Automatic Exchange of Financial Account Information - How it affects you as an account holder?
Overview and Background
Automatic exchange of financial account information (“AEOI”) refers to the regular exchange of financial account information between jurisdictions for tax purposes. The main objective of the information exchange is for tax authorities to detect and deter taxpayers that have kept their untaxed money in accounts held in foreign financial institutions.
In Singapore, AEOI is effected through:
- Singapore-US Intergovernmental Agreement to Implement the Foreign Account Tax Compliance Act ("FATCA IGA")
The FATCA was enacted by the US Congress in March 2010 to target non-compliance with US tax laws by US persons using foreign accounts. FATCA requires all financial institutions outside the US to periodically transmit information about financial accounts held by specified US persons (i.e. US citizens and US tax residents) to the US Internal Revenue Service (“US IRS”). Singapore and the US signed the FATCA IGA on 9 December 2014. Since 2015, Singapore-based FIs ("SGFIs") have been reporting information relating to account holders who are specified US persons to IRAS annually for IRAS to onward transmit the information to the US IRS.
More information on the FATCA requirements can be found in the FATCA page.
- Competent Authority Agreements to Implement the Common Reporting Standard ("CRS")
The CRS is an internationally agreed standard for AEOI, endorsed by OECD and the Global Forum for Transparency and Exchange of Information for Tax Purposes. Singapore has made an international commitment to begin AEOI under the CRS in 2018. While the FATCA IGA only requires SGFIs to identify and report account information of specified US persons, the CRS will require SGFIs to establish the tax residence(s) of all their customers with effect from 1 January 2017. SGFIs will then report to IRAS the financial account information of customers who are tax residents of jurisdictions where Singapore has a Competent Authority Agreement ("CAA") based on CRS to exchange the information with. As at November 2016, 101 jurisdictions have committed to implement the CRS by 2018.
More information on CRS requirements and the list of Competent Authority Agreements which Singapore has concluded can be found in the CRS page. You can also refer to the IRAS CRS brochure (PDF, 2,263KB), which highlights the salient features of CRS and how it affects you as an account holder.
How would I, as an account holder, be affected by FATCA and CRS?
The AEOI legislation as set out under Part XXB of the Income Tax Act, the Income Tax (International Tax Compliance Agreements) (United States of America) Regulations 2015 (“FATCA Regulations”), as well as the Income Tax (International Tax Compliance Agreements) (Common Reporting Standard) Regulations 2016 (“CRS Regulations”), requires financial institutions to establish the tax residence of their account holders, and for FATCA purposes, to identify specified US persons. As such, it can be expected that your financial institution will ask you for information on your jurisdiction of residence for tax purposes, or confirmation of your non-US citizenship status. In addition, your financial institution may ask you to explain or provide supporting document to verify your tax residence or non-US citizenship status.
If you maintain or open an account in the name of a company, partnership or trust (such accounts are categorised as “entity accounts”), you could be asked to provide information relating to the tax residence of the entity and in some situations, the details of individuals who control the entity.
Your financial institution may approach you for information when you open an account or when your financial institution holds information, such as a foreign correspondence address, that indicates that you could be a tax resident in a foreign jurisdiction.
How do I determine the jurisdiction where I am tax resident in?
You should ensure that you provide accurate information and documentation on your tax residence.
In general, the tax residency of:
- Individuals, is determined by the person’s physical presence or duration of stay in a jurisdiction (e.g. whether the individual’s stay in a jurisdiction is over 183 days over a tax year)
- Partnerships, which are treated as fiscally transparent, is determined by the entity's registered address, principal office or place of effective management
- Companies, is determined by the place of incorporation or place of effective management
- Trusts, is determined by where the trustee(s) is resident in.
As the rules for tax residency vary among jurisdictions, you can:
- Refer to the Rules Governing Tax Residence published by the different jurisdictions for information on the respective jurisdiction's tax residency rules;
- Check with the tax authority of the jurisdiction which you think you may be a tax resident.
(e.g. If you have stayed in Country X for more than 6 months, you can seek a confirmation from the tax authority of Country X on whether you are regarded as its tax resident for the tax year); or
- Consult a tax advisor.
Can I choose not to provide my tax residency information and document to my financial institution when requested?
It is important that you respond when you are requested by your financial institution to provide information or documentation to establish your tax residency status. You should also inform your financial institution of any change in circumstances which affects your tax residency status (e.g. you have been seconded by your employer to work in Country X for more than 6 months and you are a tax resident in Country X for the relevant period).
If you do not provide the requested information or documentation, your financial institution may be obliged to report your account information to IRAS, refuse to open new account(s) for you, or in certain cases, close your existing account(s). Wilfully providing false information on your tax residency status may subject you to a fine not exceeding $10,000 or to imprisonment for a term not exceeding 2 years or to both.
How do I know if my financial institution is not asking me for more information than required for AEOI purposes?
Financial institutions typically use a self-certification form to collect your tax residency information. For FATCA purposes, some financial institutions will require their account holders to fill up an US IRS-issued W-8 or W-9 form.
For individuals, a valid self-certification for CRS purposes will contain the Account Holder’s (i) name, (ii) residence address, (iii) all jurisdiction(s) of residence for tax purposes, (iv) tax identification number(s) for each jurisdiction that is indicated in (iii), and (v) date of birth.
For entities, a valid self-certification for CRS purposes will contain the Account Holder’s (i) name, (ii) registered/business address, (iii) all jurisdiction(s) of residence for tax purposes, (iv) tax identification number(s) for each jurisdiction that is indicated in (iii), (v) a description of the type of financial institution or non-financial entity, and (vi) details of controlling person(s), if the entity is a passive non-financial entity.
In addition, your financial institution may ask you explain or provide supporting document to verify the accuracy of the information that you have provided on the self-certification.
Please check with your financial institution when you are unsure of the purpose for which the information is requested for.
Would my account information be shared with a foreign non-tax authority?
Under the terms of the FATCA IGA and the respective CAAs based on CRS, information provided by Singapore shall only be disclosed and used for tax purposes (e.g. assessment, collection, recovery, enforcement, prosecution, determination of appeals and the oversight of these functions). Information may not be used for other purposes unless such disclosure is also permitted in Singapore and with prior authorisation from Singapore.