Singapore, U.S. Reach Deal on Tax-Evasion Law
SINGAPORE–Financial institutions based in Singapore will need to regularly report information on U.S.-owned financial accounts, after the Asian financial center agrees a deal that would help the U.S. curb offshore tax evasion.
The move is part of Singapore’s push to toughen mechanisms for tackling cross-border tax offenses, as it emerges as a key wealth-management hub on low tax rates and a highly developed banking sector.
The Singapore government said in a statement Tuesday it has “substantially concluded” talks on an bilateral agreement with Washington that would facilitate compliance with the U.S. Foreign Account Tax Compliance Act, known as Fatca.
The law–which takes effect July 1–requires foreign financial institutions to turn over information about U.S.-owned accounts to the U.S. Internal Revenue Service, or face stiff penalties that include loss of access to U.S. markets.
Enacted in 2010 to deter tax evasion through the use of overseas financial accounts, Fatca has emerged as a global standard as a growing number of countries seek information on their own citizens’ offshore money.
In Singapore’s case, financial institutions would supply information about their U.S. account holders to local tax authorities, which would relay the data to the IRS.
This arrangement–known as a Model 1 agreement–will be finalized in the second half of this year, the Singapore government said.
In May 2013, Singapore said it would boost efforts to help other governments investigate tax crimes by expanding the list of countries with which it exchanges tax information, and concluding a Fatca deal with the U.S.
Singapore is the seventh Asian-Pacific nation to agree a Fatca deal with Washington. Australia and Japan have already signed agreements, while India, Indonesia, New Zealand and South Korea have reached agreements in substance.
Tokyo’s arrangement, known as a Model 2 agreement, differs from the other six in that it requires financial institutions to report information on American-held accounts directly to U.S. tax authorities.
To date, the U.S. Treasury has negotiated more than 60 Fatca deals, including 31 that have been finalized. The majority are Model 1 agreements.