Singapore joins BEPS Action Plan and Country by Country Reporting

The Singapore Ministry of Finance announced on 16 June 2016 its commitment and intention to implement the BEPS Action Plan. Singapore will commence a consultation with Multinational Enterprises (MNE) on the implementation of Country By Country (CbC) Reporting and will release details on the outcome in September 2016.

Singapore will implement the four actions considered as the minimum standards under the BEPS Action Plan. These four actions are (1) Countering Harmful Tax Practices, (2) Preventing Treaty Abuse (3) Transfer Pricing Documentation and (4) Enhancing Dispute Resolution.

In the press release, Singapore Ministry of Finance stated its support to the key principle underlying the BEPS project whereby ‘profits should be taxed where the real economic activities generating the profits are performed and where the value is created.' This further emphasises Singapore’s commitment to the arm’s length and substance principle.

What do you need to know?

Singapore intends to implement CbC Reporting requirements for the financial years beginning on or after 1 January 2017.
CbC Reporting will apply to ultimate parent companies located in Singapore whose Group exceed SG$1.125 million
These parent companies will be required to file CbC Reports with the IRAS within 12 months from the last day of their financial year.
The IRAS will exchange information on the CbC Reports with jurisdictions that Singapore has entered into bilateral agreements. Singapore will perform automatic exchange of CbC information with jurisdictions that comply with the following:

The jurisdictions can ensure the confidentiality of the information exchanged and prevent its unauthorised use; and
There is reciprocity in terms of the information exchanged

What can you do now?

Think about preparing a “test run” of the CbC Report for 2016/2017 with the purpose of addressing key issues for implementation (e.g. processes to gather the data, responsibilities among teams)
The CbC Report template may highlight gaps and inconsistencies. Therefore, it is recommended that companies consider addressing these gaps or inconsistencies before they file their first CbC Report.
Taxpayers should review their current business models and arrangements to ensure that the current allocation of profits mirrors the substance and real economic activities.