Updates on Singapore’s Adoption of the OECD Standard for Effective Exchange of Information

Further to the March 6 2009 announcement by the Ministry of Finance (“MOF”) that Singapore will endorse the Organization for Economic Cooperation & Development (“OECD”) Standard for the effective exchange of information through an Avoidance of Double Taxation Agreement (“DTA”), Singapore has recently introduced draft legislative amendments to amend its laws to facilitate the adoption of the OECD Standard and signed protocols with certain countries to amend the DTAs between them.

Reading of Draft Legislative Amendments to Incorporate the OECD Standard

The MOF recently concluded a month-long public consultation on the Draft Income Tax (Amendment) (Exchange of Information) Bill (“Bill”). Revisions were made to the Bill as a result of the public consultation exercise.The revised Bill was read for the first time in the Singapore Parliament on 14 September 2009.

There were two significant revisions made to the Bill. Firstly, the Bill has been re-drafted to remove the requirement for the Inland Revenue Authority of Singapore (“IRAS”) to request the written consent of the Attorney-General before it can apply for a court order to seek information. Secondly, the Bill now provides for greater rights for the affected parties, such as the right of appeal and a lengthening of the period of compliance with the court order from the previous seven days to twenty-one days.

Notwithstanding the above changes, the policy intent behind the Bill remains the same, which is to allow for access to information held by banks and trust companies while putting in place documentary and judicial process requirements to ensure that any request for an exchange of information is clear, specific, relevant, and consistent with the OECD Standard. In other words, frivolous or “fishing expeditions” will be rejected.

Signing of Protocols to Amend the Existing DTAs

A request for an exchange of information must be made pursuant to a DTA which contains an exchange of information article that adheres to the OECD Standard. Currently, Singapore’s DTAs are not compatible with the OECD Standard as the IRAS is only obliged to exchange information which is already in its possession. Generally, the IRAS does not possess information on bank accounts held by foreigners as Singapore taxes are not applicable in respect of such accounts.

In line with its endorsement of the OECD Standard, Singapore has announced its intention to negotiate and conclude changes to its DTAs with other countries so as to incorporate the OECD Standard and such a process will be based on a mutual balance of benefits.

As at 15 October 2009, Singapore has announced its intention or signed a protocol to incorporate the OECD Standard into its DTAs with the following countries:

1. France (while no formal protocol has been signed yet, both countries have agreed to work expeditiously to do so later in the year);
2. Belgium;
3. New Zealand;
4. United Kingdom;
5. Denmark;
6. The Netherlands;
7. Australia;
8. Austria;
9. Norway;
10. Qatar;
11. Mexico, and
12. Bahrain.

The above protocols will only enter into force after the Bill has been passed by the Singapore Parliament and the relevant ratification procedures have been completed.