On July 11, 2017, the Inland Revenue Authority of Singapore (IRAS) published the second edition of the e-tax guide (the “Guide”) on country-by-country (CbC) reporting. The first edition was published on October 10, 2016. See BEPS Action 13.
The Guide provides guidance for taxpayers with respect to CbC reporting requirements, including how to complete the report and how to submit the report to IRAS. The Guide is relevant for any Singapore multinational enterprise (MNE) group with international operations and annual consolidated group revenue of at least S$1,125 million in the preceding financial year. In determining whether the consolidated group revenue of the MNE is at least S$1,125 million, all of the revenue that is reflected in the consolidated financial statements should be used. However, extraordinary income should be excluded since it does not accrue under normal business circumstances.
On December 30, 2016, Singapore published the Income Tax (Amendment No. 3) Act 2016 in the official gazette, introducing CbC reporting requirements for financial years that begin on or after January 1, 2017. The ultimate parent entity of the Singapore MNE group, which is considered the reporting entity, will be required to submit a CbC report electronically to the Comptroller within 12 months from the end of the reporting financial year. The earliest CbC report required to be submitted to IRAS would be due by December 31, 2018 (for a financial year ending on December 31, 2017). Singapore does not provide for surrogate filing for foreign MNE groups.
On December 20, 2016, the IRAS announced that Singapore-headquartered MNEs may file a CbC report for financial years beginning on or after January 1, 2016 on a voluntary basis since some jurisdictions will implement CbC reporting for financial years beginning on or after this date.
According to the Guide, a CbC report includes three tables:
- The first table provides an overview of income, taxes, employees and assets of the MNE group allocated to the different tax jurisdictions that the MNE group operates in.
- The second table provides an overview of the entities (including permanent establishments) of the MNE group, organized according to the tax jurisdictions that the entities are tax resident in. The main business activities of each entity are also indicated. Dormant entities must also be included in this table.
- The third table permits any additional information that would be relevant and useful to interpret or understand the data provided in the CbC report.
In the event that a taxpayer does not submit the CbC report, it may be penalized under Section 105M of the Income Tax Act. The Comptroller will provide the CbC report to relevant tax authorities of other jurisdictions if there is an agreement with them for the automatic exchange of CbC reporting information.
On June 21, 2017, the IRAS issued a press release and explanatory notes on Singapore signing the OECD Multilateral Competent Authority Agreement for the automatic exchange of CbC reports (“CbC MCAA”). Under the CbC MCAA, signatories may exchange CbC reports with other signatories if they have CbC reporting requirements in place and are a party to the OECD Convention on Mutual Administrative Assistance in Tax Matters (“OECD Convention”).
Among other things, the CbC MCAA provides that CbC report information will be used to assess high-level transfer pricing and other BEPS-related risks, but not as a substitute for a detailed transfer pricing analysis of individual transactions and prices based on a full functional and comparability analysis. The information may be used as a basis for further inquiring into the multinational’s transfer pricing arrangements in the course of a tax audit. If an adjustment resulting from further inquiries based on the CbC report leads to undesirable economic outcomes, the tax authorities of the jurisdictions of residence of the affected entities must consult each other in attempting to resolve the case.
On January 20, 2016, Singapore deposited its ratification instrument to implement the protocol to the OECD Convention, which entered into force on May 1, 2016. The OECD Convention applies in Singapore from January 1, 2017 and includes provisions regarding the exchange of information on request, spontaneous information exchange, tax examinations in other countries, simultaneous tax examinations, and assistance in tax collection.
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