by Mary Swire, Tax-News.com, Hong Kong
04 April 2013
In her speech to the recent Asia-Pacific Regional Tax Conference in Singapore,
Josephine Teo, Minister of State for Finance and Transport, discussed taxation
issues in the region that are important to businesses, including double taxation
agreements (DTAs) and transfer pricing.
Firstly, she pointed out how Singaporean companies are internationalizing their
businesses. In 1990, Singapore’s cumulative stock of foreign direct investment
(FDI) abroad was about SGD16bn (USD12.9bn) and, by 2000, had only grown to about
SGD100bn. However, in the last decade, that FDI has grown quickly to reach over
SGD400bn, with inward FDI totaling just over SGD650bn.
Asia accounts for more than half of Singapore’s FDI abroad, and, as of
end of 2011, the top three outbound investment destinations for Singaporean
companies within Asia were China, Malaysia and Indonesia, which together accounted
for 60%.
With more Singaporean businesses internationalizing, Teo confirmed that cross-border
business transactions and investment activities have also increased in volume.
More companies have foreign sources of income and are subject to tax rules in
more than one tax jurisdiction.
To overcome possible instances of double taxation, she also confirmed that
Singapore has developed a wide DTA network, to facilitate cross-border businesses
by providing greater tax certainty and by reducing the cost of doing business
both in Singapore and overseas. To date, Singapore has signed 74 comprehensive
DTAs, and is still looking to expand that network.
However, she noted that “treaties alone are not enough and implementation
matters just as much. Tax authorities worldwide have increased their enforcement
activities to ensure that transfer prices have not been set to avoid tax. With
the imposition of stricter penalties and documentation requirements, as well
as increased audit activities, transfer pricing has now become a leading risk
management issue for cross-border businesses.”
In Singapore, if in doubt, she added, businesses can approach the Inland Revenue
Authority of Singapore (IRAS) to seek upfront tax certainty on their pricing
arrangements through Advance Pricing Arrangements (APAs). Where necessary, the IRAS
also helps businesses resolve cross-border transfer pricing disputes through
Mutual Agreement Procedures (MAPs) with Singapore’s treaty partners.
From 2007 to March this year, IRAS has concluded 10 transfer pricing cases
under a MAP, and 27 bilateral APAs involving seven other jurisdictions.
“Businesses will be pleased to know that IRAS intends to deepen its transfer
pricing capability to assist businesses with cross-border transfer pricing issues,”
Teo concluded. “We support cross-border businesses that are engaged in
activities with real economic substance. General anti-avoidance provisions in
our tax regime are set up to prevent abusive business transactions, and to ensure
that our corporate sector remains healthy and robust.”
This comprehensive report in our Intelligence Report series
examines the global and national landscapes in which companies can use transfer
pricing to improve their after-tax returns, including summaries of recent
developments in design of the corporate supply train, the usefulness of ‘offshore’
in international corporate tax planning, and a section covering the spread of
DTAAs and CFC laws. It is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp
and a description of the report can be seen at
http://www.lowtaxlibrary.com/asp/description_report16.asp
Singapore Looks At International Tax Issues - Tax
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