Y o u a n d t h e T a x m

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1 In si g h t s o n t a x i ssues t h a t m a t t er I s s u e 3, Y o u a n d t h e T a x m a n C o m p a n i es n eed t o a c t n o w a g a i n st t a x a v o i d a n c e A h a r d er l o o k a t t a x i n M & A s p o st - B E P S C h a n g es i n r ev en ue r ec o g n i t i o n Tax incentives in ASEAN: the fight for investment dollar intensifies Harmonisation needed for permanent est a b l i sh m en t r ul es i n A S E A N U p st r ea m l o a n d eb t o r c o n st r uc t i v e d i v i d en d? S ev en t h i n g s y o u n eed t o k n o w a b o ut B r ex i t

2 You and the Taxman Clearly, the tax landscape is changing and the pace of change is not relenting. Tax functions and organisations must keep ahead, for being left behind cannot be an option. 2 You and the Taxman Issue 3, 2016

3 Going by recent developments, the previous months have been anything but dull at least from the perspective of the tax practitioner. With watershed developments like the Brexit becoming a reality, investors and tax professionals across the globe are grappling with new issues and seizing opportunities amidst changes. Back home, with Singapore having agreed to join the BEPS Programme to work with other participating jurisdictions to drive consistent implementation of measures and a level playing field, businesses now feel compelled to reflect and respond nimbly and decisively so as to avoid any future surprises. In this edition, we highlight some of these pertinent issues that are keeping organisations on their toes. Companies need to act now against tax avoidance discusses how companies should look at their internal controls and transfer pricing documentation in order to comply in an evolving environment that demands greater transparency and substance. A harder look at tax in M&As post-beps explores how the BEPS project will impact transaction due diligence and deal decisions. Changes in revenue recognition addresses how the adoption of the new revenue recognition accounting standard has given rise to key tax issues that demand clarification. In this issue, we are also introducing a new section Eye on ASEAN to offer tax-related insights into doing business in Southeast Asia. Tax incentives in ASEAN: the fight for investment dollar intensifies provides an overview of the tax incentive landscape and recent changes, while Harmonisation needed for permanent establishment rules in ASEAN examines if the promised seamlessness of trade and labour movements in the ASEAN Economic Community can similarly be seen in the tax rules across Member States. Upstream loan debt or constructive dividend? looks at what a local-based parent company obtaining cash from its foreign-based subsidiary must take note of in order to achieve an effective execution. Finally, we conclude this edition with Seven things you need to know about Brexit, an interview with our Singapore-based foreign desk consultant on the questions that many have in relation to investments and taxes when the UK leaves the EU. Clearly, the tax landscape is changing and the pace of change is not relenting. Tax functions and organisations must keep ahead, for being left behind cannot be an option. Have a good read. T a x w a t c h Issue # M o n t h Y ea r M r s C hung - S i m S i ew M oon Partner and Head of Tax Ernst & Young Solutions LLP You and the Taxman Issue 3,

4 In t h i s i ssue Y o u a n d t h e T a x m a n Y o u a n d t h e T a x m a n C omp ani es need to ac t now ag ai ns t tax av oi danc e 06 As Singapore formally joins hands with other governments to tackle the issue of tax avoidance, organisations need to take a more proactive approach so as to avoid surprises. 08 A har der l ook at tax i n M & A s p os t- B E P S With increased sophistication of revenue authorities and the implications of BEPS initiatives elevating the focus on tax in transactions, what do companies need to consider when making deals? 12 C hang es i n r ev enue r ec og ni ti on The adoption of new revenue recognition accounting standard has given rise to pertinent tax issues that call for clarification. E y e o n A S E A N 15 Tax incentives in ASEAN: the fight for investment dollar intensifies With the launch of the ASEAN Economic Community (AEC) last year, we look at the tax incentive landscape and how companies that are keen to invest in ASEAN can take advantage of the schemes available. 4 You and the Taxman Issue 3, 2016

5 M 5 Issue # M o n t h Y ea r Issue 3, Harmonisation needed for permanent establishment rules i n A S E A N Amidst the optimism and potential opportunities offered by the AEC, will the promised seamlessness of trade and labour movements be similarly seen in the tax rules across Member States? E l sew h er e o ut si d e S i n g a p o r e 20 U p s tr eam l oan deb t or c ons tr uc ti v e di v i dend? What should a local-based parent company obtaining cash from its foreign-based subsidiary take note of in order to achieve an effective execution? In c o n v er sa t i o n w i t h 23 S ev en thi ng s y ou need to k now ab out B r exi t When the UK leaves the EU, how will it impact the country s future tax policy and businesses? We address pressing concerns relating to the recent sea change here. A t a g l a n c e 26 This section lists the latest Inland Revenue Authority of Singapore e-tax guides, Monetary Authority of Singapore circulars, and treaties signed or ratified. anag i ng edi tor : Chung-Sim Siew Moon E di tor : Russell Aubrey C ontr i b utor s : Aw Hwee Leng, Chai Wai Fook, Darryl Kinneally, Joe Kledis, Sean Lim, Jerome van Staden, Henry Syrett, Tan Bin Eng, Tan Ching Khee, Billy Thorne, Toh Shu Hui, Yeo Ying E di tor i al : Linda Lee D es i g n: Irene Lee The editors, contributors, Singapore Tax Partners, Executive Directors and Directors are from Ernst & Young Solutions LLP or EY Tax Services Limited. E mai l : contact.eys@sg.ey.com W eb s i te: For more information on the articles published in this issue, please contact: The Editor, You and the Taxman, Ernst & Young Solutions LLP, One Raffles Quay, North Tower, Level 18, Singapore Tel: Fax: Editor note: You and the Taxman is published exclusively for clients of Ernst & Young Solutions LLP. Although every care has been taken in its production, it cannot take the place of specific advice for clients particular circumstances. Readers are advised to contact Ernst & Young Solutions LLP for more details and any update on the topics discussed in any of our publications before taking action based on the advice and views expressed by our writers. For specific tax questions, please contact the Ernst & Young Solutions LLP tax executive who handles your tax affairs. MCI (P) 154/12/2015 Printed by Hock Cheong Printing Pte Ltd You and the Taxman Issue 3,

6 You and the Taxman C o m p a n i es n eed t o a c t n o w a g a i n st t a x a v o i d a n c e It s too risky to take a wait and see approach to BEPS as Singapore formally joins hands with other governments to tackle tax avoidance. Henry Syrett and Jerome van Staden discuss. Companies should review the sustainability of existing tax incentives or rulings now, so that appropriate action can be taken to avoid surprises. THE biggest evolution in tax is upon us locally. On 16 June 2016, Singapore announced that it would become a Base Erosion and Profit Shifting (BEPS) Associate and formally unite with other governments to implement a number of measures against tax avoidance. Firstly, let s dispel a couple of misconceptions. For one, BEPS is more than just tax; its impact can influence decisions around almost any non-tax aspect of the business. Secondly, BEPS is not just of concern to large multinationals in the Group of Twenty (G20) or Organisation for Economic Co-operation and Development (OECD) member countries. It affects any company that has cross-border businesses and operations, regardless of size or country of origin. Companies in Singapore are obviously not immune to international tax reforms given the openness of its economy. With the country committed to specifically implementing the OECD s BEPS standards on countering harmful tax practices, preventing treaty abuse, transfer pricing documentation, and enhancing dispute resolutions, companies need to prepare themselves for this new tax reality. With increased transparency standards comes a requirement for more comprehensive reporting. Companies can expect more queries and challenges on their structures and transactions from authorities in their home country and wherever they invest. 6 You and the Taxman Issue 3, 2016

7 7 Issue # M o n t h Y ea r Governments will be able to raise more tailored and context-specific queries, as they perform analytics on the information that is collected. Consistency in the information that companies provide to the authorities is key, as any incongruence will prompt more controversy with the authorities, amid a higher level of inter-government information sharing. There is also a risk that propriety tax information of companies may eventually be made public. For instance, the European Union is open to making data from country-by-country reports (CbCR) public, and the Australian Tax Office has stated it may share certain information about large taxpayer entities in Australia. This means that companies, in addition to supporting a technical position to governments in accordance with law, will have to deal with public perception of whether their tax payments are fair. In Singapore, the government has assured taxpayers on the confidentiality of information in the CbCR and that it will only exchange CbCR with countries if certain relevant conditions are met. The focus on substance will only get stronger and companies will, more than ever, need to demonstrate alignment of where tax is incurred to where their substantive economic activities are performed and value is created. Companies enjoying preferential tax rates in Singapore may come under greater scrutiny. Therefore, companies should review the sustainability of existing tax incentives or rulings now, so that appropriate action can be taken to avoid surprises. T r ea t y sh o p p i n g Companies may also be challenged in accessing double tax treaties to minimise or eliminate withholding tax on cross-border payments. Treaty shopping, which was frowned on in the past, is definitely gone and use of low-tax and tax haven regimes for businesses will require substantiation. The Inland Revenue Authority of Singapore (IRAS) actively challenges structures, such as financial structures that involve the use of an entity in a treaty country to access the benefits of payments. Tax residency may no longer be sufficient to provide guarantee that a company can obtain the tax treaty benefits. Authorities may argue that the sole purpose for a taxpayer to enter into the arrangement is to obtain the tax treaty benefits, and if so, the onus is on the taxpayer to defend otherwise. Companies should therefore review the level of substance of their holding, operating and financing companies to determine the sustainability of their current holding, operating financing and structures now. Some pertinent questions include: Are your tax strategies in sync with your business operations and how they are evolving? Have you maintained legal documentation of the business model and updated it to reflect the latest set of facts? Do you have robust internal control procedures for tax compliance and managing tax risks? Tax authorities may become increasingly aggressive in challenging the cross-border arrangements that multinationals enter into. This may result in more disputes and increase the risk of double taxation as countries take opposing views, notwithstanding the efforts of the OECD to improve dispute resolution in this area. Depending on the extent of dispute, companies may need to involve the authorities in their countries to assist to resolve the issue on hand. They can also monitor how countries relevant to their company plan to implement different parts of the BEPS project and if possible, work with policymakers during this process. Clearly, as the compliance and administrative burden increases with the heightened reporting obligations, companies will need to invest more resources in the tax function. If we accept that BEPS has far-reaching implications for companies beyond tax, then any key business decision ought to be considered in light of the possible tax risks. Therefore, the tax function must proactively partner with other business functions, including human resources, supply chain, financial planning, mergers & acquisitions, legal and operations, to view their decisions through a BEPS lens. The structure of the tax function needs to change so as to better collaborate with other functions, if not already so. Singapore s latest commitment towards anti-tax avoidance is welcome in that it offers much needed clarity and certainty for businesses. Perhaps the greatest certainty arising is that a wait and see approach to BEPS is not sufficient and is risky. Proactive action is definitely needed. C o n t a c t us H en r y S y r et t Partner, Transfer Pricing Services henry.syrett@sg.ey.com J er o m e v a n S t a d en International Director, International Tax Services jerome-van.staden@sg.ey.com You and the Taxman Issue 3,

8 You and the Taxman A h a r d er l o o k a t t a x i n M & A s p o st - B E P S Increased sophistication of revenue authorities and the implications of BEPS initiatives are elevating the focus on tax in transactions. Darryl Kinneally and Sean Lim elaborate. In a highly globalised economy, businesses are faced with increased competition for market share from both domestic and international players. Profit margins continue to erode as business cost rises. Facing pressures on both the top and bottom line, companies can hardly sustain profitability and achieve breakthrough growth without expanding their presence into other portfolios, divesting and reconsidering their strategies. Yet, joint ventures and divestments expose companies to unfamiliar business environments with complex regulatory and tax consequences. This challenge is further exacerbated with complications arising from global regimes such as the Base Erosion and Profit Shifting (BEPS) initiatives. On 5 October 2015, the OECD issued its final reports on the 15 focus areas identified in its Action Plan on BEPS. This has set the wheels in motion for fundamental changes in international tax rules. When fully implemented, it is anticipated that there will be a significant impact on group holding structures, due diligence processes on targets being acquired, postdeal restructuring and more. In a recent global EY Capital Confidence Barometer survey, 26% of over a thousand respondents indicated that BEPS has resulted in them either altering the structure of a planned acquisition (14%) or cancelling a planned acquisition altogether (12%). The figures are likely to increase as more countries adopt OECD s recommended measures to counter BEPS. Below are some key BEPS Actions and recommendations that could potentially impact deals and transactions. 8 You and the Taxman Issue 3, 2016

9 A c t i o n 2 N eut r a l i si n g the effects of hybrid m i sm a t c h a r r a n g em en t s Hybrid mismatch arrangements can exploit the differences in tax treatment of an entity or instrument, in two or more jurisdictions, achieving double non-taxation (i.e., arrangements that produce multiple deductions for a single expense or a deduction in one jurisdiction with no corresponding taxation in the other jurisdiction). Action 2 aims to neutralise the effects of such cross-border hybrid mismatch arrangements. By clamping down on such practices, Action 2 reduces the value that can be accessed by investors from interest shields under current rules. In particular, structures that have been used and resulted in a debt deduction at the target level with no interest pick up at the intra-group lender s level may no longer be viable. This should be considered in deal pricing, as it could adversely impact projected returns and the ability to generate after-tax cash flows at a level that is able to service any external debt related to the acquisition financing. A c t i o n 3 D esi g n i n g effective controlled foreign c o m p a n y ( C F C ) r ul es Action 3 responds to the risk that taxpayers may be shifting profits into a CFC in a low-tax jurisdiction (as opposed to bringing it to tax in the country where the relevant business activities were carried out to earn the revenue), leading to long-term deferral of taxation. Many countries have, in the past, adopted some form of CFC rules. However, these may not have kept pace with changes in the international business environment. Action 3 aims to address such concerns. Due diligence used to focus on past events. Increasingly, from a tax perspective, investors will need to look forward. You and the Taxman Issue 3,

10 As a result, it is possible that target groups that have used such arrangements in the past may be required to restructure with the introduction of new tax legislation. Such restructuring could trigger tax leakage with respect to income being attributed and subject to tax prior to receiving the underlying cash. A c t i o n 4 L i m i t i n g b a se er o si o n i n v o l v i n g i n t er est d ed uc t i o n s a n d o t h er financial payments Funding an acquisition and the deductibility of interest expenses for tax purposes are key considerations in M&A transactions. Under Action 4 of the BEPS Action Plan, the OECD recommends best practice guidelines to counteract excessive base erosion through interest payments. The OECD hopes to limit enterprises to a single net tax deduction on interest expenses incurred globally by groups of companies. In addition, Action 4 proposes a fixed ratio rule, which aims to limit an enterprise s net interest deductions to a percentage (proposed to be between 10% and 30%) of its Earnings Before Income Tax, Depreciation and Amortisation. Many countries have traditionally adopted some form of thin capitalisation approach to address this issue, and we have recently seen authorities in countries such as Australia, Indonesia and Korea tightening such measures. The above restrictions are likely to have an impact on deal pricing as tax-related costs increase, and should therefore be carefully considered prior to a transaction. The private equity industry s leverage model, in particular, may be adversely impacted. A c t i o n 6 P r ev en t i n g t h e granting of treaty benefits in i n a p p r o p r i a t e c i r c um st a n c es Through Action 6, the OECD aims to reduce the perceived abuse of tax treaties by certain enterprises to unnaturally (or arguably) reduce withholding taxes on dividends, interest and royalties, as well as to relieve non-resident capital gains tax charges on exit. South Korea, amongst others, has addressed this issue some years ago, requiring foreign investors or offshore investment vehicles to provide prescribed supporting documents to the tax authorities when claiming treaty benefits. Indonesia currently has anti-treaty abuse rules in place, which limit tax treaty benefits in situations where the non-resident is unable to meet prescribed beneficial ownership and certain administrative requirements. In addition, Indonesia imposes a final tax on the deemed income arising from a sale of unlisted shares by a nonresident, regardless of whether a gain or loss has been realised. Rules similar to those currently adopted by Indonesia may become more commonplace. Closer to home, in Singapore, there continues to be a tightening in the application and verification process for Certificates of Residence, which is often required to be submitted to foreign tax authorities in order to claim treaty benefits. In a deal situation, you might come across structures including intermediary holding companies in jurisdictions that have beneficial treaties in place. If these entities have no employees or other presence in-country, they will increasingly be open to challenge by tax authorities. Enterprises are likely to need to have real substance within holding company structures in order to continue to benefit from reduced tax treaty rates. This will likely lead to an increase in operating costs and may even create a shift away from the use of holding structures in certain jurisdictions. Arguably, the need to ring fence liabilities may constitute substance and could be an argument as to why a special purpose vehicle in a particular location has been used. The costs and benefits of holding structures would thus need to be critically assessed. The potential need to restructure leads to various additional costs, for example, higher withholding taxes payable on dividends distributed by the target to the holding company. Investors will need to factor in such tax costs and the costs of any restructuring that may need to be undertaken. Unless relief is available, any restructuring could trigger tax leakage with respect to capital gains on direct or indirect transfers in some jurisdictions. A c t i o n 8 t o 10 a n d 13 Aligning transfer pricing o ut c o m es w i t h v a l ue creation and transfer pricing d o c um en t a t i o n a n d c o un t r y - b y - c o un t r y r ep o r t i n g ( C b C R ) Actions 8 to 10 will place greater scrutiny on transfer pricing policies adopted so that they adhere to arm s length principles. As part of this, the OECD has recommended a CbCR initiative (Action 13) in which multinational enterprises will be required to report data on a country-by-country basis (in countries where they have operations). Such data will include revenue earned, pre-tax profits, cash tax paid and even headcount numbers in order to help the relevant tax authorities match revenue earned and taxes paid to the jurisdiction where the enterprise has most substance or activities. 10 You and the Taxman Issue 3, 2016

11 To-date, a number of countries, including the US, UK, Japan, Australia and South Africa have implemented CbCR. Singapore, meanwhile, is scheduled to follow suit in As recently as July this year, the European Commission has, in conjunction with Action 13 of the OECD s BEPS project, also set out the next steps in its campaign to boost tax transparency in the European Union, in a bid to reduce the incidence of tax evasion and avoidance. In a potential acquisition, the target may lack formal transfer pricing policies or benchmarking studies. For a buyer, potential transfer pricing exposures may exist, which are difficult to quantify without significant effort. We are also seeing many transactions in the broadly defined e-commerce space. Often, these companies are born global and grow rapidly without always having in place the necessary systems and policies with respect to tax governance. Transfer pricing is one of the typical risk areas. Although these companies are typically in losses, there is a risk that they might have a tax liability that has not been reported in a particular country in which they, for example, might have a shared services facility. The above are already happening in many countries. Even in jurisdictions where no current reporting obligations exist, it may only be a matter of time before these are incorporated into the respective local legislations due to political and societal pressures. Im p a c t o n t h e M & A p r o c ess Due diligence and structuring Tax due diligence traditionally focuses more on historical and current tax risks and liabilities. With BEPS recommendations being put into place, there is increased focus on the viability of structures going forward. Investors should use the due diligence process to review the future sustainability of the target s business structures, their associated transfer pricing policies and financing arrangements. It is also likely that due diligence and structuring procedures will become more complex, as investors request for increased levels of diligence in order to understand potential limitations of tax treaty reliefs, identify where permanent establishments may crystallise in light of regulatory changes and assess how profits from intangibles (for e.g., intellectual property and trademarks) may be allocated on a forward-looking basis. Post-transaction integration and operational management It is anticipated that transaction structures will increasingly be developed around the core concepts of sustainability and durability. We also expect the ongoing maintenance of tax structures to become as critical as initial execution, as enterprises strive to maintain their competitive edge in an ever-changing tax environment. Post-transaction, investors may require some form of restructuring to address changes in business models and any issues identified from the due diligence, for e.g., refinancing of debts, bolstering of substance in holding locations, updating of transfer pricing arrangements or restructuring to remove certain intermediary holding companies. The costs of doing this should be factored in as part of the investment decision. Moving forward The BEPS initiative tackles weighty issues in today s business environment. As proposed plans remain in their infancy, the BEPS initiative also replaces certainty with doubt and clarity with ambiguity. M&A transactions have never been simple, particularly cross-border ones. There can only be more complexities going ahead. Investors should take note to mitigate their exposure to BEPS. More than ever, acquirers need to carefully consider the various tax risks associated with a target. They need to ask questions such as: Is the structure and projected post-tax returns sustainable? If not, what are the costs and tax leakages of restructuring? Alternatively, what would after-tax returns look like in the event that OECD BEPS recommendations are adopted? Acquirers should also not just look at how BEPS impacts their existing operations, but consider how the new rules will affect the combined holding and financing structures that arise from contemplated transactions. Due diligence used to focus on past events. Increasingly, from a tax perspective, investors will need to look forward. C o n t a c t us D a r r y l K i n n ea l l y Partner, Transaction Tax darryl.kinneally@sg.ey.com S ea n L i m Senior Manager, Transaction Tax sean.lim@sg.ey.com You and the Taxman Issue 3,

12 You and the Taxman C h a n g es i n r ev en ue r ec o g n i t i o n Chai Wai Fook and Toh Shu Hui examine the key tax issues that arise from the adoption of the new revenue recognition accounting standard. It is critical that companies analyse the full impact of transitional adjustments so that they can assess the corresponding tax impact carefully and will not be caught unaware of their eventual tax position. On 19 November 2014, the Accounting Standards Council issued Financial Reporting Standard (FRS) 115 revenue from contracts with customers. Effective for accounting periods beginning on or after 1 January , FRS 115 applies to contracts which an entity has with its customers that will give rise to revenue in the entity (with limited exceptions). With this, virtually all businesses will be impacted some to a larger extent than others. FRS 115 essentially requires entities to recognise revenue which depicts the transfer of goods or services to customers in amounts that reflect what the entity expects to be entitled to in exchange for those promised goods or services. This is achieved through the introduction of a five-step model, namely: 1 The mandatory effective date for FRS 115 was deferred for one year to 1 January Early adoption of the standard is permitted. 12 You and the Taxman Issue 3, 2016

13 Issue # M o n t h Y ea r Identify the contract(s) with a customer Identify the separate performance obligations in the contract Determine the transaction price Allocate the transaction price to the separate performance obligations Recognise revenue when (or as) the entity satisfies a performance obligation Entities will need to apply FRS 115 retrospectively using either a full retrospective approach or a modified retrospective approach. Entities that elect the full retrospective approach will apply the new standard to all the periods presented in the financial statements. This will normally result in the entity making cumulative retrospective adjustments to the comparative periods presented in the financial statements. Alternatively, entities may adopt FRS 115 by using the modified retrospective approach. Under this approach, the standard will only be applied to the most current period presented in the financial statements. Entities will continue to present the comparative periods in accordance with existing revenue standards and recognise a retrospective adjustment to the opening balance of retained earnings at the effective date for existing contracts that still require performance by the entity in the year of adoption. Additional information will need to be disclosed in their financial statements. P r o p o sed t a x t r ea t m un d er F R S 115 en t On 12 October 2015, the Inland Revenue Authority of Singapore (IRAS) issued a consultation paper (Consultation Paper) seeking public feedback on its positions on the income tax implications arising from FRS 115. The consultation closed in November 2015 and the IRAS has yet to issue any final circular as at the date of this article. While the Consultation Paper has set out the proposed tax treatment of the income tax implications arising from adoption of FRS 115, there are some gaps which are not addressed. We discuss some of these issues here. Acceptance of accounting revenue for tax purposes Under FRS 115, revenue should be recognised when the entity has performed the necessary performance obligations. As a result, there may be instances where estimates of revenue are required and recognised earlier under FRS 115 even though the entity might not be considered as entitled to the income yet under current tax principles and hence only assessable to tax in the future when the said income has accrued (Entitlement Principle). Notwithstanding, the IRAS recognises that for most cases, the difference in the amount of revenue recognised from adopting FRS115 is due to a mere difference in timing and the entire amount of revenue from a contract would eventually be subject to tax. To minimise the compliance burden of entities, the Consultation Paper proposes to accept the FRS 115 accounting revenue as the revenue figure for tax purposes except where specific tax treatment has been established through case law or provided under the law and where accounting treatment deviates significantly from tax principles 2. However, under this proposed tax treatment, no tax deduction will be granted to the entity for any deduction claims of estimated expenses (based on accounting matching principle) against the estimated FRS 115 revenue subject to tax. In view of the above, this potentially creates a mismatch with estimated revenue being taxed upfront and corresponding expenses deductible only in subsequent periods. Consequently, this may cause undue stress on companies cash flow positions. In this instance, it will be helpful if the IRAS would allow entities that are able to identify and keep track of their FRS 115 estimated revenue to be taxed only upon entitlement in the future as an alternative to the proposed FRS 115 tax treatment. Contracts with significant financing components FRS 115 requires an entity to consider the effect of any significant financing component when determining the transaction price and to present such effects (i.e., interest revenue or interest expense) separately from its revenue. This typically applies to longterm contracts where the payments by customers and performance of the entity may occur at significantly different times. In such a scenario, the Consultation Paper has clarified that this is a significant departure from the Entitlement Principle and therefore the IRAS will not accept, for tax purposes, the revenue figures reflected in the accounts for such cases. Accordingly, the entity will need to make tax adjustments to bring the full amount of revenue to tax as income in the year it is regarded as earned for tax purposes. This means that the FRS 115 interest income or expenses arising from the financing effects will not be taxable or deductible respectively as these are accounting adjustments and hence, notional in nature. 2 For example, the existing tax treatment for property developers where profits will be taxable upon issuance of the Temporary Occupation Permit will continue notwithstanding FRS 115. You and the Taxman Issue 3,

14 In view of the above, it is imperative for companies with contracts of such nature to assess the tax impact and note that processes are put in place to track the FRS 115 interest income or expense amounts from other interest income or expenses. Where contracts are with non-residents, the Consultation Paper is silent on whether Singapore withholding tax would apply to such interest expenses arising from adoption of FRS 115. In view that such expenses are notional in nature, it would be helpful if the IRAS can confirm that Singapore withholding tax should not apply to such expenses. T r a n si t i o n a l a d j ust m en t s Regardless of the transition approach adopted by an entity, the Consultation Paper has clarified that the IRAS will treat the profit or loss arising from transitional accounting adjustments as income or losses respectively subject to tax under Section 10(1)(a) of the Income Tax Act in the year of assessment (YA) relating to the year in which FRS 115 is first adopted, where the income is derived from a trade, business, profession or vocation. In other words, there is no need for companies to relate the transitional accounting adjustments back to the relevant periods. However, this proposed tax treatment may have a negative tax effect if the transitional accounting adjustments relate to a prior year when the entity was taxed under a concessionary rate under a tax incentive, which has expired during the basis period in which FRS 115 is first adopted. To illustrate using a hypothetical example, let us assume that a company adopts FRS 115 for the financial year ending 31 December 2018 and recognises an additional income from prior years as a transitional accounting adjustment in the same year. The company was under a concessionary tax rate of 10% up to the financial year ending 31 December Effective from 1 January 2018, the company s trade income is assessable at the prevailing rate of 17%. Under the proposed tax treatment by the IRAS, the additional income from prior years would be subject to tax at 17% even though the said income is relating to the prior years when the company s tax rate was 10%. This may aggrieve certain companies if the quantum of additional tax on the transitional accounting adjustment is significant. Perhaps the IRAS could allow companies that can track and identify the transitional adjustments to the respective prior years to apply the concessionary rate. Further, a concession by the IRAS to allow the additional tax payable arising from the transitional accounting adjustments to be paid by instalments over a certain period to ease cash flow constraints will be welcomed. Besides the above, there are other questions left unanswered: (a) Entities are required to furnish details showing how the tax adjustments are arrived at and maintain relevant documents to support the tax adjustments made. However, the Consultation Paper is silent on the details and documents that are required to be maintained. (b) The proposed tax treatment by the IRAS appears to assume that an entity s income from contracts with its customers is automatically an income derived from an active trade or business. What if the entity s income from contracts is assessed as passive income for tax purposes? (c) The examples of the relevant tax adjustments provided in the annex to the Consultation Paper seem to relate only to the modified retrospective approach. What about entities that opt for the full retrospective approach? In view of the above, it is critical that companies analyse the full impact of the transitional adjustments so that they can assess the corresponding tax impact carefully when considering the approach to adopt and will not be caught unaware of their eventual tax position. It is also imperative that companies keep track of the supporting details of their transitional adjustments so as to determine the appropriate tax adjustments in the first year of adoption of FRS 115 when computing their provisional income tax for tax provisions and preparing the actual income tax computation for tax filing purposes. C o n c l usi o n The IRAS Consultation Paper helps to provide clarity on the IRAS position on some of the tax implications arising from the adoption of FRS 115. However, there are certain aspects of the proposed tax treatment that require further clarifications and finetuning by the IRAS. With the effective date of adoption of FRS 115 approaching, businesses should start sooner than later in identifying and assessing the potential tax impact arising from it. C o n t a c t us C h a i W a i F o o k Partner, Tax Services wai-fook.chai@sg.ey.com T o h S h u H ui Associate Director, Tax Services shu-hui.toh@sg.ey.com 14 You and the Taxman Issue 3, 2016

15 E Issue y e on # M A o Sn t Eh YA ean r T a x i n c en t i v es i n A S E A N : the fight for i n v est m en t dollar intensifies Tan Bin Eng discusses how the quest for investment will build up with the launch of the ASEAN Economic Community last year. According to the ASEAN Secretariat, theestablishment of the ASEAN Economic Community (AEC) in 2015 is a major milestone in the regional economic integration agenda in ASEAN, offering opportunities in the form of a huge market of US$2.6t (in terms of Gross Domestic Product) and over 622 million people. With the AEC established, the prospects of ASEAN countries have never been more optimistic. This is a region that has seen strong economic growth over the past decades and is a bright spark in terms of inbound foreign direct investment (FDI). FDI flows into some of ASEAN s largest economies Indonesia, Thailand, Malaysia, Singapore and the Philippines have surpassed those going into China for a second year running in The FDI into the ASEAN economy currently accounts for 11% of global FDI flows. The strong FDI inflow is by no means accidental. The ASEAN governments have long been proactive in using fiscal policy tools such as tax incentives to attract FDI. T h e t a x i n c en t i v e l a n d sc a p e The lowering of the concessionary tax rate will further strengthen Singapore s competitiveness as a location to conduct finance and treasury activities. Regardless of the difference in tax regimes across Southeast Asia, every ASEAN country has established numerous incentive schemes, which provide a wide range of options for foreign investors investing in respective countries. These schemes have been implemented through, among other ways, the setting up of special or designated economic zones, granting additional tax allowances and credits to You and the Taxman Issue 3,

16 investments, providing tax exemption and concessionary tax rate, personal tax reductions, as well as indirect tax and customs Incentives. To remain competitive, ASEAN countries especially Singapore, Malaysia and Thailand have recently updated their government s areas of focus and the associated tax incentives. Both existing and potential investors would be able to benefit from these changes. K ey c h a n g es The Singapore government has continued its efforts in promoting companies that engage in high value-adding activities such as R&D, intellectual property management, as well as high value-adding manufacturing activities. Activities relating to regional hubs such as trading, supply chain and headquarter-support activities also fall within the government s radar. In 2015, a new tax incentive International Growth Scheme (IGS), was set up with the objective of supporting Singapore companies with growth potential in their overseas expansion efforts. Eligible companies must be incorporated and have their global headquarters anchored in Singapore, as well as have a sound and ambitious internationalisation growth plan. Under the IGS scheme, subject to certain conditions, eligible companies will be entitled to a concessionary tax rate of 10% for a period of not exceeding five years on their qualifying incremental income. New enhancement and eligibility period extension of certain incentive schemes such as New Automation Support Package (ASP) and the Finance and Treasury Centre (FTC) were also key highlights from the 2016 Budget announcements in Singapore. C o n t a c t us The ASP scheme has been introduced with a view to combine several enhanced versions of existing standalone incentives into a single package in order to support companies over a three-year period to automate, drive productivity and scale up. The two key benefits of the ASP include grant funding to support the roll-out or scaling up of automation projects up to S$1m, as well as an investment allowance of 100% of the amount of approved capital expenditure on qualifying projects. The ASP scheme will be administered by SPRING Singapore. It is expected to help companies, particularly SMEs, accelerate their automation efforts. For the FTC scheme, the incentive has been extended until 31 March 2021 with the lowering of the concessionary tax rate from 10% to 8% and a corresponding increase of the substantive requirements needed to qualify for the scheme. The lowering of the concessionary tax rate will further strengthen Singapore s competitiveness as a location to conduct finance and treasury activities. Malaysia is one of the ASEAN nations that is working towards becoming a high-income nation. To achieve this goal, the Malaysian government has focused mainly on priority economic sectors such as oil and gas, palm oil and rubber, wholesale and retail, financial services and tourism. With regards to these sectors, a number of developments have recently been implemented, including the introduction of a new principal hub incentive. Under this scheme, subject to certain conditions, an eligible principal hub can be granted a concessionary tax rate of 0%, 5% or 10% corporate income tax rate for a duration of up to 10 years. As of February 2016, the Malaysian Investment Development Authority has approved six principal hub projects from major multinational corporations in the electronics, aerospace, commodity (pulp, paper and palm oil) and F&B industries involving investments amounting to RM5.57b. The Thai government s main areas of focus also relates to R&D, headquarters and trading hub activities. To boost growth, the Board of Investment revised the investment promotion policies and criteria from 1 January Under the new investment promotion policy, zone-based incentives have been removed and are replaced by activitybased incentives, which are granted based on the importance of the activity. Moreover, promoted persons may be granted additional incentives in terms of extended duration, depending on the benefit of their activity or meritbased incentives. A Cluster Development Policy has also been introduced to develop potential and manufacturing-based areas for certain target industries such as automotive and parts, electrical appliances, electronics and telecommunication equipment, and digital industry. An electronic fuel injector manufacturer in Rayong that committed an investment of THB1,754.1m was the first large-scale investment to be granted incentives under the special economic zone cluster-based policy. W h a t t h ese c h a n g es m ea n Most ASEAN member states have already put in place a range of incentives, which will continually be refined and enhanced over time. Companies looking at expanding their footprint or exploring opportunities in Southeast Asia should take into account the eligibility, availability and impact of incentives that abound. T a n B i n E n g Partner, EY Asean Business Incentives Advisory, Tax Services bin-eng.tan@sg.ey.com 16 You and the Taxman Issue 3, 2016

17 Issue # M o n t h Y ea r E y e on A S E A N H a r m o n i sa t i o n needed for p er m a n en t est a b l i sh m en t r ul es i n A S E A N Tan Ching Khee and Yeo Ying offer insights into the current climate and to what extent synchronisation can help ASEAN reap the full benefits of economic integration. Trying to harmonise PE rules requires striking a fine balance between the needs of various economies and the broader AEC vision. The official establishment of the ASEAN Economic Community (AEC) last December has triggered much excitement within business fraternities and sectors both big and small in the region. The AEC aims to achieve regional trade liberalisation, which promises increased trade and investment opportunities for investors and businesses. Increased business activity is expected in the region as one of the AEC s mandates, under Blueprint 2025, is to create a highly integrated and cohesive economy aimed at facilitating the seamless movement of goods, services, investment, capital and skilled labour within the countries. Amidst the optimism and opportunities potentially available to Singapore businesses, it is timely to revisit the tax rules across Southeast Asia and examine if the promised seamlessness of trade and labour movements can similarly be seen when navigating the tax rules. You and the Taxman Issue 3,

18 Concept of permanent est a b l i sh m en t ( P E ) Businesses have historically paid less attention to the concept of a PE than it rightfully deserves. It is nonetheless a concept that is integral to the cross-border movement of goods and services, as well as mobility of people and even more so under the ambitious plans of the AEC, where increased levels of cross-border collaboration and movement of people are envisaged. The concept of a PE is commonly found in tax treaties, although it may also exist in the domestic tax law of some countries. Broadly, a PE refers to a company having a taxable business presence in another country outside its country of residence. The origins of this concept dates back to the 18th century and is founded on a fundamental principle that another country may impose tax on such non-resident companies under their domestic laws to the extent that income is sourced in that country in which the companies carry on business activities. In the context of tax treaties, PEs generally operate to limit the application of domestic tax law in the taxation of non-resident companies by requiring that business activities carried out by a non-resident company in the other country should only be taxed if they have constituted a PE in that country. Simply put, the significance of the PE concept to a Singapore-headquartered company, which frequently conducts cross-border activities, lies in its potential exposure to corporate income taxes in multiple jurisdictions other than Singapore, if its activities carried on outside Singapore trigger a PE for the company. What does harmonisation of P E r ul es en t a i l? The term harmonisation, as it relates to tax laws, refers to the act of making systems or laws the same or similar in different countries. It is by no means an easy feat as this requires commitment by all member countries to adopt a common set of operating rules, as well as a common understanding of how the rules should be interpreted or applied. The European Commission (EC) is probably a good point of reference as it is well established and has been in existence for more than a decade now. As it relates to taxation, it is noted that the EC only plays an oversight role to facilitate consistency with the broader European Union (EU) policies and does not interfere with the tax system of each country, which remains a sovereignty of respective governments. In fact, the EC believes that that there is no need for an across-the-board harmonisation of Member States tax systems and Member States should have the autonomy to decide which tax system is the most appropriate for their countries provided that they respect the EU rules. Each of the ASEAN countries are unique in terms of the stage of their economic development, sophistication of tax system, technology, investment needs etc. Trying to harmonise PE rules requires striking a fine balance between the needs of various economies and the broader AEC vision. Is there a need for h a r m o n i sa t i o n? Whether there is a need for PE rules in ASEAN to be harmonised is probably best answered by first taking stock of how we currently fare in terms of the consistency of PE rules across the countries and how they are being applied and interpreted. At a glance, four characteristics are observed across ASEAN countries with respect to their PE rules: 1. Domestic tax rules in certain countries do not provide a PE definition 2. No or limited tax treaties have been concluded by some countries 3. There are varying definitions of PE in tax treaties 4. Differing interpretations of the PE concept are adopted by local tax authorities The first direct consequence arising from the above is the possibility of double taxation. This may increase the costs of doing business in a particular country and create a disincentive for companies to do business there. This is especially relevant in the case of Cambodia, which has no tax treaties; and Laos, which has a limited number. Secondly, differences in local interpretations of PE rules will create uncertainty in the taxation of crossborder movement of goods and services. Despite having the OECD Model Tax Convention and United Nations Model Double Taxation Convention in place, both of which provide a guide to the interpretation of provisions in tax treaties, deviations in their interpretations by local tax authorities continue to be seen in practice. 18 You and the Taxman Issue 3, 2016

19 Issue # M o n t h Y ea r As companies typically require a certain level of certainty when they enter new markets lest they receive a surprise in their next tax bill, such uncertainties would constitute one of the considerations for companies before they venture outside their home country. Apart from the nuances in the wordings of the respective treaties among the ASEAN countries, it is apparent that there is no consistency in the time thresholds for a service PE as shown in the table below, using Singapore as an example. It could be an administrative nightmare for a company with employees travelling to multiple countries to keep tab on the time spent by its employees in each country. Practical tax concerns also underpin the creation of a freer economy. Whilst the AEC pushes forth with its agenda to improve and increase cross-border collaboration, it should also consider whether there may be gaps in the existing tax rules of various ASEAN countries, which may present a hurdle. Otherwise, it could result in outcomes that work against the integration and collaboration that the AEC envisage. There is still a long journey ahead and the AEC has plenty to accomplish, with a wide range of issues vital to integration to be considered, including taxation cooperation. A harmonisation of PE rules is undoubtedly not without its challenges and a complete harmonisation may also not be the sole solution. It is however clear that in order for the AEC to achieve its vision of a highly integrated and cohesive economy, existing tax rules in the ASEAN countries should not lead to a disincentive or disadvantage for any one country. In the shorter term, an agreement among the countries on the interpretation of PE rules would be welcomed to remove any uncertainties. In addition, some form of alignment in the time thresholds for a service PE to relieve companies from the administrative burden would be an icing on the cake. In the longer run, countries with no or limited tax treaties should accelerate the negotiation of tax treaties so as to avoid incidences of double taxation. S er v i c e P E thr es hol ds i n tax tr eati es c onc l uded b y S i ng ap or e w i th other A S E A N c ountr i es B r unei I ndones i a M al ay s i a M y anmar P hi l i p p i nes V i etnam Thai l and L aos S i ng ap or e 3 months 90 days None 6 months 183 days 183 days 183 days days 2 1 Effective from 1 January Treaty is pending ratification. C o n t a c t us T a n C h i n g K h ee Partner, International Tax Services ching-khee.tan@sg.ey.com Y eo Y i n g Manager, International Tax Services yeo.ying@sg.ey.com You and the Taxman Issue 3,

20 E l s ew her e outs i de S i ng ap or e U p st r ea m l o a n d eb t o r c o n st r uc t i v e d i v i d en d? What should a local-based parent company obtaining cash from its foreign-based subsidiary take note of in order to achieve an effective execution? Joe Kledis and Aw Hwee Leng discuss. When a Singapore parent company (SP) needs access to its US subsidiary s (USS) cash, there are generally two ways to repatriate the cash to Singapore, namely, as a permanent corporate distribution or a temporary loan (in isolation or via a cash pooling arrangement). The US federal income tax (US Tax) consequences when the USS transfers cash to the SP as a corporate distribution are quite clear: any portion of the distribution that is treated as dividend for US Tax purposes should generally be subject to a 30% US statutory withholding tax 2. It is best practice for a taxpayer that makes an upstream loan to a shareholder to document all the objective evidence. However, when USS transfers cash to SP in the form of a loan, there is a concern as to whether the loan should be respected as debt or recharacterised as a corporate distribution for US Tax purposes. 1 A dividend means any distribution of property made by a corporation to its shareholders out of its current or accumulated earnings and profits (E&P). 2 US and Singapore do not have a comprehensive income tax treaty, so a reduced dividend withholding tax rate is not available. 20 You and the Taxman Issue 3, 2016

21 If the form is respected, then there should be no US withholding tax on the transfer of cash to the SP as a loan. However, there may be negative tax arbitrage on the interest payments because the SP should be able to deduct the interest expense at 17% for Singapore tax purposes, and the USS should generally be taxed at approximately 40% on the interest income for US Tax purposes. A 15% Singapore withholding tax would also apply to the interest payments, which should generally be available as a credit against the US Tax payable. On the other hand, if the form is not respected, the cash transferred could be recharacterised as a corporate distribution from the USS to the SP and any portion of the distribution that is treated as a dividend for US Tax purposes could potentially be subject to a 30% US withholding tax. Given what is at stake, the form versus substance debate in the upstream loan context has been a contentious one. This article addresses the various considerations in making such a determination. Common law factors The distinction between a loan in form and a loan in substance has most often been addressed in the context of shareholder loans to corporations. It is said that a shareholder is an adventurer in the corporate business: it takes the risks, and profits from the issuer s success. A creditor, on the other hand, as compensation for not sharing in the corporate profits, is paid independently of the risk of success, and gets a right to dip into capital when the payment date arises 3. In other words, a true debt instrument is said to be an unqualified obligation to pay a sum certain at a reasonably close fixed maturity date along with a fixed percentage in interest payable, regardless of the debtor s income or lack thereof 4. Given these relatively broad definitions of debt, courts have examined numerous factors in making their determinations as to an instrument s treatment as debt or equity for US Tax purposes. These factors generally fall into four categories, namely the loan s economic terms, the loan s legal terms, the parties intent and conduct and the debtor s financial capacity 5. Where the debtor and creditor are related parties (e.g., parent and subsidiary; brother and sister), courts give the arrangements heightened scrutiny and often focus their analyses on whether the debtor could have otherwise obtained the 3 Comm r v. O.P.P. Holding Corp., 76 F.2d 11, 12 (2d Cir. 1935). See also, Slappey Drive Indus. Park v. U.S., 561 F.2d 572 (5th Cir. 1977); Jewell Ridge Coal Corp. v. Comm r, 318 F.2d 695 (4th Cir. 1963); U.S. v. Title Guarantee & Trust Co., 133 F.2d 990 (6th Cir. 1943) 4 Gilbert v. Comm r, 248 F2d 399 (2d Cir. 1957). 5 See Fed Income Taxation of Debt Instruments (CCH) at 103. You and the Taxman Issue 3,

22 funds from a third-party lender and the debtor s ability to make principal and interest payments. Most importantly, where the debtor is also the shareholder, the parties intentions govern the issue. The seminal upstream loan decision is Alterman v. US 6 Alterman involved a group of companies, in various business lines, which all participated in a cash sweep programme under which each profitable subsidiaries cash (except cash needed for immediate operating expenses) was swept to the parent company on a weekly or bi-weekly basis. The parent company rarely, if ever, paid the swept cash back to the corporations from which cash was swept and no corporation ever made a claim for repayment. The cash sweeps were booked as loans but no loan documents were ever entered into. The Alterman court believed that the mere declaration by the parties that they intended the cash sweeps to be treated as loans was insufficient since the cash transfers lacked other debt-like factors. For instance, there were no interest charges, no set maturity date, no promissory notes and no apparent legal obligation to repay the cash sweeps. As such, the IRS successfully asserted that the cash transfers were treated as dividends for US Tax purposes. Looking at the facts surrounding the cash advances, the Alterman court fashioned a list of factors for determining the parties intentions that guided its decision and influenced the results of many subsequent upstream loan cases. These so-called Alterman factors include: The extent to which the shareholder controls the corporation The corporation s earnings and dividend history The magnitude of the advances Whether a ceiling existed to limit the amount that the corporation advanced Whether or not security was given for the loan Whether there was a set maturity date Whether the corporation ever undertook to force repayment Whether the shareholder was in a position to repay the advances Whether there was any indication that the shareholder attempted to repay the advances 6 Any inquiry of the parties intentions should generally be undertaken at the time when the loan is purportedly put in place. Because the upstream loan analysis is ultimately a question of fact, several courts (like the IRS) have stated that all factors must be considered, and no one factor (or group of factors) is determinative. A fixed maturity date is a factor that is highly indicative of an instrument s treatment as a debt instrument for US Tax purposes and is sometimes viewed as the most significant, if not the essential, feature of a debtor-creditor relationship. However, the presence of a fixed maturity date alone does not prevent an instrument from being treated as equity for US Tax purposes. This is because a maturity date may be meaningless if the parties to the instrument never intend repayment. In addition, if the fixed maturity date is not within the reasonably foreseeable future, it might not be respected for US Tax purposes. The subsidiary s earnings and dividend history can also be indicative of whether an upstream loan should be respected as debt for US Tax purposes. If the subsidiary is accumulating substantial cash but has never distributed the earnings as dividends, when this factor is considered with other factors, the loan has a higher chance of being characterised as a distribution. C o n c l usi o n If SP needs temporary access to USS cash, an upstream loan may be possible. Although the IRS considers all facts and circumstances surrounding the parties intentions regarding an upstream loan at the time it was entered into, the IRS also has the luxury of hindsight when an upstream loan s US Tax treatment is called into question. Therefore, it is best practice for a taxpayer that makes an upstream loan to a shareholder to document all the objective evidence, including putting in place a written loan that has customary terms, payments of interest and a fixed maturity date. More importantly, the parties have to honor the loan s terms and conditions. Otherwise, the IRS may recast the upstream loan as a corporate distribution for US Tax purposes (which may be a dividend subject to 30% US withholding tax). 6 Alterman Foods v. U.S., 505 F.2d 873, 876 (5 th Cir.1974). C o n t a c t us J o e K l ed i s US Tax Desk EY Global Tax Desk Network joe.kledis@hk.ey.com A w H w ee L en g Director, International Tax Services hwee-leng.aw@sg.ey.com 22 You and the Taxman Issue 3, 2016

23 I n c onv Issue er s # ati M on o n t wh Y i ea thr S ev en t h i n g s y o u n eed t o k n o w a b o ut B r ex i t When the UK leaves the EU, how will it impact the country s future tax policy and businesses? Billy Thorne (BT) shares his insights on the emerging concerns. On 23 June 2016, the UK held a referendum on its continued membership of the European Union (EU). The result of the UK referendum, being a vote of almost 52% to leave the EU, marks a sea change for the UK and Europe. This decision will have significant consequences for industries in the UK, Europe and further afield including Asia and Singapore. This interview attempts to address some key issues as concerned parties watch with bated breath how the mplications of this momentous vote will pan out. Q: First things first, has the UK officially left t h e E U o r i s t h er e a g r ey l ea v e- b y p er i o d? The UK government will likely want the UK to retain access to EU markets. It is likely that the UK will also seek to agree to free trade agreements with third countries. B T : The UK has not officially left the EU. For that to happen, the UK will need to follow the process set out in Article 50 of the Treaty of Lisbon. Under Article 50, once the UK provides notice that it intends to leave the EU, it has a period of at least two years to negotiate the terms of its exit. This period can be extended further provided there is agreement from the remaining members of the EU. As such, all EU directives and regulations, as well as treaties, remain in force in respect of the UK until it formally leaves the EU. Legally, nothing has changed for now. You and the Taxman Issue 3,

24 Q : N o w t h a t t h e d ust h a s m o r e o r l ess set t l ed, w h en d o y o u t h i n k t h e U K w i l l l ea v e? B T : There is no legal limit on how long the UK can wait before it invokes Article 50 and only the UK can trigger it. Current Prime Minister Theresa May has said: All of us will need time to prepare for these negotiations and the UK will not invoke Article 50 until our objectives are clear this will not happen before the end of this year. Therefore, it appears the earliest the UK will leave the EU would be 1 January 2019, assuming Article 50 would be invoked on 1 January Q : W h a t d o y o u en v i sa g e t h e future relationship between t h e U K a n d E U t o b e l i k e? B T : No Member State has ever left the EU, so there is no precedent for what might happen. It has been suggested that the UK could adopt a model following countries like Norway or Switzerland, but these countries contribute to the EU and are still bound by many of the EU s rules. They also accept free movement of people, which may be problematic in negotiations, as this is understood to be one of the factors behind the UK s vote to leave. The UK government will likely want the UK to retain access to EU markets. It is likely that the UK will also seek to agree to free trade agreements with third countries. Although the precise terms are difficult to predict, organisations like the Federation of German Industry have already insisted that tariff-free access should be maintained. It is likely that the UK will also seek to agree to free trade agreements with third countries as soon as possible. In relation to options available, Theresa May has said: We should be driven by what is in the best interests of the UK and what is going to work for the EU, not by the models that already exist We need to find a solution that addresses the concerns of the British people about free movement while getting the best possible deal on trade in goods and services. Q : H o w w i l l B r ex i t i m p a c t the UK s future tax policy? B T : Subject to the terms under which the UK leaves the EU, it is unlikely that the UK will be party to various tax initiatives currently underway in Brussels, such as the anti-tax avoidance directive, public country-by-country reporting and the common consolidated corporate tax base. However, the UK may itself choose to adopt certain elements of these proposals, in line with its commitment to the OECD proposals on base erosion and profit shifting. Outside of EU, the so-called State Aid considerations will be less relevant and restrictive on UK tax policy (but some agreement on replicating the State Aid provisions in UK legislation may be a necessary part of any free trade agreement with the EU). State Aid investigations can be lengthy, uncertain and expensive, and can result in significant repayments of tax, penalties and negative publicity. The new Chancellor of the Exchequer, Philip Hammond, has stated that he will not be presenting an emergency Budget following the UK s vote to leave the EU but will instead unveil his plans at the Autumn Statement. The date for this year s Autumn Statement has not been announced, although it is usually held in November or December. The Chancellor noted that he could use the Autumn Statement to reset fiscal policy if we deem it necessary to do so in the light of the data that will emerge over the coming months. There has been speculation that part of the new fiscal policy may include further cuts in the corporation tax rate (an idea proposed by the now replaced ex- Chancellor, George Osborne, after the vote to leave the EU). To date, there has been no indication that taxation policy will change, although the UK cannot emphasise enough of her open for business stance. This message has been heard loud and clear for some time, with EY s latest research on foreign direct investment showing that the UK continues to be the most attractive location for FDI in Europe last year. The government definitely needs to work closely with industry players for this to remain. Q: What do you foresee will b e t h e i m p a c t o n b usi n esses? B T : Until the terms of the UK s exit from EU are known, it is unclear what the impact will be from a tax, legal and regulatory standpoint as much of this will depend on the future relationship between the UK and EU. Discussions since the referendum have highlighted the potential interaction between maintaining access to the single market and controlling immigration. The key challenges for businesses are likely to be regulatory and tariff-based. Direct tax issues then becomes relevant: businesses need to analyse the changes, if any, that needs to be made to the current structure so as to either comply with regulations or take advantage of new opportunities. 24 You and the Taxman Issue 3, 2016

25 Issue # M o n t h Y ea r Non-tariff barriers could be particularly visible in the financial sector where regulation and passporting requirements may require groups to establish new regulated entities either in the UK or EU. This may mean choosing new locations, moving people and businesses, and corporate reorganisations. Planning for this possibility is essential given the lead time needed for approvals. Such decisions are, however, likely to impact not just the financial sector, but a wide range of businesses and many sectors of the economy, in differing and converse ways. For example, for small- and medium-sized companies, a lower regulatory burden may instead offer new possibilities for growth as they adapt their operations to benefit from a reduced regulatory burden. Q : H o w c a n b usi n esses b r a c e themselves for the possible up c o m i n g c h a n g es? B T : The impact of Brexit will vary significantly depending on industry, business model, supply chain and wider regulatory issues. It is important to conduct impact assessments as soon as possible to fully understand the risks and opportunities arising from Brexit. Once these are fully established, they can be used as a reference point to monitor changes to the UK-EU relationship when more details become available as we move towards the UK s exit from the EU. Q: More specifically, how c a n o r g a n i sa t i o n s m i t i g a t e risks and take advantage of t h e o p p o r t un i t i es? B T : With the EU being one of the UK s biggest customers, companies will need to consider the impact not only on their exports but also their imports and their current supply chains. Businesses also need to let the government be aware of the issues that matter to them as they enter negotiations. The new trade environment will provide opportunities: the UK will have the chance to make new trade deals, which will open up markets. Companies need to consider where the potential lies for their products and services, and even human capital, and act accordingly. C o n t a c t us B i l l y T h o r n e Senior Manager, UK Tax Desk, EY Global Tax Desk Network Asia-Pacific billy.thorne@sg.ey.com You and the Taxman Issue 3,

26 A t a g l a n c e You and the Taxman Inland Revenue Authority of Singapore (IRAS) e-tax guides issued or revised from 1 January 2016 to 31 August 2016 I nc ome tax 19 July 2016 Income tax: certainty of non-taxation of companies gains on disposal of equity investments (second edition) 11 July 2016 Income tax: the general anti-avoidance provision and its application (first edition) 30 June 2016 Income tax and stamp duty: mergers and acquisitions scheme (fourth edition) 18 March 2016 Simplification of claim of rental expenses for individuals (second edition) 4 January 2016 Transfer pricing guidelines (third edition) Goods and Services Tax (GST) 26 August 2016 GST: the electronic tourist refund scheme (etrs) (seventh edition) 8 August 2016 GST : partial exemption and input tax recovery (third edition) 1 July 2016 GST : assisted compliance assurance programme (ACAP) (eighth edition) 1 July 2016 GST: advance ruling system (second edition) 1 July 2016 GST: renewal of assisted compliance assurance programme (ACAP) status 24 June 2016 GST: the electronic tourist refund scheme (etrs) (sixth edition) 17 June 2016 GST: concession for REITS and qualifying registered business trusts listed in Singapore (third edition) 10 June 2016 GST: guide for the insurance industry (third edition) 1 June 2016 GST: guide on approved import GST suspension scheme 1 June 2016 GST guide for the aerospace industry (third edition) 25 May 2016 GST: general guide for businesses (fifth edition) 25 May 2016 GST guide for e-commerce (third edition) 25 May 2016 Claiming of GST on re-import of value-added goods (second edition) 25 May 2016 GST: guidelines on determining the belonging status of supplier and customer 16 May 2016 GST: fringe benefits 5 April 2016 GST guide for the market participants in the National Electricity Market of Singapore (NEMS) (second edition) 26 You and the Taxman Issue 3, 2016

27 Issue # M o n t h Y ea r Goods and Services Tax (GST) 5 April 2016 GST: general guide on group registration (second edition) 1 April 2016 GST: general guide for businesses (fourth edition) 1 April 2016 GST: the electronic tourist refund scheme (etrs) (fifth edition) 1 April 2016 GST: guide on divisional registration 1 April 2016 GST: how do I prepare my GST return? (second edition) 4 March 2016 GST: partial exemption and input tax recovery (second edition) 19 February 2016 GST: zero-rating of sale & lease of containers and container services 11 February 2016 GST guide for the marine industry 11 February 2016 GST: approved marine customer scheme (AMCS) Monetary Authority of Singapore (MAS) circulars issued from 1 January 2016 to 31 August 2016 D TA s s i g ned 30 June 2016 Extending and refining the tax incentive scheme for trustee companies 28 June 2016 Extending and refining tax incentive schemes for insurance companies 19 May 2016 Tax deduction for retail bond issuances Agreements for Avoidance of Double Taxation (DTAs) signed or ratified from 1 January 2016 to 31 August 2016 D TA s s i g ned 24 August 2016 Singapore Ethiopia 20 May 2016 Singapore Cambodia DTAs ratified 1 June 2016 Singapore France (revised) 16 March 2016 Singapore United Arab Emirates (Second Protocol) 15 February 2016 Singapore Rwanda 15 February 2016 Singapore Thailand You and the Taxman Issue 3,

28 T a x ser v i c es i n S i n g a p o r e Our tax professionals in Singapore provide you with deep technical knowledge, both globally and locally, combined with practical, commercial and industry experience. We draw on our global insights and perspectives to build proactive, truly integrated direct and indirect tax strategies that help you build sustainable growth, in Singapore and wherever else you are in the world. Statutory accounting and reporting Book-keeping and accounting support Corporate secretarial Tax accounting and provisions Tax compliance filing B usi n ess T a x S er v i c es Tax P ol i c y and C ontr ov er s y S er v i c es EY s global tax policy network has extensive experience helping develop policy initiatives, both as external advisors to governments and companies and as advisors inside government. Our dedicated tax policy professionals and business modelers can help address your specific business environment and improve the chance of a successful outcome. Our global tax controversy network will help you address your global tax controversy, enforcement and disclosure needs. In addition, support for pre-filing controversy management can help you properly and consistently file returns and prepare relevant backup documentation. Our professionals leverage the network s collective knowledge of how tax authorities operate and increasingly work together to help resolve controversy and pre-filing controversy issues. Tax Performance Advisory Services EY s Tax Performance Advisory network focuses on helping your tax function enhance performance. With dedicated resources in major global markets, proven methodologies and in-depth knowledge of tax technologies, we can help you build strong compliance and reporting foundations, effective risk management protocols and a higher-performing tax organisation. We have experience delivering projects to companies of all sizes, across all aspects of the tax life cycle. Our holistic approach allows us to speak the same language as your tax, finance, information technology and business professionals, which is necessary to drive enhanced tax function performance. Q uanti tati v e S er v i c es EY s Quantitative Services network offers a scalable set of services to assist clients with analysing tax opportunities, typically related to large data sets, systematically and efficiently. This helps clients identify multi-country tax regulations and the benefits that can be attained. Our services can include assistance with: Accounting methods and inventory advising on the application of tax rules and regulations related to income and expense recognition Research incentives identifying tax incentives associated with a company s qualifying research investments Flow through tax planning and advice related to partnerships, joint ventures and other tax flow-through legal entities Capital assets and incentives our technological capabilities help streamline fixed asset analysis and identify tax deductions These approaches can help clients improve cash flow, plan for cash tax and effective tax rates in upcoming years, and create refund opportunities. Our process improvements can help streamline tax compliance. P r i v ate C l i ent S er v i c es EY s Private Client Services offers tax-related domestic and cross-border planning and compliance assistance to business-connected individuals and their associated entities. In addition, in today s global environment, cross-border services can help meet the ever-growing needs of internationally positioned clients. Our dedicated resources in major markets around the world serve individual clients needing a wide range of tax services, including tax compliance, tax planning and tax advice relating to their business interests, investments and other financial-related assets. We have experience working with individuals and companies of all sizes across many aspects of the tax life cycle planning, provision, compliance and controversy. B us i nes s Tax A dv i s or y S er v i c es Our Business Tax Advisory practice combines technical skills with practical, commercial and industry knowledge to give you advice tailored to your business needs. Our tax professionals bring you their deep understanding of tax issues. We can help you reduce inefficiencies, mitigate risk and make the most of opportunities, building sustainable tax strategies that can help your business succeed. G l o b a l C o m p l i a n c e a n d R ep o r t i n g Our Global Compliance and Reporting (GCR) practice can help you meet your reporting requirements wherever you do business. GCR comprises the key elements of a company s finance and tax processes used to prepare statutory financial and tax filings in countries around the world. These include: B us i nes s Tax C omp l i anc e S er v i c es Compliance and reporting make huge demands on tax and finance functions today. So how do you reduce risk and inefficiencies and improve value cost-effectively? Our marketleading approach combines a standard global compliance process and tools with extensive local compliance and accounting experience, giving you the access, visibility and control you want. In one country or many, you can benefit from an integrated, consistent, flexible quality service with tax compliance, statutory accounts preparation and tax accounting calculation support. This can enhance your compliance function while improving efficiencies across your financial supply chain. Tax A c c ounti ng and R i s k A dv i s or y S er v i c es To help you meet the challenges of today s complex business environment, including demands for more transparency and greater tax department effectiveness, we provide assistance in three key areas: Tax accounting: under IFRS and local GAAP Tax function performance: improving organisational strategy, processes, and data and systems effectiveness Tax risk: identifying, prioritising, monitoring and remediating risk Our talented people, consistent global methodologies and tools, and unwavering commitment to quality service can help you build strong compliance and reporting foundations, sustainable organisational strategies and effective risk management protocols to help your business succeed. C or p or ate S er v i c es Our Corporate Services team supports your business in the following areas: entity formation and company secretarial matters, the preparation of management and statutory financial statements, monthly book-keeping and payroll outsourcing. We work with all stakeholders to help you meet deadlines and comply with statutory requirements. Company secretarial: We help our clients and their officers comply with the Singapore Companies Act requirements principally and other relevant regulations from a company secretarial perspective. In addition to compliance matters, we are often involved in corporate structuring work such as share capital reduction and share buy-back initiatives. Accounting: From day-to-day to complex transactions, our accounting professionals assist to facilitate that the transactions are recorded accurately, timely and in accordance with applicable accounting standards. We 28 You and the Taxman Issue 3, 2016

29 are also familiar with all aspects of the accounting function like management reporting, debtors/ creditors control and XBRL conversion. Payroll: We provide comprehensive and holistic payroll outsourcing services. We assist to facilitate that your employee payrolls are computed in accordance with the Singapore Employment Act and with the Ministry of Manpower regulations. F i n a n c i a l S er v i c es T a x Our Financial Services Tax team is dedicated to providing value to our clients in the financial services industry who are facing a constantly evolving tax landscape. Whether you are in Banking and Capital Markets, Asset Management, or the Insurance sector, we will be able to assist you in issues including managing your direct and indirect tax obligations and tax risks, navigating the complex tax rules across jurisdictions, pursuing tax incentives or concessions, dealing with transfer pricing issues, handling tax authority queries, assessing your tax provisions, and analysing your uncertain tax positions. We can also advise you on the tax implications of new financial products or transactions, and assist in applying for Revenue rulings where applicable. We can advise on the structuring of your new businesses and new funds, or on the review of such structures in an internal reorganisation or in the event of mergers or acquisitions, from the tax perspective. In d i r ec t T a x S er v i c es C us toms and I nter nati onal Tr ade In today s global economy, moving goods across borders can be complex and costly. More than ever before, effective management of customs and international trade issues is crucial to maintaining a competitive advantage. EY s customs and international trade professionals can help you manage costs and reduce the risk of penalties and significant supply chain disruption. Our core offerings include strategic planning to manage customs and excise duties, trade compliance reviews for imports and exports, internal controls and process improvement, and participation in customs supply chain security programs. We develop proactive, pragmatic and integrated strategies that can help you address the challenges of doing business in today s global environment and help your business succeed. G S T S er v i c es Our network of dedicated Indirect Tax professionals can advise on the GST treatment of transactions and supplies and help resolve classification or other disputes and issues with the authorities. We provide assistance in identifying risk areas and sustainable planning opportunities for indirect taxes throughout the tax lifecycle, helping you meet your compliance obligations and your business goals around the world. We provide you with effective processes to help improve your day-to-day reporting for indirect tax, reducing attribution errors, reducing costs and ensuring indirect taxes are handled correctly. We can support full or partial GST compliance outsourcing, identify the right partial exemption method and review accounting systems. In t er n a t i o n a l T a x S er v i c es I nter nati onal Tax S er v i c es Executives are constantly looking to align their global tax position with their overall business strategy. We can help you manage your tax responsibilities by leveraging our global network of dedicated international tax professionals working together to help you manage global tax risks, meet crossborder reporting obligations and deal with transfer pricing issues. EY s multidisciplinary teams can help you assess your strategies, assisting with international tax issues, from forward planning through reporting, to maintaining effective relationships with the tax authorities. We can help you build proactive and integrated global tax strategies that address the tax risks of today s businesses and achieve sustainable growth. G l ob al Tax D es k Our market-leading Global Tax Desk network a co-located team of highly experienced professionals from multiple countries is located strategically in major business centers so that our desks can respond to your challenges immediately and cost-effectively, avoiding time zone barriers and the high price of international travel. The desks work as a team tackling the same problem from all sides thoughtfully identifying considerations with your cross-border transaction. We work with you to help you manage global operational changes and transactions, capitalisation and repatriation issues, transfer pricing and your supply chain from forward planning, through reporting, to maintaining effective relationships with tax authorities. Transfer Pricing Our Transfer Pricing professionals help you build, manage, document, review and defend your transfer pricing policies and processes aligning them with your business strategy. Here s how we can help you: Strategy and policy development Governance optimisation and decision making process to help: Reduce impact of year-end Issue # M o n t h Y ea r adjustments Monitor transfer pricing footprint Coordinate across organisation Global or regional assistance to support transitions to new documentation requirements Controversy risk assessment, remediation or mitigation as a result of documentation requirements Global transfer pricing controversy and risk management Operating Model Effectiveness Our multi-disciplinary Operating Model Effectiveness teams work with you on operating model design, business restructuring, systems implications, transfer pricing, direct and indirect tax, customs, human resources, finance and accounting. We can help you build and develop the structure that makes sense for your business, improve your processes and manage the cost of trade. P eo p l e A d v i so r y S er v i c es As the world continues to be impacted by globalisation, demographics, technology, innovation and regulation, organisations are under pressure to adapt quickly and build agile people cultures that respond to these disruptive forces. EY People Advisory Services believes a better working world is helping our clients harness their people agenda the right people, with the right capabilities, in the right place, for the right cost, doing the right things. We work globally and collaborate to bring you professional teams to address complex issues relating to organisation transformation, end-to-end employee lifecycles, effective talent deployment and mobility, gaining value from evolving and virtual workforces, and the changing role of HR in support of business strategy. Our EY professionals ask better questions and work with clients to create holistic, innovative answers that deliver quality results. T r a n sa c t i o n T a x S er v i c es Every transaction has tax implications, whether it s an acquisition, disposal, refinancing, restructuring or initial public offering. Understanding these implications can mitigate transaction risk, enhance opportunity and provide crucial negotiation insights. Transaction Tax Services comprises a worldwide network of professional advisors who can help you navigate the tax implications of your transaction. We mobilise wherever needed, assembling a personalised, integrated global team to work with you throughout the transaction life cycle, from initial due diligence through postdeal implementation. And we can suggest structuring alternatives to balance investor sensitivities, promote exit readiness and raise opportunities for improved returns. You and the Taxman Issue 3,

30 E Y T a x l ea d er sh i p If you would like to know more about our services or the issues discussed, please contact: C h un g - S i m S i ew M o o n Partner and Head of Tax siew-moon.sim@sg.ey.com S i n g a p o r e T a x P a r t n er s, E x ec ut i v e D i r ec t o r s a n d D i r ec t o r s B us i nes s Tax S er v i c es Angela Tan angela.tan@sg.ey.com Lim Gek Khim gek-khim.lim@sg.ey.com Russell Aubrey russell.aubrey@sg.ey.com Helen Bok helen.bok@sg.ey.com Choo Eng Chuan eng.chuan.choo@sg.ey.com Goh Siow Hui siow.hui.goh@sg.ey.com Latha Mathew latha.mathew@sg.ey.com Lim Joo Hiang joo-hiang.lim@sg.ey.com Business Incentives Advisory Tan Bin Eng bin-eng.tan@sg.ey.com G l ob al C omp l i anc e and R ep or ti ng Soh Pui Ming pui.ming.soh@sg.ey.com Chai Wai Fook wai-fook.chai@sg.ey.com Chia Seng Chye seng.chye.chia@sg.ey.com Ivy Ng ivy.ng@sg.ey.com Teh Swee Thiam swee-thiam.teh@sg.ey.com Nadin Soh nadin.soh@sg.ey.com Corporate Services David Ong david.ong@sg.ey.com F i nanc i al S er v i c es O r g ani s ati on Amy Ang amy.ang@sg.ey.com Stephen Bruce stephen.bruce@sg.ey.com Desmond Teo desmond.teo@sg.ey.com Louisa Yeo louisa.yeo@sg.ey.com Ben Ellis Mudd bmudd@sg.ey.com Michele Chen michele.chen@sg.ey.com I ndi r ec t Tax Customs and International Trade Adrian Ball adrian.r.ball@sg.ey.com GST Services Yeo Kai Eng kai.eng.yeo@sg.ey.com I nter nati onal Tax S er v i c es International Tax Chung-Sim Siew Moon siew-moon.sim@sg.ey.com Chester Wee chester.wee@sg.ey.com Tan Ching Khee ching-khee.tan@sg.ey.com Jerome van Staden jerome-van.staden@sg.ey.com Aw Hwee Leng hwee-leng.aw@sg.ey.com Wong Hsin Yee hsin-yee.wong@sg.ey.com Transfer Pricing Luis Coronado luis.coronado@sg.ey.com Henry Syrett henry.syrett@sg.ey.com Stephen Lam stephen.lam@sg.ey.com Kor Bing Keong bing-keong.kor@sg.ey.com Jonathan Bélec jonathan.belec@sg.ey.com Chew Boon Choo boon-choo.chew@sg.ey.com Tracey Kuuskoski tracey.kuuskoski@sg.ey.com 30 You and the Taxman Issue 3, 2016

31 Issue # M o n t h Y ea r Asia-Pacific Tax Centre A us tr al i a Tax D es k David Scott david-edwin.scott@sg.ey.com E ur op e / N ether l ands Tax D es k Barbara Voskamp barbara.voskamp@sg.ey.com I ndi a Tax D es k Gagan Malik gagan.malik@sg.ey.com Japan Tax Desk Kenji Ueda kenji.ueda@sg.ey.com U K Tax D es k Billy Thorne billy.thorne@sg.ey.com I ndi r ec t Tax C us toms and I nter nati onal Tr ade Donald Thomson donald.thomson@sg.ey.com Life Sciences Richard Fonte richard.fonte@sg.ey.com Operating Model Effectiveness Nick Muhlemann nick.muhlemann@sg.ey.com Paul Griffiths paul.griffiths@sg.ey.com Blake Langridge blake.langridge@sg.ey.com P eop l e A dv i s or y S er v i c es Mobility Grahame Wright grahame.k.wright@sg.ey.com Wu Soo Mee soo.mee.wu@sg.ey.com Kerrie Chang kerrie.chang@sg.ey.com Panneer Selvam panneer.selvam@sg.ey.com Tina Chua tina.chua@sg.ey.com Grenda Pua grenda.pua@sg.ey.com Talent and Reward Samir Bedi samir.bedi@sg.ey.com Tr ans ac ti on Tax Darryl Kinneally darryl.kinneally@sg.ey.com Sandie Wun sandie.wun@sg.ey.com Pang Ai Lin ai-lin.pang@sg.ey.com I ndus tr y s ec tor s R eal E s tate Lim Gek Khim gek-khim.lim@sg.ey.com C ons umer P r oduc ts & R etai l Soh Pui Ming pui.ming.soh@sg.ey.com H os p i tal i ty Helen Bok helen.bok@sg.ey.com W & A s s M eal th et anag ement Desmond Teo desmond.teo@sg.ey.com Ivy Ng ivy.ng@sg.ey.com Tec hnol og y, M edi a and Tel ec ommuni c ati ons Chia Seng Chye seng.chye.chia@sg.ey.com Life Sciences Tan Ching Khee ching-khee.tan@sg.ey.com Diversified Industrial Products Russell Aubrey russell.aubrey@sg.ey.com S hi p p i ng Goh Siow Hui siow.hui.goh@sg.ey.com E mer g i ng & P r i v ate E nter p r i s e Chai Wai Fook wai-fook.chai@sg.ey.com B ank i ng & C ap i tal M ar k ets Stephen Bruce stephen.bruce@sg.ey.com R es our c es Angela Tan angela.tan@sg.ey.com G ov er nment & P ub l i c S ec tor Tan Bin Eng bin-eng.tan@sg.ey.com I ns ur anc e Amy Ang amy.ang@sg.ey.com You and the Taxman Issue 3,

32 H ow do y ou er as e b or der s and c r eate g l ob al op p or tuni ty? F i n d o ut h o w i n t er n a t i o n a l t a x a n d o p er a t i o n s insights helped a company grow from local to global. ey. c om/ ac c el er ati ng g r ow th # B etter Q ues ti ons 2016 E Y G M L i m i t ed. A l l R i g h t s R eser v ed. E D N o n e.

33 Tax thought leadership Ernst & Young Solutions LLP s Tax practice aims to give you insights on the tax issues that matter in today s fast-changing business environment. To find out how these tax issues impact your business, read You and the Taxman. You and the Taxman Issue 2, 2016 You and the Taxman Issue 1, 2016 You and the Taxman Issue 4, 2015 You and the Taxman Issue 3, 2015 You and the Taxman Issue 2, 2015 You and the Taxman Issue 1, 2015 You and the Taxman Issue 4, 2014 You and the Taxman Issue 3, 2014 You and the Taxman Issue 2, 2014 Past issues of You and the Taxman can be downloaded from