Singapore and Hong Kong have announced that they will join the Organisation for Economic Co-operation & Development as Associates in the inclusive framework for implementation of the package of measures against base erosion and profit shifting (BEPS). The Government of Singapore made its announcement already on June 16, 2016, where Hong Kong made its announcement on June 20, 2016.
Singapore
In a press release the Singaporean Government states that it supports the key principle underlying the BEPS Project, namely that profits should be taxed where the real economic activities generating the profits are performed and where value is created.
In the press release it is also stated that Singapore is committed to implementing the four minimum standards under the BEPS Project, namely the standards on countering harmful tax practices, preventing treaty abuse, transfer pricing documentation, and enhancing dispute resolution. In keeping with this commitment and after consulting Singapore-headquartered multinational enterprises, Singapore intends to implement Country-by-Country Reporting (“CbCR”) for these enterprises for financial years beginning on or after January 1, 2017.
The press release also contains an Annex containing the following details of Singapore’s position on the four BEPS minimum standards:
· Countering harmful tax practices. As with many other jurisdictions, Singapore uses tax incentives to promote investment in certain areas of the economy. Incentive recipients would have to anchor substantive operations in Singapore and contribute meaningfully to the growth of the overall economy. Our tax incentives are legislated and granted for defined periods of time on qualifying activities. Non-qualifying activities of incentivised companies are taxed at the prevailing corporate tax rate. We regularly review our tax incentives to ensure that they remain relevant and competitive. As an outcome of these reviews, we have allowed some tax incentives to lapse and refined several others over the years.
· Preventing treaty abuse. Singapore does not condone treaty shopping. A number of our bilateral tax treaties contain anti-treaty shopping provisions to prevent abuse. Singapore is currently part of a group of jurisdictions working together under the aegis of the OECD and G20 to develop a multilateral instrument for incorporating BEPS measures into existing bilateral treaties to counter treaty abuse. Singapore will consider whether to join the instrument after it is finalised and ready for jurisdictions to sign.
· Transfer pricing documentation. Singapore adheres to the internationally agreed arm’s length principle. We will commit to implement CbCR for financial years beginning on or after 1 Jan 2017 for multinational enterprises whose ultimate parent entities are in Singapore and whose group turnover exceed S$1,125 million. These enterprises are required to file the Country-by-Country (CbC) reports with the Inland Revenue Authority of Singapore (IRAS) within 12 months from the last day of their financial year. IRAS will exchange CbC reports with jurisdictions that Singapore has entered into bilateral agreements with for automatic exchange of CbCR information, having established that they meet the following conditions:
- First, 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.
· Enhancing dispute resolution. IRAS has been active in engaging foreign tax authorities to resolve cross-border tax disputes via the mutual agreement procedure provided in our bilateral tax treaties. As a BEPS Associate, Singapore will work closely with other jurisdictions to monitor the implementation of minimum standards on dispute resolution developed under the BEPS Project. This will complement the other BEPS minimum standards and ensure that taxpayers have access to effective and expedient dispute resolution mechanisms under bilateral tax treaties.
Hong Kong
The Secretary for Financial Services & the Treasury (Prof KC Chan) stated that Hong Kong's commitment to implement the BEPS package is subject to timely passage of the necessary legislative amendments. He furthermore stated that in coming up with the timelines for implementation, the Hong Kong Government will take into account factors such as the characteristics of the domestic tax regime, the envisaged magnitude of legislative changes involved and the practical need to prioritise amongst the BEPS measures.
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