Singapore joins tax framework led by OECD and G20

Singapore joins tax framework led by OECD and G20
Under the new tax framework, Singapore will implement minimum standards aimed at preventing "aggressive tax planning" by multinationals.

By Nicole Tan
Posted 16 Jun 2016 19:41

SINGAPORE: Locally headquartered multinationals will soon have to file reports broken down by country as well as income and taxes to the Inland Revenue Authority of Singapore (IRAS).

In a statement on Thursday (Jun 16), the Ministry of Finance announced that Singapore is joining the tax framework led by the Organisation for Economic Co-operation and Development (OECD) and G20.

The OECD Base Erosion and Profit Shifting (BEPS) Action Plan was initiated in 2013. Under the framework, Singapore will implement minimum standards aimed at preventing "aggressive tax planning" by multinationals. The framework also includes setting standards on countering harmful tax practices, preventing treaty abuse, transfer pricing documentation, and enhancing dispute resolution.

This supports the principle that companies are taxed in the country where the economic activity takes place.

Multinational firms with a group turnover of more than S$1.125 billion and whose parent firms are in Singapore will have to report financials and economic activity to the tax authority on a country-by-country basis, for financial years starting in 2017.

IRAS will consult Singapore-headquartered multinationals further on the implementation details of country-by-country reporting (CbCR), and release details by September 2016.

NOT MANY WOULD BE AFFECTED: PwC

Tax consultants estimate that less than 100 firms will be affected. Still, advocating such tax principles can help raise the city-state's competitiveness.

"There won't be a large number of companies affected,” said Ms Nicole Fung, transfer pricing leader at PricewaterhouseCoopers Singapore. “Our estimate: It'll be less than 100. And these companies are not just in Singapore. They're global companies and they play in the international space. And so in terms of additional costs, I don't think there will be additional cost because even if Singapore doesn't have these requirements, they would have to comply with other jurisdictions that have these requirements.

“We actually end up being more competitive when we're adhering to it, because global companies just want to run their business. They don't really want to have issues regarding their tax.

"So they would want to be located in a country where the country embraces these principles, is respected, part of the international community where these principles are concerned, so that at the end of the day, the company or the group is not tainted just by virtue of the fact that it has operations in Singapore," Ms Fung said.

- CNA/ek

- wong chee tat :)