Singapore's financial institutions race to meet the FATCA deadline

By now most, if not all, Financial Institutions in Singapore are aware of FATCA. FATCA stands for Foreign Account Tax Compliance Act and was enacted by the United States Congress back in 2010 to encourage tax compliance by US persons using non-US financial accounts.

Individual Singaporeans with US green cards (i.e. lawful permanent residents of the USA) have an extra form (Form 8938) to complete each tax season since 2011. While Financial Institutions operating here in Singapore are legally required to report on the activity of account holders with certain US indicia.

As of December 1^st, only 1300 Singapore Financial Institutions (SGFIs) had signed up on the FATCA portal and secured their Global Intermediary Identification Numbers (or just 'GIIN' numbers) to prove it. Singapore's 1300 was compared to Hong Kong's 2500.

As of the end of January 2015 however, the SGFI count had risen to 1800 or a 38% increase versus Hong Kong's 13% increase to 2800.

Clearly the publicity around December's signing of the Intergovernmental Agreement (IGA) spurred SGFIs to take swift action with regards to FATCA. I am referring to the binational arrangement between the US and Singapore which was signed in early December 2014.

Thanks to this IGA, SGFIs will benefit from simplified compliance procedures with regard to identifying and reporting on financial accounts held by US persons. Compliant SGFIs will also avoid the 30% FATCA-related withholding tax on relevant payments that they receive from the US.

In terms of the data transmission process to be followed by those SGFIs who have their GIIN, earlier this month, the Inland Revenue Authority of Singapore (IRAS) published detailed instructions for all SGFIs to follow. These instructions require urgent attention by all SGFIs.

Urgent because February 9^th to March 6^th 2015 is the window provided by IRAS for SGFIs to test their file transfer process. If this window is missed, there may not be another opportunity to do a test before the first complete report from SGFIs to the US' Internal Revenue Service (IRS) via IRAS becomes due by May 31^st 2015.

IRAS has made it perfectly clear that it will not be providing an online service or separate portal for manual input and reporting of FATCA data. So it is the responsibility of all reporting SGFIs to have their own systems and processes in place to collate and prepare the required data in accordance with the prevailing FATCA XML Schema.

With limited exceptions, FATCA reporting data submitted to IRAS in any other format will be rejected. If an SGFI has nothing to report, a nil return must be prepared and properly submitted.

There are now many IT / Tax firms here in Singapore who are equipped to work with SGFIs to ensure that they remain properly compliant using the new International Data Exchange Service (“IDES”) system. The IDES is an electronic delivery point for transmitting and exchanging FATCA data with the US IRS.

Reporting SGFIs will transmit their FATCA reporting data directly to the IDES, and IRAS will approve the data before it is released to the US IRS. The IDES runs on all major browsers, including Chrome, Internet Explorer, Safari, and Firefox and will support application-to-application exchanges.

So the race to make the FATCA deadline is now on.