Singapore has signed the multilateral instrument on 7 June 2017, aiming to facilitate the implementation of tax related measures to Prevent Base Erosion and Profit Shifting (MLI).
Singapore intends for the Multilateral Instrument to apply to Double Taxation Agreements with treaty partners that are members of the Ad Hoc Group, and this would put the treaties to be in line with international standards and increase access to benefits such as certainty and efficient dispute resolution mechanisms. The agreed changes to each DTA will enter into force after the Multilateral Instrument has been ratified by Singapore and the treaty partner.
Singapore will work towards the ratification of the Multilateral Instrument at the earliest possible date. Clarification of the changes to each DTA will be provided to the taxpayer by the Inland Revenue Authority of Singapore website.
The Inland Revenue of Singapore has recently clarified its practice that allows service providers companies which provide “routine support services” to adopt the cost-plus mark-up method. The routine support services are such that service companies do not take risks or own assets and their expenses are usually operating costs. As part of the cost-plus mark-up method, the chargeable income is calculated on the basis of a 5% premium of the total expenditure without further adjustments.
Singapore: IRAS launches public consultation on draft GST guide on customer accounting for prescribed goods
The Inland Revenue Authority of Singapore (IRAS) is engaging in a public consultation on the draft Goods and Services Tax (GST) Guide on Customer Accounting for Prescribed Goods.
According to the existing GST rules, a GST-registered supplier will generally charge GST (output tax) on its local sale of goods, unless the goods are exempt. The GST-registered customer will then be able to claim the GST, which is paid as a pre-tax credit on local purchases and/or imports, subject to meeting the conditions for making the input tax claim.
Under the Draft Guide, from 1 January 2018, customer accounting will be implemented to better address non-compliance relating to transactions involving the prescribed goods (i.e., mobile phones, memory cards and off-the-shelf software). The responsibility for accounting for output tax on the sales of the prescribed goods will shift from the GST-registered supplier to the GST-registered customer. The supplier needs to issue a customer accounting tax invoice to the customer, indicating that the customer has to account for the output tax.
A GST-registered supplier will have to apply customer accounting on a local sale of the prescribed goods made to a GST-registered customer if the GST-exclusive value of the sale exceeds $5,000.
Comments are invited on the Draft Guide before the deadline of 2 June 2017. Electronic submission is encouraged. The comments are to be sent to the Goods and Services Tax Division on the IRAS. The IRAS will provide a summary of responses to the feedback received on the draft guide by 31 August 2017.
The government of Singapore released Budget 2017 on 20 February 2017, for the financial year 1 April 2017 to 31 March 2018.
The Budget bill raised the existing corporate income tax (CIT) rebate cap from SGD 20,000 to SGD 25,000 for the assessment year 2017, but the rebate rate remains unchanged at 50% of tax payable. This CIT rebate will be extended for another year to YA 2018 but there will be a reduced rate of 20% of tax payable with a cap of SGD 10,000.
According to the Budget 2017, for the purpose of encouraging the use of IPs arising from research and development (R&D) activities, IP income will provide incentive under the new base erosion and profit shifting (BEPS)-compliant IP regime called the IP Development Incentive (IDI). However, existing incentive receivers will keep on having such income covered under their existing incentive awards until 30 June 2021.
The IP Development Incentive regime will become effective on or after 1 July 2017 and the Economic Development Board of Singapore will administer the regime.
According to the released Budget, taxpayers will be able to choose to claim a tax deduction for 75% of the payments made under a Cost sharing arrangements acquired through qualifying R&D projects instead of the existing general deduction rules and the new rule will apply to CSA payments made on or after 21 February 2017. Further details will be released by May 2017.
The period withholding tax exemption on payments made to non-resident non-individuals for structured products offered by Financial Institutions will be extended until 31 March 2021. Also, the automatic WHT exemption regime will be extended to qualifying payments made on qualifying loans entered into on or before 31 December 2022. Further, the existing Integrated Investment Allowance system will be extended until 31 December 2022.
According to the Budget, the existing set of tax incentives for project and infrastructure finance providing: (a) tax exemption of qualifying income from qualifying project debt securities, (b) tax exemption of qualifying income from qualifying infrastructure projects or assets received by approved entities listed on the Singapore Exchange; and (c) concessionary tax rate of 10% on qualifying income derived by an approved infrastructure trustee manager or fund management company, will be extended to 31 December 2022.
The government signed a Protocol amending the Agreement for the Avoidance of Double Taxation with Singapore on 20 April 2017. The signing took place in Washington D.C. between Senior Minister of State for Finance and Law, Ms Indranee Rajah, and Latvia’s Minister of Finance, Ms Dana Reizniece-Ozola.
The Protocol lengthens the threshold period for determining the presence of a permanent establishment, and lowers the withholding tax rates for dividends, interest, and royalties. These changes, and other changes, are expected to enhance cross-border investment, and boost trade and economic flows between the two countries.
The Protocol will enter into force after its ratification by both countries.
Singapore and Ghana signed a double tax agreement on 31 March 2017. The treaty provides clarification to the taxing rights of both countries on all types of income flows arising from cross-border business activities, and provides provision to ensure the avoidance of double taxation of such income.
According to the treaty the maximum rate of withholding taxes on dividends, interest, and royalties will be 7%. However, the withholding tax rate on service fees will be 10%.
The agreement will enter into force after both countries complete the ratification procedure and the above rates will become effective on or after January 1 following the year in which the agreement comes into force.
The Competent Authority Agreement on Automatic Exchange of Information (2016) between Singapore and Luxembourg was signed on 10 March 2017. The agreement provides details of what types information will be exchanged and when, in accordance with OECD Automatic Exchange of Information Agreement (2014).