If you’re new to the country or visited here for the first time for establishing your own business or work here as an employee, it’s imperative for you to know the tax obligations and FATCA compliance in Singapore to continue your living/earning purpose. However, in today’s growing global landscape, Singapore has retained its foot-mark as a tax-friendly nation by introducing timely and progressive tax policies and regulations. Although to overcome these taxation policies and regulations, one needs to go through the detailed of Singapore’s FATCA which ease their living and working journey in Singapore.
For your convenience, the below-mentioned FAQ will provide you an overview of various aspects of Singapore’s tax system including federal tax. These are the questions which are frequently asked by first-time visitors as well as Singapore earning opportunity obsessed individual. Go through these important to know FAQs as it can resolve all your Singapore taxation queries.
Q 1. What the term ‘FATCA’ means for?
FATCA stands for Foreign Account Tax Compliance Act is a 2010United States federal law which aimed at ensuring that US citizens holding financial assets outside of the US pay US tax. It required all the financial institutions (FIs) outside of the US (known as Foreign Financial Institutions or FIIs) to regularly submit the information of the accounts which is registered in the name of US citizens to the US Internal Revenue Service.
Q 2. Who comes under the boundary of ‘FATCA’ compliance?
The financial account reporting obligations under FATCA compliance majorly affect FFIs first, which include FATCA banks Singapore, insurance companies, investment managers, custodians and the head of the department where the investment can be made.
In US FATCA regulations, FFIs conclude as any of the non-US entity or source that:
- Accepts deposits in the course of a banking transactions
- As a substantial part of business, hold financial assets other than the US
- Is an insurance company that issues or make payments to an Annuity or Cash Value Insurance Contract.
Q 3. What is Singapore-based FIs (SGFIs)?
Under the boundary of FATCA, SGFI (Singapore-based financial institution) is an FI which is:
- Tax resident as per the law of federal tax Singapore, except any branch of FIs that’s located outside Singapore border.
- Any branch of an FI with non-tax resident under the laws of Singapore Located within the border of Singapore.
Q4. Why Singapore entered into a FACTA Intergovernmental Agreement (IGA) with the US?
After getting the legislation feedback, Singapore finally decided to enter into a FATCA IGA with the US to help afore-mentioned SGFIs managed their responsibilities towards FACTA compliance Singapore. However, without the FACTA IGA, individual SGFIs outside the boundaries of the US will have to enter into individual FFI agreements with the US to avoid the withholding of tax related to FATCA. With FACTA IGA, SGFIs will benefit from the simplified tax compliance procedures for identifying and reporting on financial accounts held by US persons.
Q 5. What are the legal obligations of FATCA applicable to SGFI?
SGFIs will be required to perform due diligence checks with the purpose to identify the detail information of financial accounts held by US citizens outside the US. Thereafter, the SGFIs will need to report the obtained information to IRAS, which will, in turn, transfer the information to the US IRS (Internal Revenue Service).
These 5 crucial questions hopefully clear all your doubts regarding FACTA compliance and also make you aware of its due importance, if you want to continue your journey in Singapore.