Quarter 4 Issue. In this issue: China Transfer Pricing Regulation Review. Revision Of Code Of Corporate Governance & Listing Rules

Transcription

1 2018 Quarter 4 Issue In this issue: China Transfer Pricing Regulation Review Revision Of Code Of Corporate Governance & Listing Rules Protecting Your Business In A Data-Driven World Singapore Holding Company Analysis Building A Thriving Hub For Co-Creation In New Industrial Age

2 1 Introduction We LISTEN to our clients, THINK on their behalf and help guide them on difficult decisions. We help steer companies towards GROWTH. Our domain is ASIA. Dear Valued Clients and Associates, In this final issue for 2018, we have lined up a diversified selec on of ar cles for your reading. Let s take a look into China transfer pricing regula on review following the recommenda ons made through the release of two primary regulatory documents. The ra onale of these announcements that focused mainly on special tax inves ga on, contemporaneous documenta on, royal es and service fees between related par es, aim to standardise transfer pricing prac ces in the future. With the recent slew of amendments to SGX lis ng rules, companies can expect be er corporate governance eco-system to enhance board quality and encourage be er engagement between companies and their shareholders. The recommended revisions shall spur be er corporate governance prac ces as the rules take effect from Jan 1, In a technology-fuelled environment businesses faced today, it is without doubt that data governance remains a key challenge for business owners to ensure data stays in compliance with regula ons and corporate policies. The next ar cle shall fill you in with an insigh ul read on the importance of building good data governance. Last but not least, we wrap up the year with an interview with Worldfolio for the supplementary edi on to the Washington Post, in conjunc on with the Asean Business Summit in November. Building a Thriving Hub for Co-Crea on In New Industry Age, companies need to reconsolidate, innovate, train and build new way of doing business in an age of uncertainty. With these, we thank you for your con nuous support and wishing you a happy 2019 ahead. Henry Tan Group CEO & Chief Innova on Officer, Nexia TS henrytan@nexiats.com.sg Nexia TS Public Accoun ng Corpora on Nexia TS (Shanghai) Co Ltd NTS Asia Advisory Sdn Bhd MALAYSIA MYANMAR 100 Beach Road Shaw Tower #30-00 Singapore Tel: (65) Fax: (65) nexiats@nexiats.com.sg Website: Room A, 20 Floor, Heng Ji Building, No. 99 East Huai Hai Road, Huang Pu District, Shanghai 20021, China Tel: (8621) Fax: (8621) china@nexiats.com.sg Website: Unit No 23A-06, Level 23A Menara Landmark, No. 12 Jalan Ngee Heng Johor Bahru, Johor Tel: (60) Fax: (60) nts@ntsasia.com.my Website: La Pyayt Wun Plaza, 410(B), 4th Floor, 37 Alanpya Pagoda Road, Dagon Township, Yangon, Myanmar Tel: (951) , , Ext- 406, 407, 408 Fax: (951) nexiats@nts.com.mm Website: SINGAPORE CHINA Following the success of the 2017 Asia Pacific Holding Company Analysis published by Nexia Interna onal, the second sequel for 2018 aims to provide as an updated and prac cal tool for an ini al comparison of relevant tax aspects of some holding company regimes, including Singapore which will be of interest for foreign companies seeking expansion into the city-state. NTS Myanmar Co Ltd

3 5 Cybersecurity - No Longer An Afterthought for Businesses China Transfer Pricing Regulation Review The article is authored by Flora Luo (Director of Global Expansion & Tax Advisory) & Scott Heidecke (Senior Consultant) and was first published in the Nexia International Transfer Pricing Newsletter. Since June 2016, China s State Administra on of Taxa on (SAT) has responded to the OECD BEPS transfer pricing recommenda ons through release of two primary regulatory documents, to include Announcement [2016] #42, Improved Administra on of Related Party Declara ons and Contemporaneous Documenta on, and Announcement [2017] #6, Administra ve Measures on Special Tax Inves ga on, Adjustment and Mutual Agreement Procedures. While in some cases Announcement 42 increases the complexity of related party transac on repor ng by global companies opera ng in China, many of the provisions clarify points that were previously quite vague, and overall the regula ons mostly bring China s transfer pricing documenta on requirements into line with the BEPS recommenda ons. Meanwhile, Announcement 6 consolidates a number of previously released regula ons related to outbound payments for royal es or service fees, a+nd introduces many of the BEPS concepts into the regula ons. The scope of the announcement includes transfer pricing, thin capitaliza on, controlled foreign companies (CFCs) and general an -avoidance rules (GAAR), while also detailing the ra onale and methods used in transfer pricing audits and tax inves ga ons. A brief summary of key points in the regula ons follows. Related party transac ons clarified Announcement 42 provisions mandate that all resident and non-resident companies subject to China corporate taxa on annually file an updated version of a Report of Yearly Related Party Business Transac ons. Correspondingly the defini ons of related party rela onships and transac ons have been clarified and broadened, thereby making it simpler to determine whether or not a related party rela onship exists. Related party transac on defini ons include a new category covering financial assets transfers. The financial intermedia on category has expanded to include long-term and short-term borrowing, surety bonds, accrued interest advances, deferred payables and receivables, and similar transac ons. The related party service transac on category has been expanded to include market survey, marke ng planning, agency, design, consultancy, administra on, technical services, contract R&D, repair and maintenance, legal services, financial management, audit, recruitment, training, centralized procurement and so on. Contemporaneous documenta on and country-by-country repor ng Announcement 42 also details new contemporaneous documenta on requirements, to include how the documenta on is structured, the contents of the documenta on, the thresholds at which documenta on is required, and the deadlines for document prepara on. As per the BEPS Ac on 13 report, contemporaneous documenta on shall now include a Master File and a Local File, as well as special documenta on that may be required with respect to Cost Sharing Arrangements, or where thin capitaliza on thresholds are exceeded. Addi onally, there are now three general cases in which country-by-country (CBC) repor ng is required. In the first case, a resident ul mate holding company of a mul na onal group that has consolidated financial statements exceeding RMB 5.5 billion for the previous year must file a CBC report. A CBC report will be required where a mul na onal group designates a China resident company such responsibility. Lastly, where any taxpaying en ty in China is under special tax inves ga on, CBC repor ng is required even if the en ty does not fall into either of the two cases listed above.

4 3 China Transfer Pricing Regulation Review Special tax inves ga ons Announcement 6 clearly specifies factors that may trigger special tax inves ga ons, to include companies that: engage in a large number and/or varied types of related party transac ons; incur long-term losses or low profits; have transac ons with related par es in low tax jurisdic ons; fail to prepare contemporaneous documenta on as required; exceed standards for debt to equity ra o; have certain characteris cs related to CFCs; or have tax planning arrangements that have no reasonable business purpose. Transfer pricing methods Announcement 6 allows that in any comparability analysis, any of the OECD acceptable transfer pricing methods may be used, as well as other arm s length methods which reflect the principle that the place where profit and economic ac vi es occur matches the place of value crea on. Each of the methods is described in detail with respect to when a given method should be used, the factors that should be considered in choosing, and how prices shall be calculated. Royal es and service fees between related par es Announcement 6 mandates that any royal es or licensing fees paid to related par es must be commensurate with provable economic benefits to the party paying the fees. Likewise, service transac ons between related par es must be beneficial, willingly received by the recipient, and priced at arm s length. A list of services considered non-beneficial to the recipient is included in the announcement. If determined to have no economic benefit to the recipient, deduc bility of royal es and/or service fees is not allowed. Conclusion While remaining ques ons linger, the SAT announcements introduced above go a long way toward providing unambiguous regulatory guidance with respect to transfer pricing and related issues for both taxpayers and in-charge tax officials throughout China. As a result, it is predicted that tax inves ga on and adjustment prac ces in transfer pricing cases will be increasingly standardized from one tax bureau to the next. Likewise the reasonably close adherence to the related BEPS deliverables should help global businesses be er understand how to plan and implement transfer pricing policies and prac ces, as well as what is required to avoid special tax adjustment inves ga ons in most types of related party transac ons. CONTACTS For more informa on, please contact: Flora Luo Director of Global Expansion & Tax Advisory, Nexia TS Shanghai floraluo@nexiats.com.cn Dr Sco Heidecke Senior Consultant, Nexia TS Shanghai

5 Revision Of Code Of Corporate Governance & Listing Rules MAS issued a Revision Of Code Of Corporate Governance & Listing Rules. The revised code will take effect for companies in respect of annual reports covering financial years that commence from 1 January On 6 Aug 2018, the Corporate Governance Council ( Council ) submi ed its recommenda ons to the Monetary Authority in Singapore (MAS) whereby the authority has accepted all the recommenda ons and issued a revised Code ( Revised Code ) and accompanying Prac ce Guidance. The revised code will take effect for companies in respect of annual reports covering financial years that commence from 1 January Revised code of corporate governance The original 16 Principles in the Current Code have been condensed into 13 mandatory Principles for the Revised Code. Principle 2 - Board composi on and guidance Director independence An "independent" director is one who is independent in conduct, character and judgement, and has no rela onship with the issuer, its related corpora ons, its substan al shareholders or its officers that could interfere, or be reasonably perceived to interfere, with the exercise of the director's independent business judgement in the best interests of the issuer. Baseline tests rela ng to employment have been shi ed to the Catalist Rule- CR406(3)(d). The shareholding threshold for independent directors ( IDs ) has been revised from 10% to 5%. Board composition At least one third of the board should consist of IDs will be moved to CR406(3)(c) (star ng 1 January 2022). IDs are to comprise a majority of the board (from at least half in the Current Code) where the Chairman is not independent. The Board should comprise a majority of non-execu ve directors. Board diversity The issuer has to disclose in the annual report about its board diversity policy and progress to achieve the board diversity policy and objec ves. Principle 4 Board membership The Board has to take into account the need for the Board s progressive renewal. In addi on to having a formal and transparent process for the appointment and re-appointment of directors. If a director holds a significant number of directorships and Principal Commitments, the Nomina ng Commi ee (NC) and Board should disclose in the annual report, their reasoned assessment of the director s ability to diligently discharge his/her du es. This is in addi on to the disclosure in the annual report of the directors listed company directorship and principal commitments. Principle 8 Disclosure on remunera on Required to disclose the rela onship between remunera on, performance and value crea on. Disclosure includes names and remunera on of employees who are substan al shareholders or immediate family of substan al shareholders. In addi on to employees who are immediate family members of a director or the CEO, where such remunera on exceeds S$100,000 during the year (instead of S$50,000), in bands no wider than S$100,000 (instead of S$50,000). Principle 9 Risk management and internal controls Board requires and to disclose in the company s annual report that it has received assurance from: - The CEO and the CFO that the financial records have been properly maintained and the financial statements give a true and fair view of the company's opera ons and finances; and

6 5 Revision Of Code Of Corporate Governance & Listing Rules - The CEO and other key management personnel who are responsible, regarding the adequacy and effec veness of the company's risk management and internal control systems. Principle 10 Audit commi ee Du es of the AC are as listed. Revisions and addi on to AC s du es are indicated accordingly: a) No change- Reviewing the significant financial repor ng issues and judgements so as to ensure the integrity of the financial statements of the issuer and any announcements rela ng to the issuer's financial performance; b) No change- Reviewing at least annually the adequacy and effec veness of the issuer's internal controls and risk management systems; c) New- Reviewing the assurance from the CEO and the CFO on the financial records and financial statements; d) No change- making recommenda ons to the Board on: (i) the proposals to the shareholders on the appointment and removal of external auditors; and (ii) the remunera on and terms of engagement of the external auditors; e) Revised- Reviewing the adequacy, effec veness, independence, scope and results of the external audit and the issuer s internal audit func on; and f) New - Reviewing the policy and arrangements for concerns about possible improprie es in financial repor ng or other ma ers to be safely raised, independently inves gated and appropriately followed up on. The issuer publicly discloses, and clearly communicates to employees, the existence of a whistle-blowing policy and procedures for raising such concerns. Principle 11 Shareholder rights and conduct of general mee ngs Companies should table separate resolu ons at general mee ngs of shareholders on each substan ally separate issue unless the issues are interdependent and linked so as to form one significant proposal. All directors have to a end the general mee ngs of shareholders. The external auditors must also be present to address shareholders queries about the conduct of audit and the prepara on and content of the auditors report. Companies have to publish minutes of general mee ngs of shareholders on its corporate website as soon as prac cable (instead of upon shareholder request under the current Guideline). Principle 13 Engagement with stakeholders Engagement with Stakeholders is a new Principle introduced to ensure that companies balance the needs and interests of material stakeholders. The issuer has to: - Put in place arrangements to iden fy and engage with its material stakeholder groups to manage its rela onships; - Discloses in its annual report its strategy and key areas of focus in rela on to the management of stakeholder; rela onships during the repor ng period. - Maintain a current corporate website to communicate and engage with stakeholders. 2. Revised Catalist Rules ( CR ) SGX amended its Lis ng Rules following the MAS acceptance of the Revised Code. The amended lis ng rules will take effect on 1 January 2019, except for (b) and (d). a) Training for first- me directors Directors who has no prior experience as a director of a listed issuer on SGX (a First-Time Director ) will have to go through training in the roles and responsibili es of a director of a listed issuer. The issuer must ensure that the First-Time Director has gone through trainings prescribed by the SGX. If the NC is of the view that training is not required because the director has other relevant experience, the basis of its assessment must be disclosed. However, SGX has the authority to direct a First- me Director to a end the prescribed trainings in the Singapore Ins tute of Directors (SID) within one year from the date of appointment to the board or lis ng. List of trainings required include LED 1-4. First-Time Director must also a end modules (LED5-8) that are relevant to his/her appointment on the Board. b) IDs to make up at least one-third of the Board IDs are to make up at least one-third of the board, star ng 1 January This applies to lis ng aspirants and listed companies on an on-going basis. A er the new requirement takes effect, if an ID re res or resigns and the issuer is unable to meet the Board composi on requirement, a grace period of no more than 3-months will be provided for the issuer to fill the vacancy. Prior to 1 January 2022, the corresponding Guideline 2.1 from the current CG Code (2012) will con nue to apply, which similarly requires IDs making up at least 1/3 of the Board. c) Tests of director independence Test of director independence has been ra onalised in the Code and Lis ng Rules by: Shi ing objec ve and baseline test rela ng to employment to the Lis ng Rules, CR406(3)(d), to reflect that companies should apply these without excep ons. Revised Code (Provision 2.1). Se ng out an overarching principle-based defini on of director independence in the Code and placing the onus on the NC to determine if a director is independent bearing in mind this defini on and any other salient factors. Non-binding Prac ce Guidance. Shi ing the remaining tests of director independence, to provide companies with flexibility in applying these tests while adhering to the overarching principle-based test in the Code. d) Term of an ID to be limited to 9-years (effec ve 1 Jan 2022) IDs who have served beyond nine years are subjected to a two- er vote to be approved by the majority of (i) all shareholders; and (ii) all shareholders excluding shareholders who also serve as directors or the CEO (and their associates).

7 6 Revision Of Code Of Corporate Governance & Listing Rules e) Disclosure of rela onship between Chairman and CEO The rela onship between the chairman and chief execu ve officer of the issuer must be disclosed if they are immediate family members in the annual report. f) Establishment of Board Commi ees Issuers are required to establish commi ees to perform the func ons of an Audit Commi ee, Nomina ng Commi ee and Remunera on Commi ee. This obliga on is required on an on-going basis under CR720(1). g) Re-nomina on and re-appointment of directors at least once every three years Issuers must ensure that all directors submit themselves for re-nomina on and re-appointment at least once every 3 years. When a candidate is proposed to be appointed for the first me or re-elected to the board at a general mee ng, the issuer shall provide the informa on rela ng to the candidate as set out in Appendix 7F of the Catalist Rules in the No ce of mee ng, Annual report or relevant Circular distributed to shareholders prior to the general mee ng. Therea er, the issuer must announce the outcome of the shareholder vote in accordance with CR704(15). h) Key informa on regarding directors CR720(5) and Appendix 7F- relates to the Announcement of Appointment. The baseline of informa on prescribed in Appendix 7F has to be announced in the no ce of mee ng, annual report or relevant circular (which are distributed prior to the general mee ng) for (i) candidates proposed to be appointed for the first me, or; (ii) directors re-elected to the board, at a general mee ng. Under the new Appendix 7F, new inser ons include: (i) Date of last re-appointment (if applicable); (ii) Professional qualifica ons; (iii) Any rela onship (including immediate family rela onships) with any exis ng director, exis ng execu ve officer, the issuer and/or substan al shareholder of the listed issuer or of any of its principal subsidiaries; (iv) Other Principal Commitments including Directorships. Principal Commitments which is defined under the CG Code: includes all commitments which involve significant me commitment. i) Adequacy and effec veness of internal controls and risk management systems Disclosure must be made in the offer document whereas Rule 1204(10) requires the disclosure to be in the annual reports. Under the new amendments, both rules require the following: i. The Board must comment on the adequacy and effec veness of the issuer s internal controls (including financial, opera on, compliance and informa on technology controls) and risk management systems. A statement is required from the AC on whether it concurs with the Board s comment. ii. Where material weaknesses are iden fied by the board or audit commi ee, they must be disclosed together with the steps to address them. j) Internal audit func on An issuer must establish and maintain on an ongoing basis, an effec ve internal audit func on that is adequately resourced and independent of the ac vi es it audits. Issuers may outsource internal auditors to third party firms. The AC must comment on whether the internal audit func on is independent, effec ve and adequately resourced. k) Disclosure on reasons for not paying dividends The issuer is required to disclose reasons should directors decide not to declare or recommend a dividend. Dividend payment is not compulsory. The disclosure requirement serves as a star ng point for companies to communicate with their shareholders on their strategy and performance to align expecta ons. l) Comply-or-explain regime An issuer must describe in its annual report its corporate governance prac ces with specific reference to the principles and provisions of the Code. An issuer must comply with the principles of the Code. If an issuer s prac ces vary from any provisions of the Code, it must clearly state, in its annual report, the provision from which it has varied, explain the reason for the varia on, and explain how the prac ces it had adopted are consistent with the intent of the relevant principle. CONTACTS For more informa on, please contact: Chin Chee Choon Advisory Leader ccchin@nexiats.com.sg

8 6 Decision Making and The Span of Analytics Protecting Your Business In A Data-Driven World Businesses need to be aware of developments and possible weaknesses in their digital environment so they are protected from cyber attacks that could derail them. Informa on technology is now the cornerstone of nearly every business. Management can no longer adopt an out of sight, out of mind mentality and delegate data security to the procurement or IT department. The data governance triangle: process, technology, people Good data governance is built from a solid founda on of sound business processes, the effec ve use of technology and a well trained workforce. Business processes are o en vulnerable when new IT systems are implemented in a company. They are par cularly suscep ble if the management team does not communicate with IT when the infrastructure is being upgraded, or if the business does not consider exis ng work flows when new so ware arrives. If new compliance requirements are thrown into the mix it can lead to gaps in previously well established processes. Implemen ng new technology is supposed to revitalise a company and improve efficiency, but it can also open a backdoor to expose confiden al informa on. Promises of radical improvements to system bo lenecks can prove to be an irresis ble tempta on and can be a huge pay off if carried out correctly. The people who execute the processes and create and manage data in a company are the third key to good data governance. Hackers o en target the weakest links and rely on untrained people in the workforce clicking on bogus links to create a domino malware effect. They may also have their iden ty stolen through unsecured webpages, or neglect to protect their passwords and other personal data. Ransomware, phishing s and social engineering scams are now not just IT jargon, but daily newspaper headlines. Safeguarding the business and its data Cybersecurity is a recognised global concern and many governments around the world have introduced legisa on to limit the risk and raise awareness of cyber defence and hygiene. Yet the fine line between ensuring transparency and managing the burden of compliance can be difficult as a acks step up in scale and volume. In addi on to mee ng regulatory requirements, businesses should of course also consider whether their use of technology is effec ve and efficient for their purposes and factor into their risk planning new technologies such as: ar ficial intelligence and machine learning cloud solu ons, remote access to data and other tools enabling a mobile workforce e-commerce, e-wallets and cryptocurrencies. It is cri cal to consider the exis ng environment and poten al scalability when implemen ng these new technologies, as this can make the difference between a successful launch and a flop. Having considered compliance and IT security of the business, management may feel that the remaining risks need to be mi gated. This is where cyber insurance may be useful A holis c view The responsibili es of management and boards of directors have grown along with developments in technology. The challenges can be daun ng. For example, it is vital that customer databases are stored in a secure loca on and suitable backups are readily available. Shareholders will want to know the poten al cost implica ons of IT infrastructure upgrades if expanding to another country.

9 8 Protecting Your Business In A Data-Driven World For chari es and non-profit organisa ons, there may be addi onal reputa onal risks that can affect the willingness of donors to support their causes if personal data is not seen to be secured properly. While no industry or organisa on is safe from the lure and threat of a fully digital organisa on, an ounce of preven on may be worth several million dollars worth of cure. CONTACTS For more informa on, please contact: Darwin Thio Director, Forensic & Li ga on Support Services, Cybersecurity & Technology Advisory darwinthio@nexiats.com.sg Maria Teo Manager, Forensic & Li ga on Support Services, mariateo@nexiats.com.sg

10 8 M&A Asia Outlook Singapore Holding Company Analysis This article is authored by Edwin Leow (Director, Head of Tax) and was first published by Nexia International in Asia Pacific Holding Company Analysis 2018 Country (notes code) Singapore (SG) Relevant criteria / Date last update Treatment of Dividend Income How is Dividend Income treated for tax purposes in par cular, is the dividend income either (a) exempt from tax under a par cipa on exemp on or (b) taxable with credit for foreign tax credits 2 Minimum Par cipa on for Dividend income Minimum par cipa on holding level (%) required to be sa sfied 3 Treatment of Capital Gains Income (a) Local-sourced dividend is not taxable. (b) Foreign-sourced dividend income received in Singapore is not taxable under certain circumstances 1 N/A How is Capital Gains Income treated for tax purposes in par cular, Gains derived from disposal of ordinary shares made during the period 1 June 2012 to 31 May 2022 are not taxable if the company has held at is the capital gain either least 20% of the ordinary shares for at least 24 months con nuously just prior to the disposal. All other gains are to be subjected to determina on (a) exempt from tax under a par cipa on exemp on or of whether such gains are of a capital or income nature. Gains determined to be of an income nature are taxable.where foreign taxes (b) taxable with credit for foreign tax credits are suffered, foreign tax credits may be available under a tax treaty. 4 Minimum Par cipa on for Capital Gains Minimum par cipa on holding level (%) required to be sa sfied 5 Minimum ownership period requirements What are the minimum ownership period Requirements in respect of: (a) Dividend income (b) Capital gains derived from the par cipa ng holding? N/A For certainty of non-taxa on of capital gains to be applicable, the minimum 20% ordinary shareholdings must be held for at least 24 months con nuously just prior to the disposal.

11 10 Singapore Company Analysis Country (notes code) Singapore (SG) Relevant criteria / Date last update Ac ve Business Test on underlying par cipa on N/A Does the underlying subsidiary require to be an ac ve opera ng company or can the subsidiary be, itself, a passive holding company? 7 Subject to tax Test on underlying par cipa on Does the subsidiary require to be subject to taxa on in its jurisdic on of registra on? N/A If so, what is the minimum acceptable level of taxa on (% rate) in the jurisdic on of the holding company for the purposes of this test? 8 Corporate Rate of Taxa on Corporate tax rate in jurisdic on 9 Withholding Tax - Dividend (Outgoing) (a) Non-Treaty rate on Dividends (b) Treaty range of withholding taxes 10 Withholding Tax - Dividends (Incoming) General range of withholding taxes on dividends in the foreign source jurisdic on in terms of treaty network. 11 Withholding Tax - Liquida on of Holding Co. Is a withholding tax imposed on the final distribu on of assets of the holding company in liquida on? 12 Interest Deduc ons & Thin Capitalisa on Rules - Debt : Equity Ra os (a) Interest Deduc ons Are Interest Expenses incurred on loans (received to finance the acquisi on of the foreign par cipa on) deduc ble against dividend income: capital gains or other income of the holding company? (b) Debt : Equity Ra os Are there restric ons on the level of non-equity capital financing of the holding company in the form of prescribed Debt : Equity ra os? Debt : Equity ra o: 13 Controlled Foreign Corpora on ( CFC ) & an -abuse regula ons (a) CFC Regula ons Are CFC regula ons applied? Are the regula ons applied only to a prescribed black list of jurisdic ons or with reference to the effec ve rate of tax imposed in the overseas jurisdic on? (b) Other an -abuse regula ons Are an -abuse provisions applied in regard to the EU Parent-Subsidiary 14 Binding Advance Tax Rulings (pre-transac on) Are Advance Tax Rulings available pre-transac on? Are these rulings granted only in respect of specific situa ons? 15 Other taxes (a) Capital Duty (b) Transfer Tax on shares (c) Annual Net Worth / Patrimonial Tax (d) Trade Tax 17% 2 NIL N/A 0% -15% No Such interest expenses are generally deduc ble against dividend income, as well as against any gains from the disposal of the foreign par cipa on which are determined to be of an income nature and subjected to tax accordingly No N/A No General an -avoidance rules and arm s length requirement for related party transac ons Yes Yes (a) 0% (b) 0.2% (c) 0% (d) 7%

12 11 Singapore Company Analysis Country (notes code) Singapore (SG) Relevant criteria / Date last update Double Tax Treaty Network (a) Number of trea es in opera on (b) Is the holding company type excluded from any of the trea es? (c) Do any of the trea es include an -treaty shopping provisions and/or detailed beneficial ownership tests? 17 Exchange Controls Are Exchange Controls restric ons applied in respect of the holding company type? (a) 84 (Comprehensive), 8 (Limited) & 5 (Signed, not ra fied) (b) Generally no (c) Yes No 18 Base Erosion Profit Shi ing What kind of tests have been introduced as a result of BEPS? Introduc on of : (a) Contemporaneous transfer pricing documenta on requirements for related party transac ons exceeding specified thresholds; (b) Prescribed repor ng requirements for such transac ons which exceed the threshold; and (c) Country by Country Repor ng (CbCR) for certain Singapore-based mul na onals mee ng certain condi ons. (d) To adopt the Principal Purpose Test in Singapore s tax trea es. Asymmetrical applica on of simplified limita on of benefits rules will not be allowed. Notes To Company Analysis SG Singapore (SG) Foreign-sourced dividend income earned and received in Singapore by a Singapore tax resident company which sa sfy following condi ons are tax exempt in Singapore: SG1 i. In the year the dividends are received in Singapore, the headline (highest) corporate tax rate of the foreign jurisdic on from which the dividend is received is at least 15%; and ii. The dividends received in Singapore must have been subjected to tax in the foreign jurisdic on from which the dividend is received (i.e. either withholding tax and/or underlying tax is paid or payable); and iii. The Singapore tax authori es are sa sfied that the tax exemp on would be beneficial to the person resident in Singapore

13 12 Singapore Company Analysis Notes To Company Analysis SG Singapore (SG) Par al tax exemp on scheme Effec ve from Year of Assessment 2008, a par al tax exemp on is given to companies on normal chargeable income* (excluding Singapore franked dividends) of up to S$300,000 as follows: Exempt amount First S$ 75% = S$ 7,500 Next 50% = S$145,000 Total S$300,000 S$152,500 *Normal chargeable income refers to income to be taxed at the prevailing corporate tax rate. Tax exemp on scheme for new companies Full tax exemp on on the first S$100,000 of chargeable income and 50% tax exemp on on the next S$200,000 of chargeable income is SG2 available for a start-up company incorporated and tax resident in Singapore which has its total share capital beneficially held directly by no more than 20 shareholders: (a) where all the shareholders are individuals throughout the basis period; or (b) at least one shareholder is an individual holding at least 10% of the total number of issued ordinary shares. The full tax exemp on is available for the first 3 consecu ve Years of Assessment. This exemp on scheme is not applicable to the following companies set up from 26 February 2013: (i) Investment holding companies that derive only passive incomes such as dividend and interest income; and (ii) Companies whose principal ac vity is that of developing proper es for sale, investment or both. Corporate Tax Rebate Companies are granted a 40% Corporate Tax Rebate (capped at S$15,000) for Year of Assessment 2018 and 20% Corporate Tax Rebate (capped at S$10,000) for Year of Assessment 2019 (for income derived in the financial years ended in 2017 and 2018 respec vely). SG3 SG4 Singapore has a Goods and Service Tax (GST) which is a broad based consump on tax and is currently charged at 7%. Typically, foreign-owned investment-holding companies (defined as companies where 50% or more of its shares are held by foreign companies/shareholders) with purely passive sources of income and receiving only foreign-sourced income are not eligible for a Cer ficate of Residence (COR) in the eyes of the Singapore tax authori es. As a prac ce, however, the Singapore tax authori es may grant a COR if the company is able to sa sfy them that: 1. The control and management of the company is in Singapore; and 2. The company has valid reasons for se ng up an office in Singapore. To sa sfy these condi ons, the company would need to demonstrate that decisions on strategic ma ers are made in Singapore for example by demonstra ng that their board of directors' mee ngs are held in Singapore. Apart from this, the company must also: a. Have related companies in Singapore that are tax residents or that have business ac vi es in Singapore; or b. Receive support or administra ve services from a related company in Singapore; or c. Have at least 1 director based in Singapore who holds an execu ve posi on and is not a nominee director; or d. Have at least one key employee (e.g. CEO, CFO, COO) based in Singapore. To find out more about Asia Pacific countries visit: h ps://nexia.com/assets/files/apac_company_holdings_ Report_2018.pdf. CONTACTS For more informa on, please contact: Edwin Leow Director, Head of Tax edwinleow@nexiats.com.sg

14 5 Cybersecurity - No Longer An Afterthought for Businesses Building A Thriving Hub For Co-Creation In New Industrial Age This article was first published in The Washington Post Supplementary on 12 November A new crea ve industrial age is upon us, with tradi onal industrial sectors from retail to tourism being turned on their head by disrup ve new entrants. Thanks in part to the advent of new technological advances, the global economy is now a landscape of constant transforma on and accelera ng change, and in order to survive, no company can afford to stand s ll. Companies are evolving. Industry structures are evolving. In the past, industries existed in very tradi onal silos. Now, the boundaries are blurring, disrup ng tradi onal companies and jobs. That s the challenge that we face, says Tan Kiat How, Chief Execu ve of the Infocomm Media Development Authority (IMDA). Amid this game-changing disrup on, Singapore has posi oned itself as a center of innova on at the heart of the world s most dynamic economic region, with the introduc on of strategic, entrepreneurial-friendly schemes, grants and policies by the government, to become Asia s answer to Silicon Valley. The obvious choice for mul na onals In recent years, Singapore s robust infrastructure, ease of doing business and widespread technology adop on has seen it become a natural choice for American companies looking for a place to try out new ideas. In 2011, U.S. banking giant Ci opened the Ci Innova on Lab in Singapore, which not only allows it to create pioneering transac on banking solu ons, but provides a place for clients to test-drive them through live demonstra ons. One solu on created by the bank was last year s launch of a banking chatbot, Ci Bot on Facebook Messenger that is capable of providing customer account informa on to users, a world-first for Ci in a social media network. Payments firm PayPal Inc has also made Singapore its base for innova on, with the 2016 launch of its first lab outside of the United States. The company has since entered R&D partnerships with three of Singapore s top universi es. They have been joined by U.S. firms as diverse as IBM, Thomson Reuters and MetLife, all of which have chosen the city-state in order to collaborate with customers, tech startups, universi es and the Singapore government to roll out products and solu ons for professional markets in Asia Pacific and beyond. The mul na onals are here because of the vibrant start-up environment, says Png Cheong Boon Chief Execu ve Officer of Enterprise Singapore. Mul na onals are not just using Singapore as a regional headquarters, neither are they just using it as a manufacturing loca on. They are using it for R&D. They re using it for innova on because they want to tap the ideas from the start-up community in Singapore as well as from the region. They are looking at growing new business out of Singapore. Today, the sheer number of innova on labs that have opened in Singapore bears tes mony to the confidence in the country s proposi on as an innova ve ecosystem. We try to make Singapore a great place for people to develop new products, says Chng Kai Fong, Managing Director of the Singapore Economic Development Board (EDB). We are a natural place for talent around the region, and also for Americans. In fact, the country recently overtook tech mecca Silicon Valley as the world s top des na on for start-up talent, according to Startup Genome rankings. It is not difficult for companies here to find talent who come from or who understand the individual markets, says Mr. Png. When American companies come here, it s a mel ng pot. We have a talent pool that is very diverse.

15 14 Building A Thriving Hub For Co-Creation In New Industrial Age Government policies drive transforma on But in spite of its success thus far, the government has not rested on its laurels. Thanks to the Commi ee on the Future Economy s (CFE) Industry Transforma on Maps (ITMs), mul na onal corpora ons, banks, tech giants, start-ups and universi es have all opened their doors to facilitate conversa ons, allowing for connec ons the likes of which are unlikely to be possible anywhere else. What is required to achieve a value-crea ng economy is a tremendous amount of collabora on between the public sector, academia, business people and individuals, says Victor Mills, chief execu ve of the Singapore Interna onal Chamber of Commerce (SICC). To ensure that the en re value chain, from mul na onal company to small start-up, can reach its poten al in the changing global economy, the city-state s Budget 2018 laid out a ra of ini a ves to enable businesses to stay compe ve and relevant, par cularly on the digital front. One of these is the Produc vity Solu ons Grant, a restructured ini a ve to help SMEs in their digital transforma on journey and provide support for adop on of IT solu ons and equipment. What the ITMs do is make us think about innovation and transformation, says Henry Tan, managing director of local business Nexia TS. One of Singapore s largest accoun ng firms providing audit, tax and professional advisory services, Nexia TS embodies the Singaporean spirit of seeking new ways of doing business for the future through partnership. When I co-founded the firm together with my partner, we wanted to be a bou que corporate finance firm and our vision was that we would hand-hold SMEs towards growth, towards fundraising and expansion in the region, says Mr. Tan, adding that the firm has since decided to acquire certain of these SMEs. We acquired a data analy cs company that not only will help our clients, but also our own internal process. All aboard including the regulators Grappling with unfamiliar regulatory environments can be a barrier to businesses looking for new places to grow and create, with new ideas o en stymied by out-of-date rules. But Singapore s regulators have taken an ac ve role in driving innova on. The Monetary Authority of Singapore (MAS) sandbox is one such example. It allows interested firms, both local and interna onal, to test their products and services on real customers, allowing for the consequences of failure to be contained within the produc on environment. Singapore is a testbed, because we can change and adapt our rules, says Mr. Chng. In the rapidly-changing economy of today, no company can innovate in a silo. Success will come from seeking out ecosystems in which to co-create. Through its combina on of conducive regulatory environment, government policies, and vibrant business environment, Singapore has become that ecosystem a place where new ideas are fostered, nurtured and allowed to become reali es. CONTACTS For more informa on, please contact: Henry Tan Group CEO & Chief Innova on Officer henrytan@nexiats.com.sg

16 About Nexia TS Service Portfolio and Values Nexia TS is a rapidly growing mid- er accoun ng firm based in Singapore. We are an independent member firm of Nexia Interna onal and are directly associated with Smith & Williamson of United Kingdom. The business condi ons are changing rapidly worldwide, with shrinking economic cycles and the emergence of a new economic world order. Whether one is doing business within the known boundaries or expanding globally, one cannot escape the challenges of this new state of affairs. Those who quickly adjust to and master these con nually evolving condi ons are also known to reap huge rewards from the abundant opportuni es available today. They say the world is ge ng smaller, and it really is. We help many talented entrepreneurs from across the globe with our sound strategic advice and highly-professional services. We go beyond the mandate typically enjoyed by accountants and become custodians of your business interests. In short, Team Nexia works with you to design game-changing business solu ons. Our Service Portfolio We believe that we must con nually evolve and augment our skills to protect your business interests. We are con nually expanding our range of services in tune with your changing business needs. We serve you with: Tax Services Assurance & Business Services Risk Advisory Valua on & Transac on Services M&A Advisory Financial Advisory, Insolvency & Restructuring Accoun ng, Outsourcing & Corporate Services Forensic & Li ga on Support Services Cybersecurity & Technology Advisory Services Data Analy cs Services Sustainability Repor ng Repor ng Auditors Services Business Advisory in China, Iskandar Malaysia & Myanmar A Bouquet of Values Best of both worlds We are a home grown company from Singapore yet are connected with our highly skilled counterparts from different economies. We can therefore put together seamless solu ons when your business is partaking in cross-border opportuni es. In doing so we leverage the knowledge and exper se offered by our associates across the globe. People you can trust Having worked with our clients through many different business condi ons, the insights developed over these years have helped us quickly to find the solu ons that serve your business interest in the best possible manner. Today we enjoy the implicit trust of our clients and o en win business through referral. Seamless advice from professional teams We can draw up a team from our vast talent pool that undertands your needs and serves you efficiently, but we also give you a dedicated single point of contact, making it very easy to interact with us. Competitive in every sense With our comprehensive por olio of assurance, tax, accoun ng and advisory related services, we can offer service levels equivalent to our larger compe tors but for more compe ve fees, and o er with a more personal service and greater levels of partner involvement. Obsessed with quality, just like you We share with you common values, such as professionalism, business ethics and trust. We give individual a en on to every minute service detail, ensuring a high-quality experience.

17 Our Approach and Expertise Our Leaders Assurance and Business Services Loh Ji Kin Loh Hui Nee (65) (65) Philip JC Tan Low See Lien (65) (65) Meriana Ang Chin Chee Choon (65) (65) Christine Lee Chan Siew Ting chris (65) chansiew (65) Ross Y. Limjoco Lee Tze Shiong (65) (65) Titus Kuan (65) Tax Services Edwin Leow (65)

18 Our Approach and Expertise Our Leaders Risk Advisory Chin Chee Choon Pamela Chen (65) (65) Valuation and Transaction Services Sitoh Yih Pin Grace Lui (65) (65) Accounting, Outsourcing and Corporate Services Chin Chee Choon (65) Forensic and Litigation Support Services Darwin Thio Low See Lien (65) (65) Cybersecurity & Technology Advisory Services Darwin Thio (65) M&A Advisory Ross Y. Limjoco (65)

19 Our Approach and Expertise Our Leaders Financial Advisory, Insolvency and Restructuring Chan Yee Hong (65) Sustainability Reporting Chin Chee Choon Pamela Chen (65) (65) Data Analytics Services Chin Chee Choon (65) Global Expansion & Tax Advisory (China) Flora Luo (8621) We have taken great care to ensure the accuracy of this publica on. However, the publica on is wri en in general terms and you are strongly recommended to seek specific advice before taking any ac on based on the informa on it contains. No responsibility can be taken for any loss arising from ac on taken or refrained from on the basis of this publica on. Nexia TS Singapore 2018 Nexia TS is a member of the Nexia Interna onal network (Nexia). Nexia is a leading, global network of independent accoun ng and consul ng firms. When you choose a Nexia firm, you get a more responsive, more personal, partner-led service, across the world. Nexia is a highly ac ve network that drives quality and facilitates collabora on to enable its member firms to provide effec ve local and global solu ons. Nexia member firms deliver a partner-led service to clients which ensures con nuity, exper se and a deep understanding of the client s business. They are characterised by people who have an entrepreneurial spirit and who can relate closely to the SME and owner-managed businesses. Nexia firms are focused on suppor ng local businesses as they grow and through the Nexia network, they can also help their clients confidently venture into new interna onal markets. Nexia Interna onal Limited, a company registered in the Isle of Man which operates the Nexia Interna onal network, does not deliver services in its own name or otherwise. Nexia Interna onal Limited and the member firms of the Nexia Interna onal network (including those members which trade under a name which includes the word NEXIA) are not part of a worldwide partnership. Nexia Interna onal Limited does not accept any responsibility for the commission of any act, or omission to act by, or the liabili es of, any of its members. Each member firm within the Nexia Interna onal network is a separate legal en ty. The trade marks NEXIA INTERNATIONAL, NEXIA and the NEXIA logo are owned by Nexia Interna onal Limited and used under licence. References to Nexia or Nexia Interna onal are to Nexia Interna onal Limited or to the Nexia Interna onal network of firms, as the context may dictate. For more informa on, visit