Singapore FATCA Agreement (IGA) with the United States: Singapore and the U.S. entered into a FATCA Agreement in November 2018. FATCA is the Foreign Account Tax Compliance Act. And, even though the US. and Hong Kong have not yet entered into a bilateral tax treaty, they have agreed to FATCA. The purpose of FATCA is to promote global financial transparency, while reducing offshore tax evasion. The IRS strictly enforces FATCA for both Foreign Financial Institutions and U.S filers.
Singapore & U.S. FATCA Agreement
The FATCA Agreement between the U.S. and Singapore is complex. Here are some of the key components to the Singapore and U.S. FATCA Agreement:
Who is a U.S. Person?
The term “U.S. Person” means a U.S. citizen or resident individual, a partnership or corporation organized in the United States or under the laws of the United States or any State thereof, a trust if (i) a court within the United States would have authority under applicable law to render orders or judgments concerning substantially all issues regarding administration of the trust, and (ii) one or more U.S. persons have the authority to control all substantial decisions of the trust, or an estate of a decedent that is a citizen or resident of the United States. This subparagraph 1(ee) shall be interpreted in accordance with the U.S. Internal Revenue Code.
What is a Singaporean Financial Institution?
The term “Singaporean Financial Institution” means (i) any Financial Institution resident in or organized under the laws of Singapore but excluding any branch of such Financial Institution that is located outside Singapore, and (ii) any branch of a Financial Institution not resident in or organized under the laws of Singapore, if such branch is located in Singapore.
Who is an Account Holder?
The term “Account Holder” means the person listed or identified as the holder of a Financial Account by the Financial Institution that maintains the account. A person, other than a Financial Institution, holding a Financial Account for the benefit or account of another person as agent, custodian, nominee, signatory, investment advisor, or intermediary, is not treated as holding the account for purposes of this Agreement, and such other person is treated as holding the account.
For purposes of the immediately preceding sentence, the term “Financial Institution” does not include a Financial Institution organized or incorporated in a U.S. Territory. In the case of a Cash Value Insurance Contract or an Annuity Contract, the Account Holder is any person entitled to access the Cash Value or change the beneficiary of the contract. If no person can access the Cash Value or change the beneficiary, the Account Holder is any person named as the owner in the contract and any person with a vested entitlement to payment under the terms of the contract. Upon the maturity of a Cash Value Insurance Contract or an Annuity Contract, each person entitled to receive a payment under the contract is treated as an Account Holder.
What is a Reportable Account?
The term “U.S. Reportable Account” means a Financial Account maintained by a Reporting Singaporean Financial Institution and held by one or more Specified U.S. Persons or by a Non-U.S. Entity with one or more Controlling Persons that is a Specified U.S. Person. Notwithstanding the foregoing, an account shall not be treated as a U.S. Reportable Account if such account is not identified as a U.S. Reportable Account after application of the due diligence procedures in Annex I
How is information Exchanged?
The information to be obtained and exchanged is:
Singapore to U.S.
- a) In the case of Singapore with respect to each U.S. Reportable Account of each Reporting Singaporean Financial Institution:
(1) the name, address, and U.S. TIN of each Specified U.S. Person that is an Account Holder of such account and, in the case of a Non-U.S. Entity that, after application of the due diligence procedures set forth in Annex I, is identified as having one or more Controlling Persons that is a Specified U.S. Person, the name, address, and U.S. TIN (if any) of such entity and each such Specified U.S. Person;
(2) the account number (or functional equivalent in the absence of an account number);
(3) the name and identifying number of the Reporting Singaporean Financial Institution;
(4) the account balance or value (including, in the case of a Cash Value Insurance Contract or Annuity Contract, the Cash Value or surrender value) as of the end of the relevant calendar year or other appropriate reporting period or, if the account was closed during such year, immediately before closure;
(5) in the case of any Custodial Account: (A) the total gross amount of interest, the total gross amount of dividends, and the total gross amount of other income generated with respect to the assets held in the account, in each case paid or credited to the account (or with respect to the account) during the calendar year or other appropriate reporting period; and (B) the total gross proceeds from the sale or redemption of property paid or credited to the account during the calendar year or other appropriate reporting period with respect to which the Reporting Singaporean Financial Institution acted as a custodian, broker, nominee, or otherwise as an agent for the Account Holder;
(6) in the case of any Depository Account, the total gross amount of interest paid or credited to the account during the calendar year or other appropriate reporting period; and
(7) in the case of any account not described in subparagraph 2(a)(5) or 2(a)(6) of this Article, the total gross amount paid or credited to the Account Holder with respect to the account during the calendar year or other appropriate 9 reporting period with respect to which the Reporting Singaporean Financial Institution is the obligor or debtor, including the aggregate amount of any redemption payments made to the Account Holder during the calendar year or other appropriate reporting period.
U.S. to Singapore
b) In the case of the United States, with respect to each Singaporean Reportable Account of each Reporting U.S. Financial Institution:
(1) the name, address, and Singaporean TIN of any person that is a resident of Singapore and is an Account Holder of the account;
(2) the account number (or the functional equivalent in the absence of an account number);
(3) the name and identifying number of the Reporting U.S. Financial Institution;
(4) the gross amount of interest paid on a Depository Account;
(5) the gross amount of U.S. source dividends paid or credited to the account; and
(6) the gross amount of other U.S. source income paid or credited to the account, to the extent subject to reporting under chapter 3 of subtitle A or chapter 61 of subtitle F of the U.S. Internal Revenue Code.
Time and Manner of Exchange of Information
1. For purposes of the exchange obligation in Article 2 of this Agreement, the amount and characterization of payments made with respect to a U.S. Reportable Account may be determined in accordance with the principles of the tax laws of Singapore, and the amount and characterization of payments made with respect to a Singaporean Reportable Account may be determined in accordance with principles of U.S. federal income tax law.
2. For purposes of the exchange obligation in Article 2 of this Agreement, the information exchanged shall identify the currency in which each relevant amount is denominated.
3. With respect to paragraph 2 of Article 2 of this Agreement, information shall be obtained and exchanged with respect to the calendar year of entry into force of this Agreement and all subsequent years.
4. The information described in Article 2 of this Agreement shall be exchanged within nine months after the end of the calendar year to which the information relates.
5. The Competent Authorities of Singapore and the United States shall enter into an agreement or arrangement under the mutual agreement procedure provided for in Article 10 of the TIEA, which shall:
a) establish the procedures for the automatic exchange obligations described in Article 2 of this Agreement; and
b) prescribe rules and procedures as may be necessary to implement Article 5 of this Agreement. 10
6. All information exchanged shall be subject to the confidentiality and other protections provided for in the TIEA, including the provisions limiting the use of the information exchanged.
7. Prior to entry into force of this Agreement, each Competent Authority must have provided written notification to the other Competent Authority when it is satisfied that the jurisdiction of the other Competent Authority has in place
(i) appropriate safeguards to ensure that the information received pursuant to this Agreement shall remain confidential and be used solely for tax purposes, and
(ii) the infrastructure for an effective exchange relationship (including established processes for ensuring timely, accurate, and confidential information exchanges, effective and reliable communications, and demonstrated capabilities to promptly resolve questions and concerns about exchanges or requests for exchanges and to administer the provisions of Article 5 of this Agreement).
Prior to entry into force of this Agreement, the Competent Authorities intend to have met to establish that each jurisdiction has such safeguards and infrastructure in place.
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