Impact of EU savings tax amendments on Singapore
|
||||||||||||||||||||||||||||||||||||||||||
| Although Singapore is not party to the EU savings directive, the following categories of structures will be subject to the EU savings tax directive:- | ||
| I | Singapore untaxed entities and legal arrangements with a bank account in the savings tax territory. The bank is Paying Agent for the:
| Bank is Paying Agent |
| II | Any of the following Singapore entities and legal arrangements if its place of effective management is within the savings tax territory, irrespective of where the bank account is:-
| The directors, trustees or general partners will have Paying Agent Upon Receipt responsibilities. |
| III | Any untaxed non-Singapore entity or legal arrangement managed from within the savings tax territory with a bank account in Panama will have Paying Agent Upon Receipt responsibilities. | The directors, trustees or general partner will have Paying Agent Upon Receipt responsibilities. |
| IV | An individuals account in Singapore managed by an entity, or legal arrangement based within the savings tax territory (including managed discretionary agreements). | The management of the party managing the account will be Paying Agent Upon Receipt. |
Out of scope: An EU-resident individual's bank account in Singapore is not subject to EU savings tax if not managed from within the savings tax territory. |  |
| In scope by Paying Agent Upon Receipt: (Category IV) An individual's bank account in Singapore managed by an entity or legal arrangement managed within the EU savings tax territory is subject to the savings tax. Responsibility of the Paying Agent Upon Receipt: The entity / legal arrangement managing the account, as Paying Agent Upon Receipt, applies the savings tax provisions on the beneficial owner. Note: A discretionary mandate by a bank is a legal arrangement. As such, this legal arrangement must act as a Paying Agent Upon Receipt. |  For example an portfolio in a Singapore branch managed by the head office in Switzerland is subject to the EU savings tax. |
| Out of scope: A trust is not subject to savings tax if its place of effective management (trustee) is outside the EU savings tax territory and its account is with a bank outside the savings tax territory. |  |
| In scope by Paying Agent: (Category I) A Singapore trust is subject to savings tax if it has its account with a bank within the EU savings tax territory. Responsibility of Paying Agent
| For example, a Singapore trust with a bank account in Switzerland is in scope. |
| In scope by Paying Agent Upon Receipt: (Category II) A Singapore trust has its account with a bank outside the EU savings tax territory but place of effective management is within the EU savings tax territory. The trustee then becomes a Paying Agent Upon Receipt. Responsibility of Paying Agent Upon Receipt: An interest payment shall be regarded as having been made to, or secured for, the immediate benefit of any individual, who is resident in a Member State other than that of the economic operator as the beneficial owner of the entity or legal arrangement. 1. Immediate Beneficiary Entitled to the Payment The Beneficial Owner of a Trust is:-
2. Unidentified immediate beneficiary: The amendment takes into consideration that it will be highly unlikely to identify a beneficiary immediately entitled to the payment received. In this case, the principal contributor, i.e. the actual settlor will be deemed the beneficial owner, irrespective if the settlement is irrevocable or not. The logic being that tax liability remains yours until transferred to someone else with a tax liability. 3. Paying Agent Upon Distribution if no principal contributor identifiable: In the event that a principal settlor is not identifiable, e.g. for a deceased settlor, then the structure becomes a Paying Agent Upon Distribution and must apply the savings tax to any individual who becomes entitled to the payment within 10 years. | For example, a Singapore trust with account in Singapore and trustee based in Jersey is in scope. Foreign trustees: It is allowed for Singapore trusts to appointment non Singapore trustees, usually related to the settlor. If the trustee is based in the EU savings tax territory, then the trustee becomes a Paying Agent Upon Receipt. Place of effective management of a trust or other legal arrangement shall mean the permanent address of the natural person who has the principal responsibility for the key management decisions relating to the assets of the legal arrangement, in the case of a trust the trustee. |
| Out of scope: A Singapore company is omitted from the savings tax directive if it hold its accounts with a bank outside the savings tax territory and its place of effective management is also outside the EU savings tax territory. |  For example, a Singapore bank account owned by a Singapore company with Singapore directors is out of scope. |
| In scope by Paying Agent: (Category I) A Singapore company is subject to the savings tax if its account is with a bank established in the EU savings tax territory. Note: A Paying Agent (bank) must report on interest payments to any untaxed Singapore entities if managed within the savings tax territory, no matter who the beneficial owner is. In territories where banks may withhold interest, if the Singapore entity does not agree on having its payments reported, the bank must withhold 35% tax, irrespective of who the beneficial owner is. Responsibilities of Paying Agent: The bank as Paying Agent must look through the IBC to the beneficial owner. An interest payment shall be regarded as having been made to, or secured for, the immediate benefit of any individual, who is resident in a Member State other than that of the economic operator as the beneficial owner of the entity or legal arrangement. Beneficial Owner: The identity of that individual shall be established in accordance with the customer due diligence measures provided for in the EU directive on anti money laundering and terrorist financing. The Beneficial Owner of a company is:-
|  For example, a Swiss bank account held by a Singapore company is in scope Note on nominee shareholders and directors: It is common for offshore trust and company service providers to offer nominee shareholder and director services. Paying Agents must look through the nominee shareholder or director of a company according to the EU money laundering directive. It is inconceivable today that a bank would ignore the “know your client” requirements and accept the nominee as the de facto Beneficial Owner or director. |
| In scope by Paying Agent Upon Receipt: (Category II) A Singapore company is subject to savings tax if the place of effective management of the company is within the savings tax territory, irrespective of where the account is held. Note if bank account held within savings tax territory: A Paying Agent (bank) must report on interest payments to any untaxed Singapore company if managed in another savings tax territory, no matter who the beneficial owner is. In territories where banks may withhold interest, if the Singapore company directors does not agree on having its payments reported, the bank must withhold 35% tax, irrespective of who the beneficial owner is. Singapore companies require one local director, but that the majority of directors to be non-resident. Therefore it is likely that the majority of directors will be based in the EU savings tax territory. Therefore the bank must report to the tax authorities of the majority of the directors. The place of effective management is the residence of the directors. Responsibility of Paying Agent Upon Receipt: The management would become Paying Agents Upon Receipt who must identify the beneficial owners. The identity of that individual shall be established in accordance with the customer due diligence measures provided for in the EU directive on anti money laundering and terrorist financing. Beneficial Owner of a company is:-
| For example, A Singapore company with bank account in Singapore and managed by directors based in Jersey in scope. Place of Effective Management of an entity, with or without legal personality, shall mean the address where key management decisions are taken that are necessary for the conduct of the entity’s activity as a whole. Where key management decisions are taken in more than one country or jurisdiction, the place of effective management shall be considered to be at the address where most of the key management decisions are taken relating to the assets producing interest payments within the meaning of this Directive; |
| In scope by Paying Agent Upon Receipt: (category III) An entity or legal arrangement managed within the savings tax territory is subject to the savings tax if it has a bank account in Singapore. Responsibility of Paying Agent Upon Receipt: The management or trustee as Paying Agent Upon Receipt must look through the company / trust to the beneficial owner. An interest payment shall be regarded as having been made to, or secured for, the immediate benefit of any individual, who is resident in a Member State other than that of the economic operator as the beneficial owner of the entity or legal arrangement. 1. Immediate Beneficiary Entitled to the Payment The Beneficial Owner of a Trust is:-
2. Unidentified immediate beneficiary: The amendment takes into consideration that it will be highly unlikely to identify a beneficiary immediately entitled to the payment received. In this case, the principal contributor, i.e. the actual settlor will be deemed the beneficial owner, irrespective if the settlement is irrevocable or not. The logic being that tax liability remains yours until transferred to someone else with a tax liability. 3. Paying Agent Upon Distribution if no principal contributor identifiable: In the event that a principal settlor is not identifiable, e.g. for a deceased settlor, then the structure becomes a Paying Agent Upon Distribution and must apply the savings tax to any individual who becomes entitled to the payment within 10 years. | For example, a Guernsey trust with bank account in Singapore is in scope. |