee, societies and
charities and institutions of a public character are eligible for WCS
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WCS payout
► For wage increases given in 2013, eligible employers will receive the Wage Credit in Q2 2014
► Payment will be credited directly into the company’s GIRO bank account for income tax or through cheque
► Wage Credit is taxable► Wage Credit can be used to offset any outstanding tax
arrears of the employer before the remaining amount, if any, is paid out
IMAS Lunchtime Talk Series 2013Page 8
Corporate income tax rate
Current► Corporate income tax rate: 17%
► Partial tax exemption on first S$300,000 of chargeable income:► 75% tax exemption for up to the first S$10,000 ► 50% tax exemption for up to the next S$290,000
Proposed► No reduction in corporate income tax rate► Partial tax exemption remains as before
IMAS Lunchtime Talk Series 2013Page 9
Corporate income tax rate:Comparison to Hong Kong
►Hong Kong’s prevailing corporate tax rate: 16.5%►How does this compare to Singapore:
(a) 75% tax exemption for up to the first S$10,000 of chargeable income(b) 50% tax exemption of up to the next S$290,000 of chargeable income
Chargeable income
S$
Exempt income
S$
Income subject to tax
S$
Income at 17%S$
Effective tax rate
S$10,000 (7,500) 2,500 425
290,000 (145,000) 145,000 24,650
300,000 (152,500) 147,500 25,075 8.36%
4,900,000 - 4,900,000 833,000
5,200,000 (152,500) 5,047,500 858,075 16.5%
a
b
IMAS Lunchtime Talk Series 2013Page 10
Corporate income tax rate
Points of view
► Effective tax rate can be further reduced by:► Full and/or partial tax exemption
► Various tax incentive schemes such as: ► FSI-FM which accords concessionary tax rate of
10%
IMAS Lunchtime Talk Series 2013Page 11
Corporate income tax rebate
Current► No corporate income tax (CIT) rebate for year of
assessment (YA) 2012
Proposed► CIT rebate for YA2013 to YA2015► 30% of corporate income tax payable, capped at
S$30,000 per YA
IMAS Lunchtime Talk Series 2013Page 12
Corporate income tax rebate
How does it affect you
► Chargeable income of S$740,736 and above to reap the full benefit of the CIT rebate
► Further reduction of effective tax rate
Chargeable income Effective tax rate (after partial exemption)
Effective tax rate (after partial
exemption and CIT rebate)
S$300,000 8.36% 5.85%S$500,000 11.8% 8.3%
S$5,200,000 16.5% 15.9%
IMAS Lunchtime Talk Series 2013Page 13
Corporate income tax rebate
Clarifications from the IRAS► Given to all companies including► Registered business trusts► Companies that are not tax resident in Singapore; and ► Companies that receive income taxed at a
concessionary tax rate► No application required – automatic processing by IRAS
when assessing companies’ income tax returns► Not applicable to income of a non-resident company that
is subject to final withholding tax► Computed on the tax payable amount after deducting tax
set-offs (e.g., foreign tax credits)
IMAS Lunchtime Talk Series 2013Page 14
Corporate income tax rebate
► For companies with concessionary and normal income:
Illustrative example S$Chargeable income @ 10% concessionary tax rate 200,000Tax payable on above chargeable income 20,000Chargeable income @ 17% (after exempt amount) 400,000Tax payable on above chargeable income 68,000Total tax payable 88,000YA 2013 CIT rebate (30% of tax payable, capped at S$30,000)
26,400.00
Net tax payable 61,600Effective tax rate 10.3%
IMAS Lunchtime Talk Series 2013Page 15
Tax exemption for new start-up companies
Current► Tax exemption on first S$300,000 of chargeable income:► 100% tax exemption for up to the first S$100,000 ► 50% tax exemption for up to the next S$200,000
► Qualifying conditions include:► Incorporated in Singapore (including a company limited by
guarantee)► A tax resident in Singapore for that YA; and► Has no more than 20 shareholders throughout the basis
period for that YA where:► All of the shareholders are individuals beneficially and
directly holding the shares in their own names;► At least one shareholder is an individual beneficially and
directly holding at least 10% of the issued ordinary shares of the company
IMAS Lunchtime Talk Series 2013Page 16
Tax exemption for new start-up companies
Proposed► Tax exemption rates remain as before► Qualifying conditions remain as before► Certain companies incorporated after
26 February 2013 are excluded from the scheme:► Property developer► Investment holding company
► Property developers and investment holding companies can still enjoy the partial tax exemption
IMAS Lunchtime Talk Series 2013Page 17
Productivity and Innovation Credit (PIC)
► Announced in the 2011 Budget Statement► Available to all businesses from FY2010 to FY2014► Enhanced tax deductions or allowances for qualifying
expenditure incurred in the following six activities:
400% for first $400,000 per activity per FY
150% (for R&D) or 100% (for the rest) for the balance expenditure
* Need not be related to existing trade or business (for R&D done in Singapore)
Training of
employees
Registrationof
IP rights
Acquisition of
IP rights
Design activities
in Singapore
Automation through
technologyor software
R&D* donein
Singaporeor abroad
IMAS Lunchtime Talk Series 2013Page 18
PIC overview
► Combined expenditure cap of S$800,000 for each of the qualifying activities for FY2010 and FY2011
► Combined expenditure cap of S$1,200,000 for each of the qualifying activities from FY2012 to FY2014
► Claim must be net of grants and subsidies provided by the government or any statutory board
► Tax deferral option available
► Cash conversion option available
IMAS Lunchtime Talk Series 2013Page 19
PIC cash conversion option:In summary
YA 2011 and YA20 12
YA 2013, YA2014and YA2015
Maximum qualifying expenditure eligible for conversion
S$100,000 S$100,000
Minimum qualifying expenditure to be converted
S$400 S$400
Conversion rate 30% 60%Maximum cash payout per YA S$30,000 S$60,000Value of cash conversion in respect of qualifying deduction or allowance
7.5% 15%
Ability to combine expenditure cap
Yes No
IMAS Lunchtime Talk Series 2013Page 20
PIC cash conversion option:Qualifying conditions
► One-time irrevocable option to convert deduction / allowance into cash in lieu of tax deduction if the following conditions are met:► Incurred qualifying expenditure is entitled to the PIC
scheme during the basis period for the qualifying YA;► Active business operations in Singapore; and► at least three local employees (Singapore citizens or
permanent residents with CPF contributions excluding sole proprietors, partners under contract for service and shareholders who are directors of the company)
IMAS Lunchtime Talk Series 2013Page 21
Enhancement to PIC
Enhancement to PIC
automation
IP licensing
PIC Bonus
► Enhancement to the PIC scheme to include IP in-licensing
► Expansion to the scope of PIC automation equipment
► Introduction of PIC Bonus
IMAS Lunchtime Talk Series 2013Page 22
Automation through technology or software:Overview of existing rules► Under the PIC
► A 400% capital allowance (CA) / deduction on the first S$400,000 of qualifying expenditure
► A 100% CA / deduction on the remaining qualifying expenditure
► Qualifying expenditure► Expenditure incurred on the acquisition / lease of prescribed
automation equipment
► Examples include:► Computers, mobile phone and other personal digital assistant ► IT software including office system software and software
used in connection with provision of any office automation service (e.g., ERP, CRM etc)
IMAS Lunchtime Talk Series 2013Page 23
Expansion to the scope of PIC automation equipment
► Currently IRAS issues a prescribed list of automation equipment qualifying for PIC to provide tax certainty to businesses for their PIC claims. Automation equipment on the prescribed list automatically qualifies for PIC.
► Where the automation equipment is not on the prescribed list, taxpayers can apply, on a case-by-case basis, to the IRAS to seek approval to claim enhanced allowances / deductions under the PIC scheme.
IMAS Lunchtime Talk Series 2013Page 24
PIC Bonus
► PIC Bonus is paid over and above existing PIC benefits
PIC
► Businesses that invest a minimum of S$5,000 per YA in PIC qualifying expenditure will receive a dollar-for-dollar matching cash bonus
► The bonus will be up to S$15,000 over three YAs from YA2013 to YA2015
$
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PIC Bonus
► The PIC Bonus is applicable to sole-proprietorships, partnerships and companies that have:► Incurred at least S$5,000 in PIC qualifying expenditure during
the basis period for the YA in which a PIC Bonus is claimed;
► Active business operations in Singapore; and
► At least three local employees (Singapore citizens or permanent residents) with CPF contributions, excluding sole-proprietors, partners under contract for service and shareholders who are directors of the company
► The PIC Bonus is not available to town councils, clubs and associations
► Businesses can claim the PIC Bonus together with their PIC cash payout applications or income tax returns
IMAS Lunchtime Talk Series 2013Page 26
PIC Bonus
► Where the 400% tax deductions / allowances are claimed in the income tax return:► Businesses can expect to receive the PIC Bonus within
three months from the date of receipt of the income tax return by the IRAS
► IRAS will start disbursing the PIC Bonus from October 2013
► Where the PIC cash payout is claimed:► IRAS will generally approve the cash payout claim within
three months from the date of receipt of the application► PIC for these cases will be disbursed from July 2013
► The PIC Bonus is taxable
IMAS Lunchtime Talk Series 2013Page 27
Extending and enhancing the Financial Sector Incentive (FSI) scheme► FSI – ST 12%► FSI – FM► FSI – HQ
► FSI – BM► FSI – EM► FSI – CFS► FSI – DM
► FSI – IF
Expire on 31 December 2013
5%
► Financial Derivatives► OTC Commodity Derivatives► Exchange Traded Commodity
Derivatives►OTC and Exchange Traded
Commodity► Financial, OTC and Exchange
Traded Commodity Derivatives
10%
IMAS Lunchtime Talk Series 2013Page 28
► Financial Derivatives► OTC Commodity Derivatives► Exchange Traded Commodity
Derivatives►OTC and Exchange Traded
Commodity► Financial, OTC and Exchange
Traded Commodity Derivatives
Extending and enhancing the Financial Sector Incentive (FSI) scheme► FSI – ST 12%► FSI – FM► FSI – HQ
► FSI – BM► FSI – EM► FSI – CFS► FSI – DM
► FSI – IF
Expire on 31 December 2013
5%
FSI-CM
FSI – DM
subsumed into FSI-ST
31 December 2018
10%
IMAS Lunchtime Talk Series 2013Page 29
Extending and enhancing the Financial Sector Incentive (FSI) scheme
► FSI-ST► FSI-CM► FSI-CFS
► FSI-HQ► Interest payments on qualifying loans ► Automatic withholding tax (WHT) exemption
wef 25 February 2013
► MAS will release details by end June 2013
Range of incentivised activities and financial instruments will be broadened
IMAS Lunchtime Talk Series 2013Page 30
Extending and refining the QDS and QDS + incentive schemes
► Interest income► Discount income► Prepayment fee► Redemption
premium► Break cost
Issuer HolderQDS
QDS +
FSI-ST Companies or bodies of person resident in Singapore
Non-resident
Resident individuals
12% 0%10% 0%
0% 0%0% 0%
IMAS Lunchtime Talk Series 2013Page 31Investors
Extending and refining the QDS and QDS + incentive schemes
Arranger
Qualifyingcriteria
Types of instrumentBonds, notes, CPs, CDs
Issue date on
or before
31 December 2013
► Substantially arranged by a Singapore FI; or
► Arranged by an FSI-BM company
At primary launch:
►At least four investors; or
►< 50% held or funded by related parties
► QDS
► If at least 50% of QDS / QDS+ held by related parties, that portion of income does not qualify for concessionary tax treatment
IMAS Lunchtime Talk Series 2013Page 32
Extending and refining the QDS and QDS + incentive schemes
► QDS+ - QDS that are ► Debt securities (excluding SGS) with an original
maturity of at least ten years; or ► Islamic debt securities or sukuk
IMAS Lunchtime Talk Series 2013Page 33
Extending and refining the QDS and QDS + incentive schemes
Proposed► QDS and QDS+ schemes extended from
31 December 2013 to 31 December 2018► Debt securities issued during 1 January 2014 to
31 December 2018 “substantially arranged in Singapore” rationalised
IMAS Lunchtime Talk Series 2013Page 34
Extending and refining the QDS and QDS + incentive schemes
Debt securities issued 1 January 2014
to 31 December 2018“Qualifying programme”
► Programme wholly arranged by FSI-CM or FSI-ST
► New issuer: participation wholly arranged by FSI-CM or FSI-ST
Substantially arranged in Singapore
“Non-qualifying programme”
► > 50% issued in that tranche distributed by FSI-CM or FSI-ST
“Not under a programme”
► > 50% of lead managers are FSI-CM or FST-ST
► Other proxies : > 50% of revenue from arranging, distributing, attributable to FSI-CM or FSI-ST
IMAS Lunchtime Talk Series 2013Page 35
Extending and enhancing the Financial Sector Incentive (FSI) scheme
► QDS+► “Standard early termination clauses” do not affect
status► Early termination due to taxation, default, redemption or
modification and amendment events► If redeemed prematurely, QDS+ benefits revoked
prospectively for outstanding debt securities► Embedded options which can be exercised within ten
years from debt of issuance ≠ QDS+► Effective from date of release of MAS circular before
end of June 2013
IMAS Lunchtime Talk Series 2013Page 36
Expiry and withdrawal of certain tax schemes
► Further tax deduction scheme for expenses incurred on relocation or recruitment of overseas talent► Expires on 30 September 2013
► Tax incentive scheme for family-owned investment holding companies (FIHC)► Aligns tax exemption of income received directly by individuals and
that through a qualifying FIHC
► Expires on 31 March 2013
IMAS Lunchtime Talk Series 2013Page 37
Personal income tax rate
No change to the current personal income tax rates► A more progressive personal income tax schedule took
effect from year of assessment (YA) 2012► Top marginal tax rate remains at 20%
IMAS Lunchtime Talk Series 2013Page 38
Tax structure effective from YA2012
Chargeable income (S$) Tax rate (%) Tax payable (S$)
On the first 20,000 0 0
On the next 10,000 2 200
On the first 30,000 200
On the next 10,000 3.5 350
On the first 40,000 550
On the next 40,000 7 2,800
On the first 80,000 3,350
On the next 40,000 11.5 4,600
On the first 120,000 7,950
On the next 40,000 15 6,000
On the first 160,000 13,950
On the next 40,000 17 6,800
On the first 200,000 20,750
On the next 120,000 18 21,600
On the first 320,000 42,350
In excess of 320,000 20
IMAS Lunchtime Talk Series 2013Page 39
Personal income tax rebate
One-off personal income tax rebate to be granted to all resident taxpayers for YA 2013
Rebate Criteria
30% Aged less than 60 years old as at 31 December 2012
50% Aged 60 and above as at 31 December 2012
Cap S$1,500 per taxpayer
IMAS Lunchtime Talk Series 2013Page 40
Singapore vs Hong Kong (YA 2013)
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
50 100 150 200 250 300 350 400 450 500 550
Effe
ctiv
e ta
x ra
te
Income level (S$ '000)
Singapore Hong Kong (2012/2013 tax rates)
S$520,000
S$82,000
Notes :
1. Assumes a married man 50 years of age and below, with two children. Wife has no income and sole source of income is from his employment
2. Hong Kong calculations are based on 2012/2013 tax rates, with 75% tax rebate capped at HK$10,000.
3. Singapore calculations are based on YA 2013 tax rates, with 30% tax rebate capped at S$1,500.
4. Exchange rate used: S$1 : HK$6.2159
Comparative Analysis (2012/2013 Hong Kong vs Singapore YA2013 tax rates)
IMAS Lunchtime Talk Series 2013Page 41
Simplifying the taxation of accommodation benefits
► Proposed changes with effect from YA 2015► Taxable value of accommodation provided by employer to
employee, including service apartment*:
* Not located within a hotel building
CurrentThe lower of 10% of employment income or the annual value of premises, less rent paid by employeeIf furnished, taxable value of furniture and fittings is based on a prescribed list
ProposedAnnual value of premises, less rent paid by employee
If furnished, taxable value is based on a percentage of annual value
IMAS Lunchtime Talk Series 2013Page 42
Illustration: proposed changes to taxable benefit of accommodation
Current tax treatment on housing accommodation
(S$)
SalaryBonusFurniture & fittingsHousing benefit
180,00030,0001,200
21,120
Assessable income 232,320
Less: personal reliefsEarned incomeSpouseChildren
(1,000)(2,000)(8,000)
Chargeable income 221,320
Tax 24,588
Difference in tax to be paid
Proposed changes to taxable benefit on
housing accommodation (S$)
180,00030,0003,250
65,000
278,250
(1,000)(2,000)(8,000)
267,250
32,855
8,267
IMAS Lunchtime Talk Series 2013Page 43
Illustration: proposed changes to taxable benefit of accommodationAssumptions: 1. Taxpayer is married with two dependent children. Wife has no
income.2. Salary is S$15,000 per month. Bonus is equivalent to two
months salary. 3. House rental is S$8,000 per month. Annual value of property is
S$65,000. 4. Taxable benefit of furniture and fittings amount to S$1,200 per
annum under current treatment. For the taxable value under the proposed treatment, we have assumed the furniture and fittings based on 5% of the annual value of the housing.
5. No other reliefs/deductions apply. 6. Based on current individual tax rates without tax rebate.
IMAS Lunchtime Talk Series 2013Page 44
Simplifying the taxation of accommodation benefits
Taxable value of hotel accommodation provided by employer to employee, including service apartment located within a hotel building:
► Further details to be released by IRAS by October 2013
Current ProposedS$250 per month each for self and spouse, including varying rates for children + 2% of base salary relating to the period of hotel stay
Actual cost of the hotel stay incurred
IMAS Lunchtime Talk Series 2013Page 45
Impact
Higher tax costs► Employers who bear the tax liabilities of employees► Employees who bear their own taxes
IMAS Lunchtime Talk Series 2013Page 46
Employee equity-based remuneration schemes
Tax incentive schemes
Tax deferral scheme
Tax exemption schemes for employees –Equity Remuneration Incentive Scheme (ERIS)
Qualified Employee
Equity-Based Remuneration
scheme (QEEBR)
ERIS (Start-ups)
ERIS (SMEs)
ERIS (All
Corporations)
IMAS Lunchtime Talk Series 2013Page 47
ERIS: Brief background
ERIS(Start-ups)
►Employees of qualifying start-up companies enjoy tax exemption on 75% of taxable stock gains, up to S$10m over 10 years
►Effective 16 February 2008 for five years
►Subject to qualifying conditions
ERIS (SMEs)
►Employees of qualifying SMEs enjoy tax exemption on 50% of taxable stock gains, up to S$10m over 10 years
►First introduced on 1 June 2000
►Subject to qualifying conditions
ERIS (All Corporations)►Employees of
qualifying companies enjoy tax exemption on the first S$2,000 of taxable stock gains plus 25% of the remaining gains, up to S$1m over 10 years
►First introduced on 1 April 2001
►Subject to qualifying conditions
IMAS Lunchtime Talk Series 2013Page 48
ERIS: Proposed changes
ERIS(Start-ups)
►Expired on 15 February 2013 – will not be renewed
►Employee stock plans that previously qualified under this scheme will continue to enjoy tax exemption on gains derived on / before 31 December 2023
ERIS (SMEs) and
ERIS (All Corporations)►No prior expiry date
►Will now expire on 1 January 2014
►Employee stock plans that qualify under this scheme on / before 31 December 2013 will continue to enjoy tax exemption on gains derived on / before 31 December 2023
IMAS Lunchtime Talk Series 2013Page 49
Employee equity-based remuneration schemes
► Qualified (EEBR)► Sole scheme remaining► Tax deferral scheme, i.e., not an exemption scheme► Application by the taxpayer to IRAS to defer payment
on tax on share gains up to five years► Deferral is subject to interest charge at prime rate
IMAS Lunchtime Talk Series 2013Page 50
Property tax changes
Current► Property tax rate is 10% on Annual Value► As a concession, lower rates apply for owner-occupied
residential properties
Annual value (AV) Property tax ratesFirst S$6,000 0%Next S$59,000 4%AV above S$65,000 6%
IMAS Lunchtime Talk Series 2013Page 51
Property tax changes
► Proposed rates for owner-occupied residential properties:Annual value (AV) Rates from
1 January 2014Rates from
1 January 2015First S$8,000 0% 0%Next S$47,000 4% 4%Next S$5,000 5% 6%Next S$10,000 6% 6%Next S$15,000 7% 8%Next S$15,000 9% 10%Next S$15,000 11% 12%Next S$15,000 13% 14%AV above S$130,000 15% 16%
IMAS Lunchtime Talk Series 2013Page 52
Property tax changes
► Proposed rates for non-owner-occupied residential properties:
► Property tax rate for land and non-residential properties remains at 10%
► More details to be released by June 2013
Annual value (AV) Rates from 1 January 2014
Rates from 1 January 2015
First S$30,000 10% 10%Next S$15,000 11% 12%Next S$15,000 13% 14%Next S$15,000 15% 16%Next S$15,000 17% 18%AV above S$90,000 19% 20%
IMAS Lunchtime Talk Series 2013Page 53
Property tax changes
Current► Refund concessions available for certain vacant
properties
► Residential properties undergoing demolition and reconstruction► Rate of 10% applies► Can apply to be taxed at owner-occupied rates
► Vacant land undergoing new development► Rate of 10% applies during period of development
IMAS Lunchtime Talk Series 2013Page 54
Property tax changes
Proposed► With effect from 1 January 2014► Refund concessions on vacant properties will be removed► Vacant properties despite reasonable efforts to find a tenant► Residential properties undergoing repairs or building works
for owner-occupation*► Vacant land undergoing residential development*
* For properties intended for owner-occupation, owner may apply to IRAS for owner-occupied residential property tax rates► Rates to apply up to two years► Property must be owner-occupied for at least one year
IMAS Lunchtime Talk Series 2013Page 55
Property tax changes
► No change to:► Property tax on residential property undergoing
demolition and reconstruction► Vacant land undergoing new development
► Further details to be released by IRAS by June 2013
IMAS Lunchtime Talk Series 2013Page 56
Foreign worker policies
Work pass eligibility criteria► Tightening of S Pass qualification criteria► Increase of minimum qualifying monthly salary from
S$2,000 to S$2,200 from 1 July 2013► Tiered salary system based on age and qualifications
► Eligibility requirements for Employment Pass (EP) will be further tightened
IMAS Lunchtime Talk Series 2013Page 57
Foreign worker policies
► New EP framework to ensure firms give fair consideration to Singaporeans in their hiring practice► Ministry of Manpower will release more details and will
consult
IMAS Lunchtime Talk Series 2013Page 58
Recent Singapore tax treaties
Signed but not in force In force
► Portugal (Protocol)► Turkey (Protocol)
► Bermuda (tax information exchange agreement)
► Bahrain (Protocol)► Canada (Protocol)► Estonia (Protocol)
Addition of Exchange of information Article
IMAS Lunchtime Talk Series 2013Page 59
Recent Singapore tax treaties
Signed but not in force In force
► Guernsey► Isle of Man► Jersey► Poland
(enhanced agreement)
► Italy (Additional Protocol)
► Switzerland (revised)► United Kingdom
(Second Protocol)► Vietnam
(Second Protocol)
Comprehensive tax treaties
IMAS Lunchtime Talk Series 2013Page 60
Recent Singapore tax treaties
Highlights1. DTAs with low tax jurisdictions (Guernsey, Isle of Man
and Jersey)► Dividends not subject to withholding tax (WHT)► Interest WHT @ 12%► Royalties WHT @ 8%
2. Includes internationally agreed Standard for Exchange of Information (39 to date)
3. Trustee deemed to be beneficial owner of the income for the purposes of the Articles on dividend, interest and royalties ( Guernsey, Poland and UK)
IMAS Lunchtime Talk Series 2013Page 61
Recent Singapore tax treaties
Highlights4. Article on Dividends includes REIT distributions which is subject to 15% WHT (UK)5. Cessation of tax sparing provision (Italy)6. Increase in threshold period for permanent
establishment (PE) (Italy, Poland and Switzerland)7. 5 years sunset clause for service PE (UK)8. Most favoured nation clause for interest WHT (Vietnam)9. Remittance clause not applicable to income exempted
from Singapore tax (Poland and Switzerland)
IMAS Lunchtime Talk Series 2013Page 62
Where is Singapore heading in terms of tax compliance?► Adoption of risk-based compliance approach to assess
taxpayers► Steps taken by IRAS to-date► Voluntary Disclosure Program (VDP)► Enhanced Taxpayer Relationship Program► GST Assisted Compliance Assurance Program (ACAP)
in April 2011► Corporate Income Tax – Objection and Appeal Process
(with effect from 1 January 2014)► Next ?► Co-creating a Tax Risk Management (TRM) framework
for Singapore► TRM to be the proposed basis of IRAS’ compliance
program
IMAS Lunchtime Talk Series 2013Page 63
Common issues in tax compliance
► Classification of income and expenses► For tax incentive companies► Normal vs concessionary income► Allocation keys for expenses
► Information flow is ineffective within entity/across entities► Lack of controls to manage errors and protect data integrity► Lack of records to substantiate transactions► Manual data extraction resulting in inefficiencies and wrong
classification► Lack of tax trained personnel to perform pre-submission
review► Failure to comply with withholding tax
IMAS Lunchtime Talk Series 2013Page 64
Compliance focus by IRAS
► Past and ongoing► Timely filing of corporate tax returns► Accurate filing of income and expenses, especially by
family owned and managed companies► Abuse of tax exemption scheme for new companies► Claims of capital allowance and industrial building
allowance► Up and coming► Classification of income and expenses by companies
enjoying tax incentives► Related-party transactions and allocation of development
cost by real estate developers ► Income declaration by companies whose principal
activities are that of tutoring services or tuition agencies
IMAS Lunchtime Talk Series 2013Page 65
IMAS Lunchtime Talk Series 2013
Updates to the fund Industry
Presented by Desmond Teo
Partner, Financial Services and International Tax
21 March 2013
IMAS Lunchtime Talk Series 2013Page 66
Singapore asset management industryConfirming our suspicion over the past 10 years
IMAS Lunchtime Talk Series 2013Page 67
Designated investments and specified income
üAll stocks and shares of any company, other than an unlisted company that is in the business of trading or holding of Singapore immovable properties (other than the business of property development) are covered
üREITs are considered “securities” and covered even if they have Singapore real estate
Non-qualifying debt securities and other securities issued by private companies that are in the business of trading or holding of Singapore
The list of designated investments was simplified and some changes of particular interest:
IMAS Lunchtime Talk Series 2013Page 68
Designated investments and specified income
üUnless excluded, all income and gains derived on or after 17 February 2012 from designated investments will be considered as specified income
ü Disposal gains from any REITS
Interest and other payments that fall within the ambit of Section 12(6) of the Income Tax Act (ITA), unless excluded
Distributions made by a trustee of a SGX-listed REIT
The list of specified income will be enhanced and revised as an exclusion list. Some key income/gains impacted:
IMAS Lunchtime Talk Series 2013Page 69
Other changes impacting prescribed funds
SPVs (Exempt SPV) that enjoy the Singapore tax exemption which are wholly-owned by the Prescribed Fund
Key changes/clarifications► 100% ownership must be at all
times during the basis period where the Exempt SPV enjoys tax exemption
► Prescribed Fund must meet the prescribed conditions for Section 13R/X
Investors
Exempt SPV
Must be 100% at all times during the basis period where Exempt SPV enjoys tax exemption
Prescribed Fund must meet the prescribed conditions for Section 13R/X
Prescribed Fund
Prescribed Fund that enjoy the Singapore tax exemption
Key changes/clarifications► Conditions to be met at all times
during the basis period for the year of assessment
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GST remission for prescribed funds
► GST remission for prescribed funds managed by fund managers in Singapore• Fixed recovery rate for 1 January 2013 to 31 December 2013 will be 87%
• Operating costs for the fund are marginally increasing
2009 2010 2011 2012 2013Fixed Recovery Rate 93% 92% 91% 90% 87%GST leakage / $1 mil
expenses $4,900 $5,600 $6,300 $7,000 $9,100
$0
$2,000
$4,000
$6,000
$8,000
$10,000
70%
75%
80%
85%
90%
95%
100%
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Ernst & Young
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© 2013 Ernst & Young Solutions LLP. All Rights Reserved.
FEA no. 12000446
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This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither Ernst & Young Solutions LLP nor any other member of the global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor.
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