Singapore Foreign Account Tax Compliance Act (FATCA)
Update on e-Tax Guide
Singapore adopted the FATCA regime in 2014, with the signing of the Model 1 Intergovernmental Agreement (“IGA”) with the United States. The Inland Revenue Authority of Singapore (“IRAS”) subsequently issued the subsidiary regulations to facilitate compliance with the FATCA provisions by Singapore-based Financial Institutions (“SGFIs”).
In 2015, the IRAS issued the First and Second Editions of the e-Tax Guide to provide guidance to SGFIs in understanding the FATCA framework and their FATCA compliance obligations.
The IRAS has now published an updated FATCA e-tax guide on 13 April 2020 and we have summarised the relevant updates and provided a brief overview of how these updates may affect you and your business.
The IRAS’s updated FATCA e-tax guide can be found here.
Key updates to the IRAS FATCA e-tax guide
Singapore and the USA signed a Model 1 Intergovernmental Agreement ("IGA") on 9 December 2014 to help ease SGFIs’ FATCA compliance burden.
Singapore subsequently signed a reciprocal FATCA IGA on 13 November 2018 which will supersede the 2014 IGA when it enters into force by the end of 2020. The main difference between the two agreements is that under the Reciprocal FATCA IGA, account information relating to certain financial accounts held by Singapore residents with Reporting US Financial Institutions may also be shared by the US with Singapore. Notwithstanding, the Reporting SGFIs’ obligations to comply with FATCA remain under the IGA signed in 2014.
The IRAS has now clarified that an “execution-only” broker that solely executes trading instructions or receives and transmits such instructions to another executing broker will not be considered as maintaining Financial Assets for the account of others. As a result, an execution broker as described in the previous sentence will not fall within the definition of a “Custodial Institution” and accordingly will not be required to comply with the registration, due diligence and reporting requirements.
The IRAS further clarified that where an executing broker becomes a legal owner of the assets due to failed trades, the holding of the assets or resultant claims will not lead to Financial Assets being maintained by such an executing broker.
Our observation
The clarification is consistent with the “Advisory-only” distributors where the entities are seen to be providing services rather than maintaining legal ownership of the assets on behalf of its customers. This is in line with the clarification provided in the IRAS’s CRS FAQ.
The IRAS’ clarification is welcomed on the period of legal ownership arising from failed trades as an essential consideration in determining whether the ownership by the execution brokers constitutes a financial asset.
To streamline the FATCA reporting process, the IRAS amended the FATCA reporting requirements.
With effect from 1 April 2020, all FATCA returns, including nil returns (if applicable) must be submitted electronically to the IRAS via the “Submit CRS or FATCA Return” e-Service at IRAS’ myTax Portal. No paper returns will be accepted. Reporting SGFIs can select “Return with Nil Data” via this e-Service if they did not maintain any US Reportable Accounts in 2019. Correspondingly, IRAS will no longer accept paper NIL returns or FATCA returns submitted via the International Data Exchange System (“IDES”).
| FATCA Reporting | Until 31 March 2020 | With effect from 1 April 2020 |
| NIL Return |
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| Return with Reportable Data |
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Electronic submission via IRAS’s myTax Portal in any of the following formats:
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For revision of FATCA reportable information (if any), the revised FATCA returns will have to be submitted via the IRAS’s myTaxPortal. Revisions through the IDES will no longer be accepted.
Our observation
Reporting for FATCA and CRS is now aligned on the same platform (i.e. IRAS’s myTaxPortal). Accordingly, there is no longer a requirement to purchase digital certifications for the encryption of the XML files.
Similar to CRS, the IRAS has introduced the fillable PDF FATCA return option. This promotes cost savings for Reporting SGFIs with minimal US reportable accounts as the PDF format does not require a reporting tool unlike the XML format report. There are also in-built validation functions in the PDF FATCA return which will reduce errors in the reporting fields requirements as compared to past XML files submission.
The IRAS has clarified that a Reporting SGFIs that is in the process of liquidating or is no longer a Reporting SGFIs due to cessation of certain activities should file a final FATCA return to the IRAS in the year of liquidation or cessation of activities via the IRAS’s myTaxPortal. Filing should be done before the Reporting SGFIs proceed with their FATCA deregistration.
Our observation
There is no longer ambiguity as to advance filing of FATCA returns by Reporting SGFIs as the IRAS’s myTaxPortal now allows advance year reporting. This is also in line with the requirements provided for in the FATCA regulations, as well as the clarification set out in the CRS e-tax guide.
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