Tax trends and issues for financial services Michael Velten, Southeast Asia Financial Services Industry Tax Leader
Agenda Overview: Tax as a risk BEPS: A changing tax landscape CRS: Status in the region Tax Management: A framework 2016 Deloitte & Touche LLP 2
Overview Tax as a risk 2016 Deloitte & Touche LLP 3
2013 Lloyd's Risk Index: Taxation is now the highest risk priority globally According to the Lloyd s Risk Index 2013 1, tax uncertainty is the greatest fear for global businesses following more recent public and political exposure and debate Top 5 business risks overall 2013 Rank in 2011 2011 High taxation 1 13 1 Loss of customers / cancelled orders Loss of customers / cancelled orders 2 1 2 Talent and skills shortage Cyber risk 3 12 3 Reputational loss Price of material inputs 4 7 4 Currency fluctuation Excessively strict regulation 5 10 5 Changing legislation 1 A global survey of over 500 C-suite and board level executives conducted by Ipsos MORI for Lloyd s during April and May 2013 2016 Deloitte & Touche LLP 4
Current themes in taxation globally Continued revenue pressures on Government; pressure to pay increased tax (incl. tax as a moral issue) Focus on tax compliance and risk management (incl. reputational risk) Focus on international tax avoidance and tax system integrity (e.g. BEPS) Current themes in tax Tax and transfer pricing audits and enforcement; increase in tax disputes (and consideration of alternative despite resolution e.g. APAs) Tax reform (e.g. China VAT) and changes in law (e.g. MAAL, India GAAR) Focus on transparency; esp. in view of Panama Papers (e.g. drive on BO registers). Financial Secrecy index in focus. CRS a key pillar of tax transparency 2016 Deloitte & Touche LLP 5
BEPS A changing tax landscape 2016 Deloitte & Touche LLP 6
BEPS recap Implementation approach Domestic law change Transfer Pricing Treaties Monitoring Recommendations for national law, regulations, or administrative practice Changes to the OECD s Transfer Pricing Guidelines Signing of multilateral instrument, and changes to the OECD Model Treaty & Commentary Monitoring / reporting by OECD / Global Forum Action 1: Digital Economy Action 2: Hybrid mismatches Action 3: CFCs Action 4: Limiting interest deductions Action 5: Harmful tax practices Action 12: Mandatory disclosure Actions 8 10: Assure that transfer pricing outcomes are in line with value creation Action 2: Hybrid mismatches Action 6: Treaty abuse Action 7: Permanent establishments Action 14: Dispute resolution Action 15: Multilateral instrument Action 5: Harmful tax practices Action 11: BEPS information Action 13: TP documentation (incl CbC) Action 14: Dispute resolution Action 13: TP documentation (incl CbC) 2016 Deloitte & Touche LLP 7
BEPS actions: Response in Asia Country Australia Peoples Republic of China Japan South Korea India Hong Kong Taiwan Singapore Indonesia Malaysia Philippines Thailand Vietnam Type First mover First mover First mover First mover Fast follower Slow follower Slow follower Slow follower Slow follower Slow follower Slow follower Slow follower Slow follower 2016 Deloitte & Touche LLP 8
BEPS Singapore: Position on key actions Action Singapore s position 1 Digital economy Unclear, may consider GST on e-services 2 Hybrids Not expected to adopt recommendations 3 CFC No change expected 4 Interest Unclear, unlikely to adopt in short-term 5 Harmful tax practices Singapore tax incentives to be examined as follow on work; although now unlikely that OECD will review in 2016. Government believes incentives are all substance based, to be seen whether OECD agrees. On transparency, taxpayer agreements may be shared spontaneously via AEOI in due course 6 Treaty abuse Minimum standard likely to be adopted. Singapore has preference for Principal Purpose Test 7 PE status Unlikely to actively push to adopt, but have indicated that the new version of the PE article may start to find its way into Singapore s treaties in the future over time 8-10 Transfer pricing To consider adoption of updates to OECD TP Guidelines on case-by-case basis 11 Monitoring Government considers this as important 12 Mandatory disclosure Unclear 2016 Deloitte & Touche LLP 9
BEPS Singapore: Position on key actions (cont.) Action Singapore s position 13 CbC, master / local file No public announcement on CBCR yet, but Government is consulting widely and appears to generally be in favour of adoption. Local HQ companies seem to favour adoption Possible that a consultation document may be released following private/closed consultations. Assuming consultation proceeds as expected, Singapore would likely look to adopt CBCR in OECD prescribed format once sufficient OECD/G20 countries adopt Concerns about use of taxpayer data by other tax authorities to initiate profit grabs / disputes TP documentation requirements updated in January 2015 14 Dispute resolution Will adhere to minimum standard, considering mandatory binding arbitration 15 Multilateral instrument Actively participating In general, an increased focus on BEPS in Singapore: Proactive interactions from Government with taxpayers and interested parties Ministry of Finance has taken an active role at the OECD (Singapore has observer status) Media interest growing 2016 Deloitte & Touche LLP 10
CRS Status in the region 2016 Deloitte & Touche LLP 11
More than 90 countries to implement AEOI Signed (54) Anguilla Germany Mauritius Argentina Gibraltar Mexico Barbados Greece Montserrat Belgium Greenland Netherlands Bermuda Guernsey Niue British Virgin Islands Hungary Norway Bulgaria Iceland Poland Cayman Islands India Portugal Colombia Ireland Romania Croatia Isle of Man San Marino Curacao Italy Seychelles Cyprus Jersey Slovak Republic Czech Republic Korea Slovenia Denmark Latvia South Africa Estonia Liechtenstein Spain Faroe Islands Lithuania Sweden Finland Luxembourg Turks & Caicos France Malta UK Signed (26) Albania Cook Islands Saint Kitts & Nevis Andorra Costa Rica Saint Lucia Antigua & Barbuda Ghana Saint Vincent & Grenadines Aruba Grenada Samoa Australia Indonesia Sint Maarten Austria Japan Switzerland Belize Malaysia Canada Marshall Islands Chile China Monaco New Zealand 2018 2017 Committed (2) Dominica Trinidad & Tobago Committed (14) Bahamas Brazil Brunei Darussalam Hong Kong (China) Israel Kuwait Macau (China) Qatar Russia Saudi Arabia Singapore Turkey United Arab Emirates Uruguay 2016 Deloitte & Touche LLP 12
CRS Implementation: Areas of focus From a group perspective From a business perspective CRS classification Review classification of legal entities within their group according to CRS statuses New CRS documentation New Self-certifications and documentation requirements Products / payments analysis CRS due diligence Processes Review products and payments from CRS Financial Account definition standpoint Implement due diligence procedures described in CRS CRS remediation Implement due diligence procedures described in CRS Policies & procedures Draft new policies and procedures to comply with CRS CRS communication program Design a communication program to provide the information required by CRS to account holders Compliance program Establish a compliance program specific for CRS Monitor country developments Monitor local regulations and local reporting requirements 2016 Deloitte & Touche LLP 13
Tax Management A Framework 2016 Deloitte & Touche LLP 14
Tax management: A framework Tax data and systems Tax strategy, policy and risk Tax operating models 2016 Deloitte & Touche LLP 15
Speaker profile Michael Velten SEA Financial Services Industry Tax Leader mvelten@deloitte.com Michael is a Financial Services Tax Partner with Deloitte in Singapore and the firm s SEA FSI Tax Leader. Michael covers all area of Singapore tax (including GST and stamp duty) and specialises in Asia banking and capital markets. Michael s focus includes financial services transfer pricing and FATCA. Michael is a recognised industry tax expert. Michael has been advising on Singapore and Asia regional tax since the early 1990s, having held senior tax roles in Asia with leading financial institutions and professional firms. Prior to joining Deloitte, Michael was Group Head of Tax at a leading brokerage and investment house and before that he headed the Asia ex-japan Tax Department of a leading global investment bank. He was also a Tax Partner in a Big Four firm in Singapore and a Tax Partner in the Singapore office of a leading international law firm. Michael was held appointments as an Adjunct Associate Professor of Law at the National University of Singapore and Visiting Fellow to the University of Melbourne. 2016 Deloitte & Touche LLP 17
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