Magazine issues » June 2017

ASSOCIATION COLUMN: A new standard

Brendan_Egan-Denise_LimThe phrase “it’s a small world” has never been more appropriate in the realm of tax. Since the OECD and G20’s initiative in 2013 to combat base erosion and profits shifting and to provide greater transparency for cross-border transactions, the sharing of tax data between governments has become a reality. Early adopters of the Common Reporting Standard (CRS) have filed their first reports with their tax authorities. But what is the new standard and why should it matter to you? Not to be confused with Generally Accepted Accounting Principles or International Financial Reporting Standards, the CRS is an internationally agreed standard for the automatic exchange of information between jurisdictions with the aim of tax transparency and to tackle offshore tax evasion. Singapore is one of over 100 jurisdictions that have made an international commitment to commence automatic information exchange under the CRS. Since the start of 2017, all Singapore-based financial institutions are required to establish the tax residency status of their account holders. These institutions must report to the Inland Revenue Authority of Singapore details of those who are tax residents of jurisdictions with which Singapore has an agreement to exchange the information. To date, Singapore has signed bilateral agreements with 23 countries for the exchange of information and that number will grow. The countries include Australia, UK, Japan, Republic of Korea, South Africa, Norway, Italy, Canada, Finland, the Netherlands, Iceland, Malta, Ireland, Latvia and New Zealand. New duties
Fund structures are likely to be classified as investment entities for CRS purposes and, as such, would be considered financial institutions under the Singapore CRS Regulations. As a result, it is important to understand the impact of CRS on fund structures and on fund managers or trustees. Here are three steps that funds need to take to prepare for CRS:
  • Identify – Assuming that the fund falls within the definition of ‘investment entity’ and is therefore a financial institution for the purposes of the CRS, the first step is to determine whether it is a reporting financial institution, which would have to meet the obligations under CRS. 
  • Assess and collect – Once the fund establishes that it is a reporting financial institution, it should assess if its current processes and systems are able to identify financial account holders and collect the necessary information. It may be necessary for the funds to align or re-align systems and controls to undertake due diligence for information collection and reporting. Due diligence on accounts prior to January 1, 2017 needs to be completed by December 31, 2017. Though the registration and reporting mechanism is yet to be announced, the first reporting is due on May 31, 2018. 
Register and report – Fund managers and trustees should note that the obligation of compliance falls with them. They may seek advice to ensure funds are compliant at all times. Brendan Egan is financial services tax partner and Denise Lim is financial crime partner at PwC Singapore
This article was contributed by the Singapore Fund Administrators Association 2017 funds global asia

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