There are no exchange control regulations in Singapore, and, as a result, there are no restrictions on movement of funds out of Singapore. However, there is a reporting requirement if physical currency or bearer negotiable instruments brought into or out of Singapore exceed SGD 20,000.
Tax equalisation or reimbursement plans
Generally, a tax reimbursement program is provided by an employer to alleviate the additional tax costs which may be incurred as a result of an overseas assignment. A tax reimbursement program may be modelled either as a ‘tax protection’ or ‘tax equalisation’ plan.
Under a tax protection plan, the company reimburses the employee for actual taxes paid in excess of the amount the individual would have paid in their home country if they had not been posted overseas. If the actual tax liabilities are less than the hypothetical home country tax, the employee is allowed to keep the difference.
In contrast, a tax equalisation plan ensures that the employee’s tax burden remains the same as if they had remained in the home country. If the individual’s actual taxes are greater than they would have incurred in the home country, the employer reimburses the excess, and if the actual taxes are less, the employer retains the excess.
Both plans require calculation of the hypothetical home country tax, which is generally determined on the base salary and other remuneration as if the employee had remained in the home country.
The amount that is reimbursed by the employer is a taxable benefit to the employee generally in the year in which the reimbursement is made. However, where the hypothetical tax amount deducted from payroll is treated as final (not to be reconciled on actual tax liability after year end), and/or the employee’s home country tax if any is not borne by the employer, the Singapore tax liability borne by the employer may need to be grossed-up in the same year.
Exchange of information (EOI)
Generally, Singapore’s tax treaties and EOI arrangements include provisions for the exchange of information for tax purposes. Treaty partners may make a request to the Comptroller of Income Tax for information, or the exchange may take the form of spontaneous EOI or automatic EOI.
Singapore has committed to spontaneously exchange certain rulings under the agreed framework for the compulsory spontaneous EOI set out in the BEPS Action 5 Report ‘Countering Harmful Tax Practices More Effectively, taking into Account Transparency and Substance’.
International Tax Compliance Agreements
Singapore has also concluded the following international tax compliance agreements and will exchange information pursuant to those agreements as follows:
Foreign Account Tax Compliance Act (FATCA)
Singapore has a Model 1 FATCA intergovernmental agreement (IGA) with the United States in place to help ease the compliance burden of Singapore-based financial institutions (SGFIs). All Reporting SGFIs must submit a FATCA Return to the IRAS, setting out the required information in relation to every US Reportable Account.
Common Reporting Standard (CRS)
SGFIs are required to establish the tax residency of all their account holders. Further, they will need to report to the IRAS the requisite information for each Reportable Account relating to tax residents of jurisdictions with which Singapore has a Competent Authority Agreement to exchange information.