Singapore and the United States of America (US) signed the reciprocal Foreign Account Tax Compliance Act (FATCA) Model 1 Intergovernmental Agreement (Reciprocal FATCA IGA) on 13 November 2018.

Singapore and the US also separately signed a Tax Information Exchange Agreement (TIEA) on the same date. Please click here for our client alert on the TIEA.

Background

The Reciprocal FATCA IGA will supersede the current FATCA Model 1 Intergovernmental Agreement ("Non-Reciprocal FATCA IGA") that is currently in force, and which was signed on 9 December 2014.

The Non-Reciprocal FATCA IGA was entered into to facilitate compliance with the US FATCA by Singapore-based financial institutions (also known as Reporting Singapore Financial Institutions). Under the agreement, such Reporting Singapore Financial Institutions are required to report account information of certain US persons (e.g., US citizens or resident individuals, and corporations organised in the US or under the laws of the US) to the Inland Revenue Authority of Singapore ("IRAS"), and IRAS will in turn share this information with the US Internal Revenue Service (IRS)

Key impact of the Reciprocal FATCA IGA

While the Reciprocal FATCA IGA was signed on 13 November 2018, it has not yet been ratified by Singapore and the US, and therefore does not yet have the force of law. The agreement will come into force on 1 January of the calendar year following the later of:

  1. the date of entry into force of the TIEA, which was also signed on 13 November 2018; or 2.
  2. the date of the last notification of an exchange of written notifications between the US and Singapore confirming the completion of each party's necessary internal procedures for entry into force of the agreement.

As discussed above, upon entry into force, the Reciprocal FATCA IGA will supersede the current Non-Reciprocal FATCA IGA. 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. Specifically:

  1. Reporting US Financial Institutions include custodial institutions, depository institutions, investment entities, or specified insurance companies that are resident in the US.
  2. The definitions of the various categories of financial institutions and of financial accounts have not been amended substantively from the original definition in the Non-Reciprocal FATCA IGA.
  3. The Reporting US Financial Institutions may have to report the account information relating to the financial accounts of Singapore resident individuals or entities under the Reciprocal FATCA IGA.
  4. Such account information includes:
    • name, address, and Singapore tax reference number; 
    • the account number (or the functional equivalent);
    • the name and identifying number of the Reporting US Financial Institution 
    • the gross amount of interest paid (in the case of a depository account);
    • the gross amount of US source dividends paid or credited to the account; and
    • the gross amount of other US source income paid or credited to the account (where they are subject to reporting under the specific US rules). 

We highlight that the Reciprocal FATCA IGA will likely be subject to further rules and regulations that may be introduced in the US and/or Singapore regarding the implementation of its provisions.

Next steps

The Reciprocal FATCA IGA will affect US-resident clients that may be undertaking activities that may cause it to be considered a Reporting US Financial Institution (e.g., as a custodial institution, depository institution, investment entity or specified insurance company). Such entities should obtain advice from US counsel to consider whether it will be subject to the FATCA rules, and if so, the extent of the due diligence and reporting obligations that may be imposed by the IRS to implement the Reciprocal FATCA IGA.

Singapore-resident clients may wish to review their estate planning vehicles in the US (if any) such as trusts, personal investment companies, family offices, private trust companies and other underlying investment vehicles to assess if any of these entities will be considered Reporting US Financial Institutions with FATCA obligations in the US. If so, once the Reciprocal FATCA IGA is implemented, their account information may be reported to the US authorities, and shared with the Singapore authorities.

Singapore resident individual clients who maintain depository accounts with financial institutions in the US should similarly be aware that their account information may eventually be shared with the Singapore authorities.

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