LAW & COMPLIANCE

Singapore Signs Multilateral Convention to Implement Tax Treaty-Related Measures to Prevent Base Erosion and Profit Shifting

Singapore has signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting.

The Multilateral Instrument was signed in Paris by Sim Ann, Senior Minister of State, Ministry of Culture, Community and Youth, and Trade and Industry. It was the first signing ceremony for the Multilateral Instrument, with over 60 jurisdictions signing the Multilateral Instrument.

Singapore continues to build on its commitment to the principle behind the Base Erosion and Profit Shifting (BEPS) project, which is that profits should be attributable to the jurisdiction where the substantial economic activities giving rise to the profits are conducted.

Singapore is among the earliest non-OECD, non-G20 jurisdictions to have joined the Inclusive Framework on BEPS in June 2016. The Multilateral Instrument represents another key component of our efforts.

Singapore had participated actively in the Ad Hoc Group formed under the aegis of the OECD and G20 to develop the Multilateral Instrument. The negotiation of the Multilateral Instrument was concluded on 24 November 2016 in Paris.

“Singapore strongly supports the principle that profits should be attributable to the jurisdiction where substantive economic activities generating the profits are based,” says Minister for Finance, Heng Swee Keat.

“Signing the Multilateral Instrument allows Singapore to swiftly update its wide network of Avoidance of Double Taxation Agreements to internationally agreed standards. Singapore’s signing of the Multilateral Instrument reaffirms Singapore’s commitment and support to the BEPS Project.”

Facilitates implementation of tax-treaty measures to counter BEPS

The Multilateral Instrument seeks to facilitate the implementation of tax-treaty-related measures to counter BEPS. Signatories to the Multilateral Instrument can efficiently update their DTAs to incorporate the measures, without the need to re-negotiate each DTA.

These measures include BEPS minimum standards on preventing treaty abuse and enhancing dispute resolution.

Singapore does not condone the abuse of Avoidance of Double Taxation Agreements (DTAs). Some of our DTAs already contain anti-treaty shopping provisions to prevent possible abuse.

In signing the Multilateral Instrument, Singapore will adopt the following provisions, amongst others:

  • BEPS minimum standard for preventing treaty abuse: This consists of (i) a statement of intent that a DTA is to eliminate double taxation without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance, and (ii) the adoption of a general anti-abuse rule, commonly known as the Principal Purpose Test.
  • BEPS minimum standard for enhancing dispute resolution: When a Singapore resident taxpayer encounters taxation which is not in accordance with the intended application of the DTA provisions, the taxpayer can seek assistance from Inland Revenue Authority of Singapore to contact the treaty partner to resolve the dispute
  • Providing more certainty and timeliness to taxpayers for cross-border disputes: Singapore has opted for the mandatory binding arbitration provisions to be included in our DTAs as they provide certainty to taxpayers that treaty-related disputes will be resolved within a specified timeframe.

Singapore intends for the Multilateral Instrument to apply to DTAs with treaty partners that are members of the Ad Hoc Group, and this would put our treaties in line with international standards and increase access to benefits such as certainty and efficient dispute resolution mechanisms.

The agreed changes to each DTA will enter into force after the Multilateral Instrument has been ratified by Singapore and the treaty partner.

Singapore will work towards the ratification of the Multilateral Instrument at the earliest date. Clarification on the amendments to each DTA will be provided to taxpayers through the Inland Revenue Authority of Singapore’s website.

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