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Singapore to join BEPS framework on tax reporting

Singapore is to join the international base erosion profit shifting (BEPS) project as a 'BEPS associate' and will adopt the minimum standards under the plan including country-by-country reporting.20 Jun 2016

BEPS refers to the shifting of profits of multinational groups to low tax jurisdictions and the exploitation of mismatches between different tax systems so that little or no tax is paid. Following international recognition that the international tax system needed to be reformed to prevent BEPS, the G20 asked the Organisation for Economic Cooperation and Development (OECD) to recommend possible solutions. In July 2013, the OECD published a 15 point Action Plan and the final reports were published in October 2015.

The OECD announced the BEPS associate framework in February, allowing any country to join the BEPS project if it agrees to adopt minimum standards and pay an annual fee.

Singapore supports the principle behind the BEPS project, that profits should be taxed where the economic activity generating the profit is performed, the Singapore Ministry of Finance said

"Our tax policies are designed to support substantive economic activities, in order to create skilled jobs and build new and enduring capabilities in Singapore," it said.

Singapore has been participating in the OECD's Committee on Fiscal Affairs since 2013 and in the design of the project, it said.

The country will implement the four minimum standards under the project: countering harmful tax practices; preventing treaty abuse; transfer pricing documentation; and enhancing dispute resolution.

Multinationals based in Singapore whose group turnover exceeds S$1.125 billion ($833 million) will have to disclose profits, revenues and taxes paid in each country from 1 January 2017 under the country-by-country reporting rules, the Ministry of Finance said.

Deputy prime minister Tharman Shanmugaratnam said: "Singapore is committed to working with the international community to counter artificial shifting of profits, and continues to welcome substantive economic activities. We will be actively involved with the OECD and G20 in ensuring the consistent implementation of the BEPS standards across all jurisdictions, so as to ensure a level playing field."

Singapore is one of the first countries outside of the OECD and G20 to join the framework, said, Singapore-based tax expert Valerie Wu of Pinsent Masons, the law firm behind Out-Law.com.

"The Inland Revenue Authority of Singapore updated its guidelines in 2015 on transfer pricing, and also said it would consult Singapore-headquartered multinational companies further on country-by-country reporting," Wu said.