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Understanding Foreign Account Tax Compliance Act (FATCA) and CRS in Singapore

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In 2014, Singapore adopted the Foreign Account Tax Compliance Act (FATCA) regime after signing a Model 1 Intergovernmental Agreement (IGA) with the United States (U.S.) to help Singapore-based FIs (SGFIs) manage their FATCA compliance burden. Under the IGA, SGFIs will benefit from simplified compliance procedures for reporting the financial information of U.S. persons to the Inland Revenue Authority of Singapore (IRAS). Subsequently, IRAS will report the information to the U.S. Internal Revenue Service (IRS).

The subsequent introduction of Common Reporting Standards (CRS) in 2017 further amplified the impact of these global taxation regulations on financial markets and businesses. This blog post provides an overview of FATCA and CRS, discussing its impact and FATCA annual reporting deadlines.

Overview of FATCA and CRS regulations

Under Singapore’s Income Tax Act, FATCA and CRS regulations require and empower all reporting Singapore Financial Institutions (SGFIs) to establish processes and systems for collecting financial account information. The only difference is that SGFIs collect financial information from U.S. account holders for FATCA reporting to IRAS. For CRS, they will need to report the financial account information relating to tax residents of Singapore’s exchange partners to IRAS, which will be provided to Singapore’s exchange partners.

Documentation

Many FATCA and CRS regulations require financial institutions to gather and verify clients’ tax documents. 

Reporting

Today, global tax reporting has presented new challenges to financial institutions. Singapore’s tax regime requires them to do their due diligence in checking the account holders who are U.S. residents to ensure FATCA filing is timely.

Understanding FATCA and CRS Compliance

FATCA and CRS may share similar characteristics but differ in several key aspects. CRS identifies reportable persons based on tax residence, while FATCA considers citizenship and tax residence to identify U.S. persons. 

FATCA

All Foreign Financial Institutions (FFIs) outside the U.S. must regularly submit information on the financial accounts of U.S. persons to the IRS to prevent U.S. tax evasion. Non-compliance will lead to a 30% withholding tax imposed on FFIs, including SGFIs. To avoid the withholding tax, the SGFI must adhere to the customer identification, reporting and other related requirements.

CRS

CRS is an internationally agreed reporting standard for exchanging financial account information to identify account holders who are tax residents of another jurisdiction, aiming to prevent tax evasion through offshore financial accounts and ensure tax compliance.

More than 90 jurisdictions, including Hong Kong, Dubai, Luxembourg and Switzerland, have endorsed the CRS. With effect of 2 February 2024, these countries were added to the list of new reportable jurisdictions for CRS reporting:

  • Aruba (A.W.)
  • Bulgaria (B.G.)
  • Kenya (K.E.)
  • Saints Kitty and Nevis (K.N.)
  • Thailand (T.H.)

The CRS leverages the FATCA regime to maximise efficiency and reduce costs for implementing jurisdictions and their FIs.

Who is affected by FATCA obligations? 

The FATCA reporting obligations primarily affect FFI, and that includes:

  1. Banks
  2. Custodial institutions (e.g. mutual funds) 
  3. Investment companies (e.g. hedge funds or private equity funds)
  4. Insurance companies

It also affects individuals who have financial accounts or investments outside Singapore. They are required to fill out the FATCA declaration form when reporting. 

How do we comply with FATCA obligations? 

All SGFIs are required to register with the US IRS. Hence, it’s crucial to ensure that your FATCA registration is completed. SGFIs must perform due diligence by checking and reporting all financial accounts held by individuals with investments outside Singapore. It includes pre-existing accounts for individuals and entities, new accounts for individuals and entities, and payments to non-participating financial institutions.

After completing the checking process, submit annual FATCA returns in either XML or PDF format to meet IRAS requirements for every U.S. Reportable Account maintained by the SGFI. 

When is the annual FATCA reporting deadline? 

All SGFIs must submit their FATCA returns, including nil returns (if applicable), by 31 May 2024

Penalties for late filing

SGFIs will face a penalty of up to S$5,000 for late or non-filing their FATCA returns. As a business, you wouldn’t want to run into the potential risk of paying fines, which may compromise your business credibility. At Lanturn, we will provide a FATCA filing service by simplifying the application process and ensuring timely reporting, allowing you to concentrate on growing your business. 

How Lanturn Can Help You

Lanturn has a team of specialists who are well-versed in Singapore’s tax obligations and will guide you through its challenges. Our team of specialists will review your business activities to evaluate how FATCA regulations impact your company and assist you with compliance, which includes customer identification and reporting requirements.

Lanturn not only advises on filing compliance for Singapore under CRS but also provides FATCA filing services for other regions like the Cayman Islands and even the British Virgin Islands. In addition, Lanturn also offers CRS reporting services to identify account holders of another jurisdiction, relieving you of concerns about tax evasion.

What Sets Us Apart from Others

Here are the traits that set us apart from others: 

Timely Response
Managing deadlines can be stressful. Our team understands the implications and, therefore, provides timely reminders of approaching deadlines, offering support when you need it most. 

Technology
Having the latest accounting software is essential. We have up-to-date software that can automate information and streamline the application process efficiently. 

Expertise
Our experienced Lanturn’s specialists have extensive global taxation regulations knowledge and provide solutions tailored to your business’s needs. 

Approach
Our client-centric approach focuses on understanding your business’s needs when preparing FATCA documentation. You will be assigned to a dedicated team or individuals so that you can contact them whenever you need someone to address your concerns.

Filing for FATCA and CRS can take time due to the amount of paperwork. However, at Lanturn, our specialists will guide you and ensure you comply with FATCA and CRS regulations. Trust us to assist in customer identification documentation and reporting requirements. Schedule a call with us for any FATCA filing service or to discuss reporting. 

 
Lanturn Content Team

Lanturn Content Team

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