Harmful Tax Practices – 2017 Peer Review Reports on the Exchange of Information on Tax Rulings

Singapore

Singapore has met all aspects of the terms of reference (ToR) for the calendar year 2017 (year in review) and no recommendations are made.

Singapore can legally issue five types of rulings within the scope of the transparency framework.

In practice, Singapore has issued 1 008 past rulings;1 and for the year in review, Singapore issued 85 future rulings within the scope of the transparency framework.

Peer input was received from five jurisdictions in respect of exchanges of information received from Singapore. The input was in general positive, noting that information was complete, in the correct format and received mostly in a timely manner. One peer noted that some of the past rulings were received after 31 December 2017.

1. Including two that fell into more than one category under the BEPS Action 5 report

Introduction

1159.  This peer review covers Singapore’s implementation of the BEPS Action 5 transparency framework for the year 2017. The report has four parts, each relating to a key part of the ToR. Each part is discussed in turn. A summary of recommendations is included at the end of this report.

A. The information gathering process

1160.  Singapore can legally issue the five following types of rulings within the scope of the transparency framework: (i) rulings related to preferential regimes1; (ii) cross-border unilateral advance pricing arrangements (“APAs”) and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles; (iii) rulings providing for a downward adjustment of taxable profits, (iv) permanent establishment (“PE”) rulings, and (v) related party conduit rulings. Rulings are issued by two specialised teams within the Inland Revenue Authority of Singapore (Singaporean tax administration, hereafter “IRAS”): the International Tax Branch (“ITB”) is responsible for the issuing of transfer pricing rulings such as cross-border unilateral APAs; the Advance Ruling (“AR”) team is responsible for rulings that are not transfer pricing related such as rulings on permanent establishments. Singapore notes that rulings related to preferential regimes refer to the letters of awards (“LoAs”) relating to preferential regimes administered by economic agencies, which Singapore has committed to exchange within the transparency framework.2

Past rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1, I.4.2.2)

1161.  For Singapore, past rulings are any tax rulings within scope that are issued either: (i) on or after 1 January 2015 but before 1 April 2017; or (ii) on or after 1 January 2012 but before 1 January 2015, provided they were still in effect as at 1 January 2015.

1162.  The IRAS set up a specialised team, the Spontaneous Exchange of Information (SEOI) team, responsible for the processes regarding the transparency framework, and the work processes for the compilation of the data required to be exchanged. The following steps have been taken to identify the past rulings.

1163.  Regarding APAs and PE rulings, the ITB and the AR teams maintain records of all of the issued rulings in a database, which were used to identify the past rulings for the purpose of the transparency framework. The ITB and the AR teams searched their records to identify the rulings issued that fall within the scope of past rulings, filtering all rulings by conducting a search for keywords and the issuing dates. The content of the filtered rulings was then manually reviewed.

1164.  Regarding the LoAs, designated officers from the economic agencies administering the respective incentive schemes searched their records, which are kept centrally, to identify LoAs within the scope of past rulings. The search process involved filtering the database by keywords and dates, and then manually reviewing the filtered LoAs. The economic agencies then transmitted the necessary information for the completion of the SEOI templates, such as name of the preferential regime, details of the company, issuing date and period covered by the LoA, to the IRAS, where the SEOI team then checked the information received. In order to identify the potential exchange jurisdictions, the applications for the rulings/LoAs were reviewed by the ITB/AR team, or the economic agency that had issued the rulings/LoAs. In cases where the applications did not provide the relevant information, the “best efforts approach” was used which included checking taxpayers’ financial statements, searching the website of the Accounting and Corporate Regulatory Authority of Singapore for company details and searching the internet. Singapore was able to identify most potential exchange jurisdictions using the “best efforts approach”.

Future rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1)

1165.  For Singapore, future rulings are any tax rulings within scope that are issued on or after 1 April 2017.

1166.  In order to identify all potential exchange jurisdictions, the IRAS and economic agencies amended the application process for future rulings and LoAs. The relevant information under the transparency framework is obtained as part of the application process. The process set up within the IRAS to gather and transmit information on future rulings issued is similar to the process introduced for past rulings. Regarding rulings, the ITB and the AR teams identify rulings in scope when they issue the ruling and complete the SEOI templates. Regarding the LoAs, the relevant economic agency identifies LoAs in scope and transmits the necessary information to the IRAS within fifteen days from the end of each quarter.

Review and supervision mechanism (ToR I.4.3)

1167.  The SEOI team organised the processes and briefed the ITB and AR teams, and the designated officers from the economic agencies on identifying past and future rulings in scope. The designated officers from the economic agencies include senior personnel who supervise and approve the work of the economic agencies. The review process led to the identification of 37 additional LoAs after the year of review, which were not identified in the first search.

1168.  The SEOI team also provides ongoing assistance to the ITB and AR teams, and the economic agencies. The SEOI team is supervised by a manager within the IRAS.

Conclusion on section A

1169.  Singapore has met all of the ToR for the information gathering process and no recommendations are made.

B. The exchange of information

Legal basis for spontaneous exchange of information (ToR II.5.1, II.5.2)

1170.  Singapore has the necessary domestic legal basis to exchange information spontaneously. Singapore notes that there are no legal or practical impediments that prevent the spontaneous exchange of information on rulings as contemplated in the Action 5 minimum standard.

1171.  Singapore is a party to international agreements permitting spontaneous exchange of information, including (i) the Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol (OECD/Council of Europe, 2011) (“the Convention”) and (ii) double tax agreements in force with 79 jurisdictions, which allow for spontaneous exchange of information with 79 jurisdictions.3

Completion and exchange of templates (ToR II.5.3, II.5.4, II.5.5, II.5.6, II.5.7)

1172.  In order to share the required information with other jurisdictions, Singapore developed a template (SEOI template) which includes all the relevant fields contained in the template in Annex C of the 2015 Action 5 Report (OECD, 2015). It is completed by the ITB or the AR team when a past ruling was identified, or when a future ruling is issued, and is completed by the SEOI team for LoAs after the relevant information is received from the respective economic agencies. Singapore confirmed that the FHTP’s suggested guide is taken into account when completing the summary section of the SEOI template. This would usually include a summary of the transaction or activity covered by the ruling/LoA, a reference to the particular preferential regime involved, the key conclusions reached in issuing the ruling, and the agreed arm’s length rate, where applicable.

1173.  After the SEOI template is checked by a supervisor, the template is uploaded to a central location and an internal spreadsheet with details of each SEOI template is updated. To ensure that the information on rulings is made available to the EOI team in a timely way, the SEOI team set out timelines for all teams and agencies involved in the process. These are as follows:

1174.  Information on past APAs and PE rulings were provided by the ITB and the AR teams to the EOI team by December 2017, whilst the economic agencies provided information on LoAs to the SEOI team from July 2017 onwards. Regarding future rulings, the economic agencies are required to provide the relevant information on the LoAs to the SEOI team within 15 days of the end of each quarter in which the LoAs have been issued and accepted by the taxpayer. Once the information is provided to the SEOI team, they are to be exchanged with the relevant exchange jurisdictions within three months. During this period, the SEOI template is completed by the SEOI team, reviewed by the supervisor, uploaded to the central location and retrieved by the EOI team for exchange. The timelines are monitored and reminders are sent to the economic agencies to ensure that the economic agencies provide the information to the SEOI team in time. The EOI team generally retrieves the SEOI templates from the central location on a monthly basis, transmits the information to the relevant exchange jurisdictions and updates the internal tracking spreadsheet. This means that in practice most SEOI templates relating to the LoAs would be exchanged before the three months from when the relevant information is received by the SEOI team.

1175.  With respect to the other future rulings, they are to be exchanged within three months after they have been issued by the ITB or the AR team. This overall timeline includes the completion of the SEOI templates by the respective teams, the approval of the SEOI templates by the supervisor, and their upload to the central location for retrieval by the EOI team. The EOI team generally retrieves the SEOI templates from the central location on a monthly basis, transmits the information to the relevant exchange jurisdictions and updates the internal tracking spreadsheet.

1176.  For the year in review, the timeliness of exchanges is as follows:

 

Past rulings in the scope of the transparency framework	Number of exchanges transmitted by 31 December 2017	Delayed exchanges
		Number of exchanges not transmitted by 31 December 2017	Reasons for the delays	Any other comments
	1 406	269	Delays occurred due to the time needed to implement the necessary processes and because 37 past LoAs were not identified in the first search. They are not expected to be a recurring issue.	The delayed exchanges were complete by May 2018, and the recently identified LoAs will be exchanged by August 2018.
Future rulings in the scope of the transparency framework	Number of exchanges transmitted within three months of the information becoming available to the competent authority or immediately after legal impediments have been lifted	Delayed exchanges
		Number of exchanges transmitted later than three months of the information on rulings becoming available to the competent authority	Reasons for the delays	Any other comments
	5	18	Delays occurred due to the time needed to implement the necessary processes and are not expected to be a recurring issue.	The delayed exchanges on future rulings were exchanged within 10 days from the due date.
Total	1 411	287

 

Follow up requests received for exchange of the ruling	Number	Average time to provide response	Number of requests not answered
	0	N/A	N/A

1177.  Singapore notes that the delay in the exchange of rulings were a result of the implementation of the new processes and the large number of past rulings that had to be exchanged in 2017. Singapore also states that information on future rulings was exchanged within ten days from the due date, and that such delays are not expected in the future as the various teams involved in the process were able to familiarise themselves with the processes.

Conclusion on section B

1178.  Singapore has the necessary legal basis for spontaneous exchange of information, a process for completing the templates in a timely way and has completed most exchanges on time. As the delays occurred due to the time needed by the IRAS and the economic agencies to implement the new process, Singapore notes that they do not expect further delays in the exchange of information. With respect to the delays on future rulings, these were exchanged within a very short period of time from the three-month deadline. It is therefore determined that the delays will not be a recurring issue and that Singapore has met all of the ToR for the exchange of information process and no recommendations are made.

C. Statistics (ToR IV)

1179.  The statistics for the year in review are as follows:

 

Category of ruling	Number of exchanges	Jurisdictions exchanged with
Ruling/letters of awards related to a preferential regime	1 401	Australia, Belgium, Canada, China (People’s Republic of), Denmark, Finland, France, Germany, Guernsey, Hungary, India, Ireland, Italy, Japan, Jersey, Korea, Latvia, Lithuania, Luxembourg, Malaysia, Malta, Mauritius, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Russia, Saudi Arabia, South Africa, Spain, United Kingdom
Cross-border unilateral advance pricing arrangements (APAs) and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles	271	Australia, China (People’s Republic of), India, Ireland, Japan, Korea, Malaysia, Netherlands, New Zealand, United Kingdom
Cross-border rulings providing for a unilateral downward adjustment to the taxpayer’s taxable profits that is not directly reflected in the taxpayer’s financial / commercial accounts	N/A	N/A
Permanent establishment rulings	Included in de minimis	N/A
Related party conduit rulings	N/A	N/A
De minimis rule	1	N/A
IP regimes: total exchanges on taxpayers benefitting from the third category of IP assets, new entrants benefitting from grandfathered IP regimes; and taxpayers making use of the option to treat the nexus ratio as a rebuttable presumption	0	N/A
Total	1 429

1. Two of the APAs also qualified as PE rulings, but have only been reflected here.

D. Matters related to intellectual property regimes (ToR I.4.1.3)

1180.  Singapore offers two preferential regimes, which also offer benefits to income from intellectual property (“IP regime”).4 Both IP parts of the regimes are abolished as of 30 June 2018. Grandfathering will be provided and therefore both regimes are subject to transparency requirements under the Action 5 Report (OECD, 2015). It states that the identification of the benefitting taxpayers will occur as follows:

• New entrants benefitting from grandfathered regimes: new entrants include both (i) new taxpayers not previously benefitting from the regimes and (ii) new IP assets owned by taxpayers already benefitting from the regimes. Singapore has to exchange information on new entrants, which entered the (grandfathered) regimes from 17 October 20175 onwards. As Singapore’s IP regimes are offered by way of issuing a LoA, new entrants of the first category will be identified using the approach described above for identifying future rulings issued by the economic agency. In order to identify new IP assets of taxpayers already benefitting from the regimes, Singapore introduced a new process requiring all existing taxpayers under the grandfathered IP regimes to provide information on new IP assets to the administering economic agency. The economic agency will transmit the information provided by the taxpayers to the SEOI team for exchange, under the same process for exchanging information on future rulings as described above.

• Third category of IP assets: not applicable to these regimes, which are abolished as of 30 June 2018.

• Taxpayers making use of the option to treat the nexus ratio as a rebuttable presumption: not applicable to these regimes, which are abolished as of 30 June 2018.

1181.  In addition, Singapore introduced a new IP regime which, subject to legislature’s approval by late 2018, would come into effect from 1 July 2018.6 Although this is after the year in review, it is noted that this regime is not subject to transparency requirements under the Action 5 report (OECD, 2015), because:

• New entrants benefitting from the grandfathered IP regime: as this is a new IP regime rather than a grandfathered IP regime, transparency on new entrants is not relevant.

• Third category of IP assets: not applicable as the regime does not allow the third category of IP assets to qualify for the benefits.

• Taxpayers making use of the option to treat the nexus ratio as a rebuttable presumption: not applicable as the regime does not allow the nexus ratio to be treated as a rebuttable presumption.

Summary of recommendations on implementation of the transparency framework

 

Aspect of implementation of the transparency framework that should be improved	Recommendation for improvement
Singapore identified additional 37 past rulings only in 2018 during a review process.	No recommendation is made because Singapore has addressed the issue and it is not expected to recur.
Singapore experienced some delays in exchanging information on past and future rulings.	No recommendation is made because Singapore completed the exchange of all past rulings by May 2018 (except the recently identified LoAs which will be exchanged by August 2018) and this is not a recurring issue. The future rulings were exchanged within a very short period of the deadline and steps have been taken to ensure that this does not recur.

References

OECD (2017a), BEPS Action 5 on Harmful Tax Practices – Terms of Reference and Methodology for the Conduct of the Peer Reviews of the Action 5 Transparency Framework, OECD/G20 Base Erosion and Profit Shifting Project, OECD, Paris. www.oecd.org/tax/beps/beps-action-5-harmful-tax-practices-peer-review-transparencyframework.pdf.

OECD (2017b), Harmful Tax Practices - 2017 Progress Report on Preferential Regimes: Inclusive Framework on BEPS: Action 5, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264283954-en.

OECD (2015), Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5 - 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris. https://doi.org/10.1787/9789264241190-en.

OECD/Council of Europe (2011), The Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264115606-en.

Notes

← 1.  With respect to the following preferential regimes: 1) Development and Expansion Incentive - Services, 2) Pioneer Service Company, 3) Aircraft Leasing Scheme, 4) Finance and Treasury Centre, 5) Insurance Business Development, 6) Financial Sector Incentive, 7) Global Trader Programme, 8) DEI-Legal Services (abolished), 9) International Growth Scheme (abolished).

← 2.  The Singapore Economic Development Board administers the following regimes: 1) Development and Expansion Incentive – Services, 2) Pioneer Service Company, 3) Aircraft Leasing Scheme, 4) Finance and Treasury Centre, and 5) DEI-Legal Services. The Monetary Authority of Singapore administers the Insurance Business Development, and the Financial Sector Incentive. The Enterprise Singapore (previously known as the “International Enterprise Singapore”) administers the Global Trader Programme and the International Growth Scheme.

← 3.  Singapore has DTAs allowing for SEOI with Albania, Australia, Bahrain, Bangladesh, Barbados, Belarus, Belgium Darussalam, Brunei, Bulgaria, Cambodia, Canada, China (People’s Republic of), Cyprus, Czech Republic, Denmark, Ecuador, Egypt, Estonia, Ethiopia, Fiji, Finland, France, Georgia, Germany, Guernsey, Hungary, India, Indonesia, Ireland, Isle of Man, Israel, Italy, Japan, Jersey, Kazakhstan, Korea, Kuwait, Lao People’s Democratic Republic, Latvia, Libya, Lithuania, Luxembourg, Malaysia, Malta, Mauritius, Mexico, Mongolia, Morocco, Myanmar, Netherlands, New Zealand, Norway, Oman, Pakistan, Papua New Guinea, Philippines, Poland, Portugal, Qatar, Romania, Russia, Rwanda, San Marino, Saudi Arabia, Seychelles, Slovak Republic, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Thailand, Turkey, Ukraine, United Arab Emirates, United Kingdom, Uruguay, Uzbekistan and Vietnam.

Note by Turkey: The information in this document with reference to “Cyprus” relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Turkey recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the United Nations, Turkey shall preserve its position concerning the “Cyprus issue”.

Note by all the European Union Member States of the OECD and the European Union. The Republic of Cyprus is recognised by all members of the United Nations with the exception of Turkey. The information in this document relates to the area under the effective control of the Government of the Republic of Cyprus.

← 4.  These regimes are: 1) Pioneer service company and 2) Development and expansion incentive – services.

← 5.  After the publication date of the 2017 Progress Report (OECD, 2017b), which was 16 October 2017.

← 6.  This regime is the IP development incentive.