A robust tax regime will enable Singapore to attract global capital, investments

A MILESTONE was achieved when Singapore and 68 other countries signed the multilateral tax convention to counter base erosion and profit shifting (BEPS) on June 7. Once ratified by each country, the convention will modify over 2,000 tax treaties by including certain internationally accepted standards to defeat tax avoidance schemes. This will change the way MNCs and investors operate globally.

Reaffirming its position as a compliant and transparent jurisdiction, Singapore has also introduced the country-by-country (CbC) reporting norms which require MNCs headquartered here, with a consolidated group revenue of at least S$1.125 billion in their last financial year, to disclose information on the global allocation of profits, taxes and other financial data. Singapore has recently signed another multilateral convention to facilitate worldwide sharing of CbC data and around 23 bilateral agreements for automatic exchange of information, with many more to follow.

The tax convention introduces the principal purpose test, which can lead to denial of tax treaty relief if one of the main purposes of an arrangement is to obtain a tax benefit that is contrary to the treaty's purpose. While the IRAS has clarified that this is only meant to address abusive arrangements, Singapore structures could potentially be exposed to risks in countries such as Indonesia, China and India due to certain interpretation issues and ambiguities. Realising tax treaty benefits is always considered to be one of the key objectives of a cross-border structure apart from various genuine commercial factors.