The U.S. and Singapore have inked a deal to help curb offshore tax evasion by requiring financial institutions based in Singapore to regularly report information on U.S.-owned financial accounts.
Singapore’s government said in a statement that it has signed a law with the U.S. that would simplify compliance with the U.S. Foreign Tax Compliance Act, or FATCA, which goes into effect July 1, according to the Wall Street Journal. The move is part of Singapore’s effort to tighten processes that may be allowing U.S. citizens to conduct tax offenses, just when the country is becoming a major wealth-management hub, as it had $1.30 trillion worth of assets under management at the end of 2012.
Singapore’s government reportedly said in a statement Tuesday that it has "substantially concluded" with the U.S. an Intergovernmental Agreement, or IGA, to facilitate compliance with FATCA, the Journal reported.
"The advantage this gives to Singapore institutions is the certainty on how they should go about their compliance efforts and make the relevant registrations," Michael Brevetta, the lead for FACTA for Southeast Asia, PricewaterhouseCoopers, said, according to Reuters.
The law will require foreign financial institutions to give information about U.S.-owned accounts to the U.S. Internal Revenue Service, with stiff penalties on defaulters, including loss of access to U.S. markets. According to the Singapore government, this arrangement, known as a Model 1 agreement, will be finalized in the second half of 2014, Reuters reported.
In March, Hong Kong signed a different tax information agreement with the U.S. to mark the first step toward implementing a full IGA. That agreement would likely not be implemented before July 1.
China also has been talking to the U.S. Treasury Department to implement a FATCA-like law, though it is unclear how much progress has been made. The U.S. Treasury has negotiated more than 60 FATCA deals to date, of which 31 have been finalized.
Singapore’s government said last May that it would increase efforts to help other foreign governments investigate tax crimes. As a result, it expanded the list of countries with which it would exchange tax information, along with becoming the seventh Asian-Pacific nation to accept a FATCA deal.
India, Indonesia, New Zealand and South Korea have also reached similar agreements with the U.S., the Journal reported.