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.
It was recently announced that Singapore will join the BEPS project as a “BEPS associate” and will adopt the minimum standards under the plan aimed at preventing “aggressive tax planning” by multinationals. In recent years Singapore has come under scrutiny as giants such as Apple and Google have used the low-tax city-state as a hub for their Asia businesses.Companies justify booking significant amounts of revenue and profits in Singapore by the fact that they often run key business functions such as finance and operations, hold intellectual property rights there or base regional executives in the city.
Furthermore, as a part of BEPS project, Singapore required multinational firms with a group turnover of more than S$1.125 billion and whose parent firms are in Singapore to report financials and economic activity to the tax authority on a country-by-country basis, for financial years starting in 2017.
IRAS (Inland Revenue Authority of Singapore) will consult Singapore-headquartered multinationals further on the implementation details of country-by-country reporting, and release details by September 2016.
On June 20, only few days after Singapore, the Government of Hong Kong announced that Hong Kong will participate in the BEPS project as an Associate as well.
Hong Kong will participate on the remaining standard-setting under the BEPS project and review and monitor measures implemented from the BEPS package. It will support the review of the four BEPS minimum standards, on harmful tax practices, tackling tax treaty abuse, country-by-country reporting, and improvements to cross-border tax dispute resolution mechanisms.
According to the Government, the decision to join the BEPS project would enable Hong Kong to maintain its reputation and fulfill its obligations as an international financial and business center.
- Inland Revenue Authority of Singapore: “Singapore Joins Inclusive Framework for Implementing Measures against Base Erosion and Profit Shifting (BEPS)”, 2016, <https://www.iras.gov.sg/irashome/News-and-Events/Newsroom/Media-Releases-and-Speeches/ Media-Releases/2016/Singapore-Joins-Inclusive-Framework-for-Implementing-Measures-against-Base-Erosion-and-Profit-Shifting–BEPS-/>;
- Out-Law.com: “Singapore to join BEPS framework on tax reporting”, 2016, <http://www.out-law.com/en/articles/2016/june /singa pore-to-join-beps-framework-on-tax-reporting/>;
- KPMG: “Understanding and preparing for BEPS”, 2016, <http://www.kpmg-institutes.com/content/dam/ kpmg/taxwatch/pdf /2016/kpmg-beps-services-readiness.pdf>;
- Channel News Asia: “Singapore joins tax framework led by OECD and G20”, 2016, <http://www.channelnewsasia.com /news/business/singapore/singapore-joins-tax/2878342.html>;
- Global Tax News: “Hong Kong To Participate In BEPS Project As Associate”, 2016, <http://www.tax-news.com/news/ Hong_Kong_To_Participate_In_BEPS_Project_As_Associate____71508.html>;
- TPA Global: “Singapore and Hong Kong Join BEPS”, 2016, <http://www.tpa-global.com/news/2016/06/21/singapore-and-hong-kong-join-beps>.