You and the Taxman. Insights on tax issues that matter. Issue 1, Compliance, controls and controversy: are you ready?

Issue 1, 2013 Insights on tax issues that matter Compliance, controls and controversy: are you ready? Cutting through the tax incentive labyrinth Singapore: The market for ideas Attracting holding companies: Where Singapore can do better Extending Singapore s lead as an asset management hub Singapore and Vietnam strengthen ties through tax treaty

Tax watch Happy new year! All around the world, tax enforcement has become more aggressive. Therefore, top on your tax resolutions list should be getting your compliance in order. Compliance, controls and controversy: are you ready? guides you through the key areas of enforcement focus by the Inland Revenue Authority of Singapore (IRAS). This includes the IRAS tax audits on high-risk companies and focus on transfer pricing and related party transactions, amongst others. To keep tax compliance risks at bay, you need to have strong corporate governance and internal controls. Russell Aubrey Partner, Transaction Tax - Asean The Budget announcement will be on 25 February 2013. Will Ernst & Young Solutions LLP we have more measures to raise productivity and will there be more help for businesses to cope with higher costs? In this issue, we have a series of Budget-related articles, with suggestions on how we can refine our tax regime to enhance Singapore s long-term competitiveness. Cutting through the tax incentive labyrinth argues for further simplification to Singapore s tax incentive regime. In particular, it examines how the Development and Expansion Incentive, a key incentive scheme tapped by many multinationals in Singapore, can be stripped of its rigidity so that more companies can enjoy the tax benefits of the scheme. Singapore has its sights on becoming a key intellectual property (IP) hub in the region. Singapore: The market for ideas suggests enhancing the Productivity and Innovation Credit and introducing a patent box regime to encourage more businesses to house their IP here. Although Singapore is one of the most attractive holding company regimes in Asia, it still lags behind some territories on the rules for tax relief for interest expense. Attracting holding companies: Where Singapore can do better offers some food for thought in introducing group relief for interest expense. Extending Singapore s lead as an asset management hub shares observations on recent trends in the asset management industry. It also provides some suggestions on how the existing tax regime can be refined to keep Singapore one step ahead in the race for funds. Vietnam has emerged as an enticing investment destination in Asia. Singapore and Vietnam strengthen ties through tax treaty explores the key areas of the Second Protocol to the Singapore-Vietnam tax treaty and what this means for investors. Have a good read! Issue 1, 2013 1

In this issue 04 Compliance, controls and controversy: are you ready? Taxpayers need to better manage tax compliance risks as tax collection becomes more rigidly enforced. 04 A fresh look at 08 Cutting through the tax incentive labyrinth There s room to introduce more flexibility into Singapore s current tax incentive regime to keep it relevant to businesses. 10 Singapore: The market for ideas It is timely to revisit existing tax regulations to position Singapore as a hub for intellectual property. 10 2 Issue 1, 2013

13 Attracting holding companies: where Singapore can do better Group relief for holding company interest expense has yet to be introduced in Singapore, but doing so would bolster its position as a holding company location. 15 Extending Singapore s lead as an asset management hub Singapore needs to refine its tax exemption regime for funds to keep its lead as an asset management hub. At a glance 23 This section lists the latest Inland Revenue Authority of Singapore e-tax guides, Monetary Authority of Singapore circulars and treaties signed or ratified. Elsewhere outside Singapore 19 Singapore and Vietnam strengthen ties through tax treaty This article discusses the implications of the key amendments made in the Second Protocol to the Singapore-Vietnam tax treaty. 19 Editor: Contributors: Russell Aubrey Editorial coordinator: Karen Lew Chia Jing Wen Chia Seng Chye Chung-Sim Siew Moon Daniel Dickinson Lee Vin Wee Jonathan Stuart-Smith Tan Bin Eng Desmond Teo Tracy Tham Andre Toh Nhung Tran Sandie Wun Email: Website: contact.eys@sg.ey.com www.ey.com/sg For more information on the articles published in this issue, please contact: The Editor Ernst & Young Solutions LLP One Raffles Quay North Tower, Level 18 Singapore 048583 Tel: +65 6535 7777 Fax: +65 6532 7662 Editor note: 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. In line with our commitment to minimise our impact on the environment, this document has been printed on recycled paper. MCI (P) 101/12/2012 Printed by Hock Cheong Printing Pte Ltd Design: Soo Soon Tat Issue 1, 2013 3

Compliance, controls and controversy: are you ready? Companies need to have processes to identify and evaluate the risk of the tax positions they take before tax returns are filed. Chung-Sim Siew Moon and Lee Vin Wee highlight the key tax enforcement activities of the Singapore tax authorities and discuss what taxpayers should do to reduce tax compliance risks Tax authorities are stepping up their efforts to collect revenue, casting the spotlight on the compliance practices of taxpayers. But are taxpayers ready for this new level of scrutiny? To attract foreign investments, governments around the world have been lowering their corporate tax rates. To make up for the loss in tax revenue, governments have taken steps to increase the levels of compliance and enforcement and have a lower level of tolerance on taxpayer mistakes; all in the hope to recover the right amount of taxes and seek the taxes in arrears. Trends in the tax compliance landscape Tax enforcement being more aggressive and focused Ernst & Young s 2011-2012 Tax risk and controversy survey revealed that tax directors in large multinationals have experienced more aggressive tax audits. Indeed, tax administrators and legislators are enforcing existing tax laws more stringently and creating new enforcement mechanisms to recover lost revenue. They are demanding more disclosure from taxpayers, strengthening or creating economic substance doctrines and imposing criminal sanctions for willful tax evasion. The same survey also reported that tax directors experienced greater focus on their international structures by tax authorities over the past two years. The survey results also indicate that this is expected to intensify in coming years. Growing disclosure and transparency requirements Taxpayers now face greater disclosure requirements, as tax enforcement activities rise. To enhance transparency, some countries require mandatory disclosure of avoidance transactions on top of other statutory reporting requirements. This provides tax administrations with more information regarding tax positions, which could drive tax controversy and lead to additional tax revenues if such positions are not sustained. Tax authorities in different countries are also sharing more taxpayer information amongst themselves given the substantial increase in volume of information exchange agreements between countries. This may lead to more joint audits as they leverage on the shared information to drive enforcement. 4 Issue 1, 2013

Enhanced relationship with tax administrators Many tax authorities are now encouraging open channels of communication with corporate taxpayers so that issues can be mitigated before they escalate. Disputes can thus be resolved quickly and more efficiently, without the need for litigation. Taxpayers have the opportunity to seek clearer guidance and greater clarity on the interpretation of tax rules from tax administrations. They can resolve uncertain tax issues or technical positions early by engaging in pre-filing processes with tax administrators. This provides them with certainty that the resolved tax issues will not be challenged by the tax administration during the audit process. Where does Singapore stand? In light of these trends in the tax compliance landscape, what is the focus of the Inland Revenue Authority of Singapore (IRAS)? Here, we examine the IRAS key tax compliance focus based on the recent tax enforcement activities. Tax audits on high risk companies IRAS s tax compliance framework is built on the belief that taxpayers are generally compliant. IRAS adopts a risk-based approach in identifying compliance risk and rolls out specific compliance programs. It focuses on improving compliance among taxpayers in industries which pose a higher risk of non-compliance. Each year, the IRAS announces the industries which will be the focus of compliance for the year and outlines the areas of tax audit focus 1. The IRAS has invested in advanced data analytics to gain insights into the causes of non-compliance through its targeted compliance programmes in high risk areas each year 2. This strengthens its effectiveness in auditing corporate tax returns and enables it to customise enforcement actions for different taxpayer segments. As part of its tax compliance review programme, IRAS conducts corporate income tax compliance review on certain taxpayers tax returns which includes requesting for supporting documents, 1 Published in IRAS website Compliance Focus on Companies (http://www.iras.gov.sg/irashome/page04.aspx?id=12102) 2 Source: IRAS annual report for the financial year 2011/2012 Issue 1, 2013 5

invoices or ledgers of accounts for material transactions. The IRAS also scrutinises the classification of income and expenses by companies enjoying tax incentives to detect any incorrect furnishing of information or declaration. It has also implemented a self-review program where self-review letters and checklists are issued so that taxpayers, especially family-owned and managed companies, can self-review their past returns. The number of tax audits conducted by IRAS has steadily increased each year. In the 2011/2012 financial year, IRAS audited and investigated 12,490 cases, up from 9,592 cases in 2010/2011 and 8,021 cases in 2009/2010 3. It recovered S$273m in taxes and penalties for the 2011/2012 financial year. Conducting tax audits on high-risk companies appears to be a key tax enforcement area for the IRAS. Transfer pricing and related party transactions The IRAS also focuses on transfer pricing and related party transactions as part of its enforcement actions. As cross-border related party transactions are a key area of attention, large companies with large volume of transactions are expected to maintain transfer pricing documentation to support that related party transactions are conducted on an arm s length basis. In recent years, IRAS has sent out transfer pricing questionnaires to selected taxpayers chosen based on an internal set of criteria. This marks the start of the transfer pricing consultation process, which allows IRAS to assess a taxpayer s transfer pricing risks and examine supporting documentation so that recommendations can be provided for managing the risks. Multinational companies are encouraged to enter into Advance Pricing Arrangements to obtain certainty on their transfer pricing methodologies and reduce the tax risks associated with transfer pricing adjustments made by tax authorities in countries which they operate in. Anti-tax avoidance Section 33 of the Income Tax Act (ITA) is a general anti-avoidance provision that empowers the Comptroller of Income Tax to disregard certain arrangements made with the purpose of avoiding taxes. Although section 33 was first enacted in 1988, it was only recently applied in practice by the IRAS. In a recent case, the High Court held that the taxpayer s financing arrangement of a restructuring exercise fell within section 33. This landmark decision offers an insight into how the anti-tax avoidance provision should be applied and provides further impetus for the IRAS to look into potential tax avoidance schemes engaged by taxpayers. Disclosure, transparency and enhancing relationships The IRAS has launched the Enhanced Taxpayer Relationship Programme (ERTP) and the Voluntary Disclosure Programme (VDP) to encourage voluntary compliance by taxpayers. The IRAS conducts the ETRP with large corporations to understand their businesses and developments, and forge a transparent relationship to resolve issues. The VDP is aimed at encouraging taxpayers who have made mistakes in their past tax returns to come forward to correct their mistakes and straighten their tax records, in exchange for lower or zero penalties. Singapore s law provides for penalties to be imposed on taxpayers for errors or omissions made in the tax returns. In recent times, we have seen the IRAS imposing penalties on additional tax assessments arising from revisions to income tax computations for errors or omissions discovered after being queried by the IRAS. The IRAS also organises regular industry dialogues and feedback sessions to foster a closer partnership with taxpayers, and also public seminars to educate taxpayers and enhance voluntary compliance. It recognises tax agents as partners facilitating tax compliance, and thus rolls out programmes to foster a closer working relationship with them. What should you do Given today s more onerous tax compliance landscape, management and the tax function need to work hand in hand with their tax advisors and tax administrators to better manage tax compliance risks. We look at four areas companies can adopt to mitigate tax compliance risks. Strong corporate governance Strong corporate governance in tax facilitates effective management of tax compliance risks. Tax risk management is not only the domain of the tax director or the tax team. The board and audit committee should receive regular reports regarding the tax implications of specific business decisions while the tax function should receive information on strategic decisions and tactical transactions. This two-way communication will keep all parties updated on tax and business 3 Based on IRAS annual reports for the financial years 2011/ 2012, 2010/ 2011 and 2009/ 2010. 6 Issue 1, 2013

issues, allowing potential tax issues arising from business decisions to be dealt early. The board and audit committee should also understand how certain income and expenses are treated for tax purposes in prior year positions and returns already filed with the tax authorities. This would enable them to identify and manage any tax exposures that may arise if the technical position adopted is unsupported or lacks commercial substance. Such tax risks can also be mitigated and managed by leveraging on the services of tax advisors. Partnering with tax advisors enables companies to seek professional expertise and determine whether tax positions taken are defensible when challenged by the tax authorities or whether clarifications or advance rulings need to be obtained from the tax authorities. Strong internal control processes Companies need to have processes to identify and evaluate the risk of the tax positions they take before tax returns are filed. This involves designing, embedding and maintaining controls and procedures in business decision-making processes so that tax risks are considered, evaluated and acted upon in the early stages of business decisions. For example, internal processes should be in place to set up accounts to capture key tax information which is to be extracted for tax return preparation purposes. If a company makes a strategic decision to invest in another company, the tax risks associated with such an investment should be identified and evaluated together with the tax director and communicated to the Board and audit committee. Internal control procedures should be implemented such that the investment is not made without the tax director s input. Sufficient tax documentation To defend against a tax audit by the IRAS, it is crucial to maintain sufficient tax documentation to substantiate the tax treatment of transactions. This provides evidence to support claims made and tax positions taken in a tax return. Without proper tax documentation, companies may lose their tax claims and be liable for penalties for incorrect returns filed. While keeping proper records of transactions is essential, the tax function needs to make a conscientious effort to extract the relevant information for retention. For example, documentary evidence such as minutes of board meetings or internal communications stating the intention to purchase or reasons for the sale of an investment should be extracted and kept in anticipation of a challenge by the tax authorities on the basis of a capital gain claim. Companies should address the areas where tax documentation is required including documentation of accounting processes, internal controls and measures. Roles and responsibilities should be clearly assigned to individuals for monitoring and maintaining the documentation. Staying connected with legislative and regulatory changes Tax legislation and administration are continually evolving. Tax policy changes may affect or hinder the implementation of business decisions. Hence, it is vital for companies to actively monitor and assess the effect of these changes and identify opportunities to engage the government in collaborating on tax policy development. Deepening this relationship with the tax authorities will help companies understand the focus areas of the tax authorities, which would help companies improve their tax risk and controversy management strategy. To keep pace with legislative and regulatory changes, companies can also participate in tax seminars or courses organised by the tax authorities or tax advisors. The tax information and insights provided by tax advisors should be fully leveraged and shared within the organisation. This enables companies to stay updated on tax changes and monitor the development of new programmes, guidance and focus areas introduced by tax authorities so as to better manage tax risks and controversy. Conclusion Tax compliance risks have heightened as tax authorities adopt a more aggressive stance in tax enforcement. Taxpayers need to recognise the existence of these risks and act upon them sooner rather than later. Chung-Sim Siew Moon is Partner, Tax Services and Lee Vin Wee is Manager, Tax Services at Ernst & Young Solutions LLP Issue 1, 2013 7

A fresh look at Cutting through the tax incentive labyrinth If the motivation of Singapore s incentive strategy is to draw inbound investment, then it cannot afford to be too complex or burdensome administratively. Tan Bin Eng and Tracy Tham suggest ways to simplify Singapore s tax incentive system to keep it relevant to businesses By closing loopholes and lowering rates, you could increase the efficiency of the tax code and create more incentives for people to invest, said Ben Bernanke, Chairman of the US Federal Reserve. Simply put, simplify the tax code and investments will follow. In today s anemic global economic climate, this has become even more crucial. Governments commonly use tax incentives, as part of fiscal strategy, to drive investments in specific areas. Singapore is no exception. The government has purposefully refined its incentives strategy and policies over the decades to ensure that the country remains an attractive business location. If the motivation of Singapore s incentive strategy is to draw inbound investment, then it cannot afford to be too complex or burdensome administratively. Investors have choices as other countries too are repositioning their incentive strategies. As such, the streamlining and simplification of certain parts of Singapore s tax incentive regime over the last few years are moves in the right direction. For instance, the Singapore Maritime Port Authority consolidated the various maritime tax incentives under an umbrella Maritime Sector Incentive scheme in 2011, simplifying and enhancing the tax incentives for ship owners and maritime service providers. The maritime industry is an important economic pillar and must remain attractive for its players. In terms of the scope of tax incentives, the total tax relief period of the Development and Expansion Incentive (DEI), a key tax incentive scheme tapped by many multinationals rooted in Singapore, has been extended to 40 years from 20 years. This provides welcomed continuity to multinationals as they are reassured that they can continue to enjoy the incentive as long as they meet the required expansion plans and imposed conditions. But can there be improvements in Singapore s incentive regime, especially in the application and negotiation process with authorities? The process tends to be fairly long drawn and time-consuming, taking up to six months, or more for complex cases. Perhaps the process can be simplified and shortened, at least for the majority of companies. There are also several roadblocks experienced by companies during the incentive application process. The legislation may not be flexible enough to accommodate a company s changing circumstances. Authorities may also be reluctant to deviate from common practice due to past policies and precedence in place. More commonly, companies may meet practical difficulties in adhering to the specific requirements under an incentive. Take the concept of the pre-determined base, or base income, that companies with Singapore operations need to meet when applying for the DEI as an example. Only taxable income derived during the incentive period in excess of the base income qualifies for the concessionary tax rate awarded under the DEI. While the principle behind the base income is to protect existing tax revenue collection, its existence may inadvertently erode the attractiveness of the incentive. Further, this base income is computed based on a fixed formula the average income of the past 36 months. This a prediction of future earnings, based on past income. In today s shortened and more volatile global economic cycle, such assumptions may not be reasonable. The incongruity is even more problematic during economic downturns, as companies that meet the milestones committed under the DEI may not actually enjoy the tax benefit if the bottom line falls below the base income that was pegged to better economic times. 8 Issue 1, 2013

To tackle the issue, there could be some flexibility in the base income requirement. For example, the base income could be reduced for DEI companies affected during an economic slowdown. This reduction could be stepped (e.g., 10%, 20%, 30% or 40%), depending on the companies performance vis-à-vis the committed milestones. To further address the rigidity of the parameters of the DEI, qualifying income streams could be broadened. Headquarter companies that apply for the DEI under the International Headquarters Programme (IHQ) may conduct corporate finance and treasury activities. As the scope of the DEI-IHQ incentive covers corporate finance and treasury activities, service and management fees received from conducting these activities qualify for the concessionary tax rate. However, if the headquarter company acts as a lender or borrower in transactions with its related parties, the interest income arising from this is not covered under the DEI-IHQ. Similarly, the headquarter company may obtain loans from overseas network companies and is then required to deduct withholding tax on interest payments to those network companies. The headquarter company needs to apply separately for the Finance and Treasury Centre (FTC) incentive, if it wants to enjoy a concessionary tax rate on its interest income as well as the exemption of withholding tax on its interest payments to overseas network companies. The administrative challenge and additional costs for companies is in maintaining separate accounts for the separate incentives and in meeting additional commitments. It would enhance the attractiveness of the headquarters incentive regime if the relevant authorities can extend the scope of the DEI-IHQ incentive to cover interest income and allow withholding tax exemption on overseas interest payments. Singapore has made significant strides in keeping its incentive system relevant and attainable to global businesses. There is certainly room for more flexibility within the current incentives framework, so let s not rest on our laurels in the race to attract investments. Tan Bin Eng is Partner, Business Incentives Advisory and Tracy Tham is Senior Manager, Business Incentives Advisory at Ernst & Young Solutions LLP This article was previously published in The Business Times on 29 January 2013 Issue 1, 2013 9

A fresh look at Singapore: The market for ideas It would be worthy to extend the tax deduction to include the costs incurred in creating and developing the IP. Chia Seng Chye and Andre Toh suggest some refinements to Singapore s intellectual property regime to encourage more businesses to house their ideas here How do you capture value from innovation? As businesses rely increasingly on innovation to remain competitive, intellectual property (IP) protection becomes essential to defend your turf against attacks by rivals. Singapore has muscled into this market for ideas. Now, it s time to widen it. Many businesses are building their business models around IP. Businesses, especially those in high-tech industries, are snapping up patents and litigating more to protect their market share. Yet, others have found new ways of making money by licensing their technology. Google s US$12.5 billion purchase of Motorola Mobility in May 2012 landed it with an extensive patents library that many industry experts expect will help the search engine company stave off lawsuits from Apple and Microsoft that threatened its popular Android mobile operating system. Not only do tech companies such as Google and Microsoft use technology patents as shields to protect their technology, they also monetise their patents by deriving licensing fees and royalties from other companies that license their IP. Closer to home, local telco SingTel gained a foothold in the fast-growing mobile advertising and marketing industry with its game-changing US$321 million acquisition of US-based Amobee. Meanwhile, consumer companies such as Coca Cola and Nike are known to place their brands at the centerpiece of their marketing activities. In today s knowledge-driven economies, these intellectual or soft assets drive growth and build competitive advantage for companies and countries. Recognising this, both developed and developing countries are vying to build innovationbased economies by heavily promoting R&D activities and creating a conducive business environment to generate, commercialise, protect and manage IP. Singapore has set its sights on becoming Asia s premier IP hub. To become the go-to place for companies to host their global ideas, Singapore has adopted a holistic approach in helping businesses harness and exploit the full potential of their knowledge assets. It has developed a wide pool of local IP expertise, established a specialised IP court and implemented a strong legal framework to protect IP. Recently, the Intellectual Property Office of Singapore developed a competency framework to accredit key IP professionals and practitioners in the industry. Singapore s tax legislation also plays a key role in positioning the country as an IP management hub, with a number of tax policies to encourage companies to create and manage their IP here. The existing tax law allows companies to take 10 Issue 1, 2013

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an automatic tax deduction from their taxable income, on the costs incurred in acquiring legal and future economic benefit rights of IP. Patents, copyrights, trademarks and registered designs qualify for this deduction. In practice, companies own and control many other types of IP or intangible assets beyond this defined list. These include acquired customer-related intangibles, such as customer-supplier relationships and contracts, customer lists and distribution networks, which are recognised in the balance sheet. The inability to obtain a deduction for these customer-related intangible assets could deter consumer-centric companies, such as those in the insurance, telecommunications, utilities, and pharmaceutical industries, from setting up their global IP management hub in Singapore. Refinements to Singapore s IP regime Singapore s upcoming Budget is an opportunity to refine the IP regime to further entrench Singapore s position as a global IP management hub. For one, greater clarity on the interpretation of the information that has commercial value classification by the Singapore tax authorities would certainly be welcomed. The inclusion of such consumer-related IP would help to encourage consumer-centric companies to establish and expand their IP management activities here. Singapore s current IP tax deduction law only covers purchased IP, but not internally-generated IP. It would be worthy to extend the tax deduction to include the costs incurred in creating and developing the IP, such as consultancy costs as well as costs relating to logo creation and building of one s own brands. The Productivity and Innovation Credit (PIC) can also play a role in enhancing our IP regime. The PIC currently provides enhanced tax deductions of up to 400% on its first S$400,000 spent annually on qualifying activities, including R&D. In addition, the R&D expenditure in excess of S$400,000 qualifies for enhanced tax deduction of 150%, subject to conditions. This bold initiative is targeted at encouraging companies to take the up-front risk relating to spending on R&D activities and promoting innovation in Singapore. Beyond subsidising the actual R&D activities, this scheme could be enhanced by incentivising companies to commercialise their IP portfolio from Singapore. Many European countries such as Belgium, the Netherlands, France and the UK complement their R&D deduction schemes with a patent box regime. This regime provides for a lower tax rate on future income related to qualified IP rights. The patent box scheme encourages companies to re-invest the returns of investment from the commercialised IP in the country. Companies would be incentivised to generate new IPs or further develop acquired IP in the country. The implementation of the patent box could help to shape the types of R&D activities being done in Singapore. Focusing on the payback of innovation commercialisation will influence companies to invest in applied or translational R&D activities, which usually have a shorter payback period and are highly dictated by the dynamics of the marketplace. This could form a natural extension of the Singapore government s policy towards promoting public-private partnership to create more market-oriented innovations in Singapore. Creativity and innovation are undoubtedly the new drivers of the global economic growth. As emerging and developed countries around the world compete for new investments, it is timely for Singapore to revisit its existing tax regulations for IP to extend its position in the competition for global ideas. Chia Seng Chye is Partner, Tax Services and Andre Toh is Partner, Transaction Advisory Services at Ernst & Young Solutions LLP This article was previously published in The Business Times on 18 January 2013 12 Issue 1, 2013

A fresh look at Attracting holding companies: Where Singapore can do better Singapore can perhaps take a leaf from the UK s book in allowing group relief for interest expense. Jonathan Stuart-Smith and Daniel Dickinson argue why introducing group relief for interest expense will further bolster Singapore s position as a holding company location Many countries throughout the world have taken the view that attracting and retaining holding company activity is beneficial, either to seek GDP benefits, additional overall tax revenues, or both. Singapore is no exception. When assessing the relative merits of potential holding company locations, multi-national companies (MNCs) consider different commercial, practical and tax questions. Tax questions that may be considered include: Taxation of dividends received and capital gains on future disposals of investments Extent of tax treaty network Withholding tax regime Availability of local incentive arrangements Existence or nature of controlled foreign company provisions When considering the above factors, Singapore often ranks amongst the most attractive regimes. In the Asia-Pacific region, Singapore often takes top spot alongside Hong Kong and Malaysia as the most competitive regimes, and also compares favorably with other attractive regimes further afield such as the Netherlands, Luxembourg, the UK and Switzerland. However, an area where Singapore can be seen as lagging behind some territories is in the rules on tax relief for interest expense. In this regard, Singapore can perhaps take a leaf from the UK s book in allowing group relief for interest expense. Where a company borrows to acquire equity investments, no relief is available in Singapore for interest expense incurred on that borrowing as dividend income received is, in most instances, tax exempt. These rules apply equally to borrowings entirely from unconnected third party lenders. Even where interest expense is deductible in Singapore, if it results in deficits (for tax purposes) in the holding company which has borrowed the funds, these deficits cannot be set off against taxable profits arising to connected Singapore companies under Singapore s group relief rules. Singapore is not alone in seeking to restrict relief for interest deductions in this area. The US and Germany have had similar provisions in place for some time whilst Japan, the Netherlands and Spain have recently announced measures to tighten their rules on interest deductibility in these circumstances. Comparison with the UK In recent years, the UK authorities have adopted a deliberate policy to increase the UK s attractiveness for holding company activities. As part of this reform, the UK has made various changes such as introducing an exemption from Issue 1, 2013 13

of taxable profits, such as from trading activities, interest income or taxable capital gains. corporation tax for dividends received in the UK, and significantly relaxing the UK s controlled foreign company rules. During these reforms, the UK authorities have maintained the UK s flexible regime on relief for interest expense for UK corporation tax purposes. Relief for interest expense In many circumstances, the acquisition of non-uk investments by a UK holding company should not result in the UK holding company paying any additional future UK corporation tax because of exemptions from corporation tax for dividends and capital gains. However, that UK holding company is still entitled in principle to tax relief for interest expense incurred on loans taken up to fund the acquisition(s). That is not to say that UK holding companies are entitled carte blanche to tax relief on any amount of interest expense incurred. The approach the UK authorities have taken is to allow relief for interest expense on acquisitions subject to various anti-avoidance provisions. These provisions include so-called thin capitalisation provisions where UK companies must be comfortable that amounts borrowed, and the terms of that borrowing, are arm s length. In other words would an unconnected third party lender have made the same loan on the same terms to the UK company in question? A further set of rules is the so-called worldwide debt cap provisions. These are mechanically complex but in concept seek to prevent a UK taxpaying group of companies from disproportionately bearing the worldwide group s borrowings and interest costs. Both of these anti-avoidance provisions are far less likely to apply where a UK company borrows directly from a third party. For example, it is generally difficult for the thin capitalisation rules to restrict an interest deduction where funds have been borrowed from a third party in a commercial transaction. In Singapore, even with direct borrowing from a third party, interest relief can still be restricted where the borrowing funds the acquisition of equity investments. Group relief Where a UK holding company does borrow to fund an acquisition and the anti-avoidance provisions do not apply, it may well result in a loss for that company for UK corporation tax purposes because there may not be sufficient UK taxable profits against which to offset the deficit. In those circumstances, the UK s flexible group relief system can allow relief for this deficit to be taken. On a current year basis, companies generating losses on interest can surrender those deficits to other UK companies making up their group. A group includes all UK companies who are 75%-owned, directly or indirectly, by the same parent company. That parent company can be UK or non-uk resident. The other UK companies in the group can offset these losses against other sources A first step for Singapore It may be a step too far to suggest that the Singapore Budget 2013 includes provisions to allow relief for interest expense in all the circumstances in which the UK allows relief. However we consider that the inability of Singaporean companies to surrender interest expense or deficits to other Singapore resident companies under the existing group relief rules artificially forces groups to combine holding activities with trading activities in the same legal entity in order to provide some relief for the interest expense. This puts Singapore at a disadvantage to other territories as MNCs often prefer to keep these activities separate, for example to facilitate efficient deployment of capital or future disposals of investments. As such we hope that, if interest expense is inherently deductible for one Singapore company, it can be available for relief against the profits of related Singapore entities. The writers are Jonathan Stuart-Smith, Leader of the Global Tax Desks in Asia-Pacific and Daniel Dickinson Senior Manager, International Tax Services UK Tax Desk at Ernst & Young Solutions LLP A shortened version of this article was previously published in The Business Times on 10 January 2013 14 Issue 1, 2013

A fresh look at Extending Singapore s lead as an asset management hub In the longer term, we hope the government will allow an effective tax exemption for Singapore-domiciled funds investing or trading through SPCs in Singapore. Desmond Teo and Chia Jing Wen highlight recent trends in the asset management industry and suggest ways to refine the tax regime for funds 1 Source: The Monetary Authority of Singapore s 2011 Singapore Asset Management Industry Survey In just a decade, Singapore has cultivated its aspiring asset management sector to one of Asia s leading asset management hubs. To extend this lead, Singapore needs to keep its tax regime relevant and attractive. Since 2002, the industry s assets under management (AUM) have grown almost fourfold to S$1.34 trillion and the number of investment professionals has tripled to 3,052 in 2011 1. This impressive growth is neither accidental nor incidental. It is partly the result of a series of coordinated and calibrated tax measures and incentives introduced over the past decade to enable Singapore to earn a slice of the global AUM pie (see graph). Measures such as the Singapore resident fund scheme and enhanced-tier fund scheme have added depth and vibrancy to the asset management industry and established Singapore as an attractive base for funds. Assets under management (AUM) vs. investment professionals AUM in Singapore (S$ trillion) 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 S13C changed FSI-FM introduced S13R S13CA introduced introduced S13X introduced 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Investment professionals 1,114 1,012 986 1,135 1,457 1,739 2,185 2,621 2,516 2,647 3,052 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Investment professionals Section 13C and 13CA tax exemptions Grants tax exemption for offshore funds managed by Singapore-based fund managers Section 13R tax exemption Grants tax exemption for Singaporedomiciled funds managed by Singapore-based fund managers Section 13X tax exemption Grants tax exemptions for approved enhanced tier funds managed by Singapore-based fund managers FSI-FM tax incentive Provides 10% concessionary tax rate for qualifying management fee and performance fee income earned by Singapore-based fund managers AUM in Singapore (S$ trillion) 0.31 0.34 0.47 0.57 0.72 0.89 1.17 0.86 1.21 1.35 1.34 Year Issue 1, 2013 15

16 Issue 1, 2013

Recent trends In recent years, the asset management industry has been marked by increasing competition, an ever-changing regulatory landscape and shifting market conditions in Singapore and beyond. We share our observations on some of the recent trends and changes in the industry. Implementation of FATCA The Foreign Account Tax Compliance Act (FACTA) is a game-changing piece of US legislation which will require foreign financial institutions (FFIs), including investment funds, to report on US citizens and residents to prevent tax evasion by these individuals through the use of offshore accounts. The deadline for the implementation of FATCA has been extended by another year to 1 January 2014, providing some respite to FFIs which have to comply with this legislation. But as the FATCA deadline looms, momentum is gathering within the asset management industry to get FATCA-ready. Around the world, calls have been growing louder by the financial sector for governments to sign up for the FATCA inter-governmental agreements (IGA) with the US Department of Treasury to facilitate FATCA compliance. This is because being located in a non-iga jurisdiction could increase the FFIs cost and compliance burdens. Already, up to 50 jurisdictions have initiated discussions with the US 2, including common fund jurisdictions such as Guernsey, Ireland, Isle of Man, Jersey, the Netherlands the Cayman Islands, as well as Singapore. To date, Denmark, Mexico, Spain and the UK have signed IGAs. Increasing proportion of AUM from Singapore For the first time in six years, the proportion of AUM from investors outside Singapore dropped below 80% in 2011 3. There was also a slight decline of 1.2% in AUM in 2011. It appears that in relative terms, the AUM from investors outside Singapore have declined while the AUM from Singapore-based investors have increased in 2011. While it is too early to conclude whether this is the start of a trend, it demonstrates the importance of the local AUM pie. No exemption on gains from assets managed by Singapore-based fund managers According to Forbes magazine, the total net worth of Singapore s 40 richest individuals as of July 2012 was S$59.4b, up from S$54.4b in the previous year 4. Singapore-based fund managers pursuing mandates from these high net-worth individuals face an unlevel playing field compared to their overseas peers. While Singapore-based individuals enjoy tax exemption on a variety of investment income, there is no clear tax exemption for all their gains or profits from assets in accounts managed by Singaporebased fund managers. These are also not exempted under the current family-owned investment company tax exemption. If such assets are managed by a fund manager outside Singapore, say in Hong Kong, such foreign-sourced income may be exempt from Singapore tax. This may inadvertently encourage Singaporebased individuals to shift the investment mandates for their assets overseas. Increasing focus on risk management There is a sharp focus on a robust risk management framework in Singapore with the introduction of an enhanced regulatory regime for fund management companies effective from 7 August 2012. While this is a positive step, it places an increased strain on resources for fund managers operating in Singapore because of the need for more risk-management headcount. In the same vein, due to the increasingly sophisticated fund structures and complex transactions, risk management personnel are no longer an option, but a necessity. Tax exemption regime excludes special purpose companies It is quite common for funds such as private equity funds and real estate funds to set up wholly-owned special purpose companies (SPCs) to trade or hold investments, for the purpose of containing risks and limiting liabilities. Currently, the tax exemption regime for Singaporedomiciled funds is not automatically extended to such SPCs. This means that the Singapore-domiciled fund would be taxed if the trades or sales of investments were undertaken by the SPC. The tax incentive is granted on an entity-byentity basis for each SPC (not across the group) as each SPC has to individually meet the conditions to qualify for the tax exemption. This duplication of criteria may present a hurdle for some funds. 2 Source: Press release US Engaging with More Than 50 Jurisdictions to Curtail Offshore Tax Evasion by the US Department of Treasury on 8 November 2012 3 Source: The Monetary Authority of Singapore s 2011 Singapore Asset Management Industry Survey 4 Forbes article Singapore s Richest 2012 by Suzy Nam published on 25 July 2012 Issue 1, 2013 17

Fine-tuning the tax regime for funds As Budget 2013 draws near, it is timely to explore more measures to reinforce Singapore s foothold as a leading asset management hub in the region. Here are our wishes. Sign an IGA with the US We hope the government will ink an IGA with the US. This would enhance Singapore s reputation as a responsible tax jurisdiction and demonstrate the country s commitment to safeguard its financial system from being used to harbour concealed wealth. It would also provide Singapore-based investment funds with an environment that facilitates FATCA reporting. This will make Singapore a more attractive jurisdiction to house investment funds. Widen the definition of investment professionals It would be helpful if the Singapore authorities can consider treating risk managers and chief operating officers as investment professionals under the Financial Sector Incentive Fund Management (FSI-FM) tax incentive as well as for purposes of Section 13X tax exemption. This recognises the importance of risk management professionals and aligns with the focus on a robust risk management framework. As the FSI-FM tax incentive grants a 10% concessionary tax rate on qualifying fee income derived by the fund managers, this helps to defray the costs of hiring risk-management personnel. Extend tax exemption to Singapore individual investors To remove any tax uncertainty and simplify the tax regime for Singapore-based individual investors, it would be useful if the Singapore authorities can consider granting a tax exemption (similar to the tax exemption granted for funds) for Singapore-based individuals and their holding vehicles, in respect of their assets managed by Singapore-based fund managers (in addition to the family-owned investment company exemption). This move would bolster Singapore s attractiveness as a wealth management hub. Extend tax exemption to SPCs In the longer term, we hope the government will allow an effective tax exemption for Singapore-domiciled funds investing or trading through SPCs in Singapore. It would be useful if an umbrella tax exemption can be automatically extended to SPCs that are wholly owned by funds that already enjoy the tax exemption. Singapore has made great strides in positioning itself at the forefront of the asset management industry. It should continue to proactively build upon its strengths and refine its tax exemption regime to cement its lead. Desmond Teo is Partner, Financial Services Tax and Chia Jing Wen is Manager, Financial Services Tax at Ernst & Young Solutions LLP A shortened version of this article was previously published in The Business Times on 22 January 2013 18 Issue 1, 2013

Elsewhere outside Singapore Singapore and Vietnam strengthen ties through tax treaty The key proposed amendments to the Treaty include revisions to the taxes covered, permanent establishment, dividends, interest, royalties and capital gains Articles. Nhung Tran and Sandie Wun discuss the key amendments made in the Second Protocol to the Singapore-Vietnam tax treaty and the impact of the changes on investors into these countries. Vietnam has emerged as one of the most enticing investment destinations in Asia. Singapore companies which have an interest in cultivating a business presence in Vietnam can tap on the Singapore- Vietnam tax treaty as they invest in the country. The Singapore-Vietnam Income Tax Treaty has been in force since 1994. In a sign of strengthening bilateral ties, a Second Protocol to amend the treaty was inked between the two nations on 12 September 2012. It has been entered into force on 11 January 2013 and unless otherwise indicated, it is effective as of 1 January 2014. The Protocol is generally drafted in line with the OECD Model Convention and contains favorable provisions which are expected to further promote investment and trading between Singapore and Vietnam The key proposed amendments to the Treaty include revisions to the taxes covered, permanent establishment, dividends, interest, royalties and capital gains Articles. We cover some of the important amendments to the Treaty in this Protocol and what this means for Singapore companies looking to invest in Vietnam. Permanent establishment The Protocol now clarifies when service providers are considered to have created a permanent establishment (PE). The definition of PE now contains the furnishing of services, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purpose, but only if activities of that nature continue (for the same or a connected project) within a Contracting State for a period or periods aggregating more than 183 days within any twelve month period. The inclusion of the 183 day safe harbor period under the Protocol provides clarity to companies when a taxable presence is established through the furnishing of services. Issue 1, 2013 19

Taxability of capital gains on sale of shares Under the new Protocol, Vietnam will now have the right to tax capital gains derived by a Singapore resident from the sale of unlisted shares deriving more than 50% of their value either directly or indirectly from immovable property situated in Vietnam. Under the current Treaty, gains derived from a sale of unlisted shares of a similar nature shall be taxable only in the State of which the alienator is a resident, i.e., in Singapore. Therefore, with the change resulting from the Protocol, Singapore investors with substantial land or real property holdings in Vietnam will need to re-consider their exit options. They will need to consider the tax implications of their investments in Vietnam, given the change to include a land rich restriction to the Article. The current Vietnamese corporate income tax regulation is silent on gains arising from a transfer between offshore entities (i.e., indirect sale of a Vietnam entity). Technically, any gains which may arise could be argued as falling outside the ambit of the Vietnam tax regulations. In practice, however, the Vietnamese tax authority may take an aggressive approach to such arrangements. In light of a possible increase in indirect share transfers involving Vietnam entities, it is not unlikely that the Vietnam tax authority may provide clarity on the tax treatment of indirect transfers in the not too distant future given the amendment to the Treaty under the new Protocol. 20 Issue 1, 2013

It is still uncertain when updates to the tax legislation or tax practice will be taken by the Vietnamese tax authorities in the future. Therefore, companies engaging in M&A transactions should take into consideration potential Vietnamese capital gains tax liability arising from direct or indirect transfers of Vietnam entities when drafting the legal papers and negotiating the purchase consideration. Taxability of interest Under Article 11 paragraph 2, the Treaty provides for a withholding tax rate on interest payments of 10%. For interest payments made by a Vietnam resident, the withholding tax under domestic tax legislation is 5% on the gross amount of interest. Therefore, paragraph 2 would not have impact on the withholding tax rates used. However, the Protocol includes an additional paragraph 9 which states that should Vietnam, in any treaty with other jurisdictions, provide for a rate of less than 10% on the gross amount of interest, the same lower rate shall apply for the purposes of paragraph 2 of Article 11. Under the tax treaty between Vietnam and France, interest income derived by a French resident will not be taxable in Vietnam if the recipient does not carry on business in Vietnam through a permanent establishment situated in Vietnam and if the amount of the interest charged is at arm s length. Given this Vietnam-France treaty, would paragraph 9 in the Protocol to Vietnam-Singapore treaty allow interest income payments made by Vietnamese payer to a Singapore recipient an exemption from Vietnam withholding tax, in the same manner as provided under the Vietnam-French treaty? Taxability of royalties With respect to payments for the use of, or the right to use any patent, design or model, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience, the withholding tax rate remains at 5%. Withholding tax rate on royalty payments on all other cases, however, is reduced from 15% to 10%. Given that under their respective domestic tax legislations, Singapore and Vietnam both have withholding tax rates on royalties of 10%, a lower than 10% withholding tax rate would have been more welcomed. Limitation of relief clause The limitation of relief clause has been deleted under the Protocol, which will allow Vietnam income that is not remitted to or received in Singapore to enjoy treaty benefits. Considerations Before companies can take advantage of any tax treaty benefit, they need to seek an administrative procedure from the Vietnam tax authorities to confirm the tax treaty, without which the benefits of the treaty will be nullified. The Protocol has now provided further clarity to the treaty. Will having the tax treaty benefits confirmed by the Vietnam tax authorities in the future make this formal validation more of a science and less of an art, perhaps? Nhung Tran is Tax Partner, Ernst & Young Vietnam Limited and Sandie Wun is Associate Director, Transaction Tax Services at Ernst & Young Solutions LLP Issue 1, 2013 21

Budget Seminar 2013 Tuesday, 12 March 2013 9:00 a.m. to 5:30 p.m. (Registration begins at 8:30 am) 2013 Ernst & Young Solutions LLP. All Rights Reserved. Raffles City Convention Centre Fairmont Ballroom, Level 4 80 Bras Basah Road Singapore 178882 Seminar fees Clients and alumni: S$250 Others: S$300 * Fees include lunch, refreshments and GST. Attendees will receive a copy of our Singapore Budget 2013 Synopsis. A discount of 10% applies for organisations registering three or more participants for the seminar. Enjoy a 400% tax deduction on the seminar fees under the Productivity and Innovation Credit scheme, subject to the relevant expenditure caps. Closing date Thursday, 7 March 2013 Registration/enquiries Cherie Chan Tel: +65 6309 8297 Fax: +65 6532 7662 Email: cherie-sy.chan@sg.ey.com Address for payment Ernst & Young Solutions LLP Finance department One Raffles Quay North Tower, Level 18 Singapore 048583 Tel: +65 6535 7777 Fax: +65 6532 7662 * Please send your payment only after you have received confirmation of your registration. For more information or to register online, please visit www.ey.com/sg/budget A soft copy of our Singapore Budget 2013 Synopsis will be available online at www.ey.com/sg/budget from 27 February 2013 How will the Budget 2013 proposals impact you and your business? Join us at our Budget Seminar to understand the key Budget changes and their implications. Our tax leadership and guest speaker will share their in-depth perspectives on the Budget proposals and the future of managing taxes in Singapore. Seminar highlights Learn about the implications of the Budget proposals on your business, understand the issues that may arise and discover planning opportunities Clarify Budget proposals during the interactive Q&A session Keep up-to-date on recent Singapore and international tax developments Gain insights on the future of Singapore tax enforcement and how to manage tax compliance risks Obtain an economic analysis of the budget from guest speaker Dr Tan Khee Giap Guest speaker Dr Tan Khee Giap Associate Professor of Public Policy Co-Director, Asia Competitiveness Institute Lee Kuan Yew School of Public Policy National University of Singapore Chair, Singapore National Committee for Pacific Economic Cooperation Who should attend Chief financial officers, tax directors, financial controllers, tax executives, finance managers, accountants How to register Register online at www.ey.com/sg/budget

At a glance Inland Revenue Authority of Singapore (IRAS) e-tax guides issued or revised from 1 January 2012 to 31 December 2012 Corporate and personal tax 1 October 2012 Income tax treatment of real estate investment trusts 17 August 2012 Productivity and innovation credit (second edition) 9 July 2012 Carry-back relief system 9 July 2012 Equity remuneration incentive scheme (ERIS) 29 June 2012 Deductibility of keyman insurance premiums 29 June 2012 One year write-off for new diesel-driven goods vehicles and buses 29 June 2012 Income tax treatment of limited liability partnerships (LLPs) 29 June 2012 Income tax treatment of foreign exchange gains or losses for businesses 29 June 2012 Filing of income tax computations in functional currencies other than Singapore dollars 29 June 2012 Utilising unabsorbed capital allowances, trade losses and donations 29 June 2012 Tax treatment of employee stock options and other forms of employee share ownership plans 29 June 2012 Securities lending and repurchase arrangements 29 June 2012 Income tax implications arising from the adoption of FRS 39 financial instruments: recognition & measurement (revised) 28 June 2012 Income tax and stamp duty : mergers and acquisitions scheme 6 June 2012 Tax deduction for expenses incurred on renovation or refurbishment works done to your business premises 30 May 2012 Certainty of non-taxation of companies gains on disposal of equity investments 11 April 2012 Ascertainment of income from business of making investment (second edition) 2 April 2012 Advance ruling system (revised) 22 February 2012 Tax exemption under section 13(12) for specified scenarios, real estate investment trusts and qualifying offshore infrastructure project/asset 5 January 2012 Income tax treatment of trusts (second edition) Property tax 27 November 2012 Revision of annual values for HDB flats from 1 January 2013 9 May 2012 Property tax assessment on common property Goods and Services Tax (GST) 30 November 2012 GST: pre-registration claims on goods and services 23 October 2012 GST : specialised warehouse scheme and zero-rating of supplies (second edition) 19 October 2012 GST incurred on purchase of land for residential development (fifth edition) 8 October 2012 GST guide on the electronic tourist refund scheme (etrs) (fourth edition) 1 October 2012 GST: fringe benefits (sixth edition) 1 October 2012 GST: major exporter scheme (eighth edition) 1 October 2012 GST: manufacturing sector (fourth edition) 1 October 2012 GST: guide for the fund management industry (third edition) 1 October 2012 GST : assisted compliance assurance programme (ACAP) (second edition) 1 October 2012 GST: how do I prepare my GST return? (tenth edition) 1 October 2012 GST: guide for the banking industry (second edition) 1 October 2012 GST: guide for e-commerce (fourth edition) Issue 1, 2013 23

Goods and Services Tax (GST) 1 October 2012 GST: the insurance industry (fourth edition) 1 October 2012 GST: general guide for businesses (ninth edition) 1 October 2012 GST: clarification on directly in connection with and directly benefit (fourth edition) 1 October 2012 GST: clarifications on the GST treatment of hire purchase and other financing instruments (second edition) 1 October 2012 GST: import GST deferment scheme (sixth edition) 1 October 2012 GST: use of business premises by third party for free (third edition) 1 October 2012 GST: do I need to register? (seventh edition) 1 October 2012 GST: guide on imports (fourth edition) 1 October 2012 GST: questions and answers relating to the hotel industry (third edition) 1 October 2012 GST: travel industry (sixth edition) 28 September 2012 GST: treatment of advertising services (fourth edition) 10 September 2012 GST: zero-rating of container services and the sale & lease of containers (third edition) 3 September 2012 GST: approved refiner and consolidator scheme (ARCS) 3 September 2012 GST : guide on exemption of investment precious metals (IPM) 28 August 2012 GST guide for the logistics service industry 1 August 2012 GST guide on the electronic tourist refund scheme (etrs) (third edition) 1 August 2012 GST guide for retailers participating in tourist refund scheme (fifth edition) 1 August 2012 GST guide for visitors on tourist refund scheme (fifth edition) 1 August 2012 GST guide for the banking industry 18 June 2012 GST: property owners and property holding companies (fifth edition) 2 April 2012 GST : advance ruling system (seventh edition) 1 March 2012 Import GST deferment scheme (fifth edition) 1 March 2012 GST guide for the marine industry 2011 budget changes (third edition) 1 March 2012 GST guide for the biomedical industry (fourth edition) 1 March 2012 GST: major exporter scheme (seventh edition) 1 March 2012 How do I prepare my GST return? (ninth edition) 1 March 2012 GST: general guide for businesses (eighth edition) 1 March 2012 Do I need to register? (sixth edition) 1 March 2012 GST: approved contract manufacturer and trader (ACMT) scheme (ninth edition) 25 January 2012 Import GST deferment scheme (fourth edition) 18 January 2012 GST: guide for retailers (sixth edition) 10 January 2012 Approved third party logistics company scheme (sixth edition) 10 January 2012 GST : approved contract manufacturer and trader (ACMT) scheme (eighth edition) 10 January 2012 GST : major exporter scheme (sixth edition) 10 January 2012 GST guide for the biomedical industry (third edition) 10 January 2012 GST guide for the marine industry 2011 budget changes (second edition) 10 January 2012 GST guide for the marine industry 2010 budget changes (third edition) 10 January 2012 GST guide on imports (third edition) 10 January 2012 GST guide for the aerospace industry (sixth edition) 25 January 2012 Import GST deferment scheme (fourth edition) 18 January 2012 GST: guide for retailers ( sixth edition) 10 January 2012 Approved third party logistics company scheme (sixth edition) 10 January 2012 GST: approved contract manufacturer and trader (ACMT) scheme (eighth edition) 24 Issue 1, 2013

Stamp duty 11 June 2012 Additional buyer s stamp duty (ABSD) on purchase of residential properties (fourth edition) 22 February 2012 Stamp duty treatment for the acquisition of multiple properties (second edition) 19 January 2012 Additional buyer s stamp duty (ABSD) on purchase of residential properties (third edition) 12 January 2012 Additional buyer s stamp duty (ABSD) on purchase of residential properties (second edition) Monetary Authority of Singapore (MAS) Circulars issued from 1 January 2012 to 31 December 2012 21 August 2012 Goods and services tax remission on expenses for prescribed funds managed by prescribed fund managers in Singapore 10 April 2012 Financial sector incentive ("FSI") scheme - clarifications to the implementation of the removal of qualifying base 9 April 2012 Tax exemption on payments on over-the-counter (OTC) financial derivatives 21 February 2012 Changes to the designated investments and specified income lists 21 February 2012 Tax exemption / waiver of withholding tax on payments falling under section 12(6) of the Income Tax Act made to non-residents by banks, finance companies and certain approved entities Agreements for Avoidance of Double Taxation (DTAs) signed or ratified from 1 January 2012 to 31 December 2012 DTAs signed 4 November 2012 Singapore Poland (revised DTA) 29 October 2012 Singapore Bermuda (tax information exchange agreement) 17 October 2012 Singapore Jersey 21 September 2012 Singapore Isle of Man 12 September 2012 Singapore Vietnam (second protocol) 28 May 2012 Singapore Portugal (protocol) 5 March 2012 Singapore Turkey (protocol) 15 February 2012 Singapore United Kingdom (second protocol) DTAs signed 27 December 2012 Singapore United Kingdom (second protocol) 6 December 2012 Singapore Bermuda (tax information exchange agreement) 19 October 2012 Singapore Italy (additional protocol) 30 August 2012 Singapore Bahrain (protocol) 1 August 2012 Singapore Canada (protocol) 1 August 2012 Singapore Switzerland (revised DTA) 29 February 2012 Singapore Estonia (protocol) Issue 1, 2013 25

2013 Goods and Services Tax (GST) Workshop Practical complexities in a simple GST Workshop agenda Day 1 Common GST issues Mechanics of GST, value of supply and types of supply Inter-company billings and recovery of expenses Conditions governing input tax claims Deeming of output tax Invoices in a foreign currency Bad debt relief Transfer of going concern Updates on GST All about goods Place and time of supply Imports Zero-rating of exports Handling of goods on behalf of overseas principal Exercise or case study Day 2 Services exposed Place of supply Time of supply Zero-rating of international services Exercise or case study GST collection is the second largest contributor to the Singapore tax revenue at $8.7 billion after income tax and it has grown by 6% as compared to the previous financial year. GST now accounts for almost one quarter of the Singapore tax revenue. From a GST compliance perspective, $80 million in taxes and penalties were collected as a result of GST audits and investigations conducted by the Inland Revenue Authority of Singapore (IRAS). (Source: IRAS Annual Report 2011/12) Businesses are thus encouraged to be proactive in managing their GST compliance. Having the right GST knowledge is a step in managing the risks and improving compliance. This will in turn help to avoid unnecessary IRAS audits, time and resources needed to rectify GST errors and penalties for filing incorrect GST returns. The majority of GST errors are often due to the lack of knowledge of the GST rules and regulations. It is imperative that the staff responsible for the company s GST returns are equipped with the necessary GST knowledge. Ernst & Young s GST workshops provide an excellent platform to view GST afresh and to keep abreast of any changes. Our workshops provide valuable insights into major GST risk areas and common errors. Join us at our GST workshops for updates and an in-depth analysis on the practical issues and problems that businesses face, and how to better manage these issues. Attend the Common GST issues module and choose any of the following optional modules: All about goods Services exposed Preparation of GST forms Who should attend Financial controllers, finance managers, accountants and accounting staff involved in the preparation of GST returns. Staff from operations, sales, logistics and administration have also benefited from our workshops. Main workshop leaders Yeo Kai Eng (Tax Partner) Kor Bing Keong (Tax Partner) Preparation of GST forms Completion of forms (GST F5, F7 and F8) Payment or refund of GST Record keeping requirements Common errors Exercise or case study Registration form (Please fax completed form to Cherie SY Chan at +65 6532 7662) 1st day, morning Inclusive in all course combinations 9:00 a.m. to 12:30 p.m. Common GST issues (Lunch provided) 19 March 11 April 22 May Optional modules - please indicate the dates for the modules you would like to register for: CPE hours: 7 to 14 CPE hours, depending on choice of modules Raffles City Convention Centre (City Hall MRT Station) Level 4, Plaza Meeting Room 80 Bras Basah Road, Singapore 189560 1st day, afternoon 1:30 p.m. to 5:00 p.m. 2nd day, morning 9:00 a.m. to 12:30 p.m. 2nd day, afternoon 1:30 p.m. to 5:00 p.m. All about goods 19 March 11 April 22 May Services exposed Preparation of GST forms 20 March 12 April 23 May 20 March 12 April 23 May Clients/Alumni of EY Public 2013 Ernst & Young Solutions LLP. All Rights Reserved. Address Ernst & Young Solutions LLP Finance department One Raffles Quay, North Tower Level 18, Singapore 048583 Tel: +65 6535 7777 Fax: +65 6532 7662 Website: ey.com/sg Registration/Enquiries Cherie Chan Tel: +65 6309 8297 Fax: +65 6532 7662 Email: cherie-sy.chan@sg.ey.com Register online now at www.ey.com/sg/gst Ernst & Young Solutions LLP reserves the right to cancel the seminar or amend the schedule, venue and speaker(s) due to circumstances beyond our control. Registration is on a first-come-first-served basis. We regret that we cannot give fee refunds, but changes in the personnel attending can be accommodated. Common GST issues + 3 modules $760 $820 Common GST issues + 2 modules $600 $660 Common GST issues + 1 module $420 $480 * Fees stated include lunch on first day of workshop, materials, refreshments and GST Group discount - A discount of 10% applies to organisations registering three or more participants in one registration. Name(s) Name(s) Name(s) Company Designation(s) Designation(s) Designation(s) Contact person Address S( ) Tel Email Fax (Please state clearly as confirmation is sent via email) Ernst & Young client: Yes No Ernst & Young alumni: Yes No Please send payment only after you have received confirmation of your registration.

Tax partners and directors If you would like to know more about the issues discussed and our services, please contact: Adrian Ball Managing Partner Tax Asean and Singapore +65 6309 8787 adrian.r.ball@sg.ey.com For further information, you can also contact one of the following or your usual Ernst & Young contact: Singapore Tax Partners and Directors Business Tax Services Chung-Sim Siew Moon +65 6309 8807 siew-moon.sim@sg.ey.com Ang Lea Lea +65 6309 8755 lea-lea.ang@sg.ey.com Helen Bok +65 6309 8943 helen.bok@sg.ey.com Chai Wai Fook +65 6309 8775 wai-fook.chai@sg.ey.com Cheong Choy Wai +65 6309 8226 choy.wai.cheong@sg.ey.com Chia Seng Chye +65 6309 8359 seng.chye.chia@sg.ey.com Choo Eng Chuan +65 6309 8212 eng.chuan.choo@sg.ey.com Goh Siow Hui +65 6309 8333 siow.hui.goh@sg.ey.com Lim Gek Khim +65 6309 8452 gek-khim.lim@sg.ey.com Lim Joo Hiang +65 6309 8654 joo-hiang.lim@sg.ey.com Latha Mathew +65 6309 8609 latha.mathew@sg.ey.com Florence Ng +65 6309 8632 florence.ng@sg.ey.com Ivy Ng +65 6309 8650 ivy.ng@sg.ey.com Poh Bee Tin +65 6309 8017 bee-tin.poh@sg.ey.com Nadin Soh +65 6309 8630 nadin.soh@sg.ey.com Soh Pui Ming +65 6309 8215 pui.ming.soh@sg.ey.com Angela Tan +65 6309 8804 angela.tan@sg.ey.com Tan Bin Eng +65 6309 8738 bin-eng.tan@sg.ey.com Tan Ching Khee +65 6309 8358 ching-khee.tan@sg.ey.com Tan Lee Khoon +65 6309 8679 lee-khoon.tan@sg.ey.com Sally Tan +65 6309 8245 sally.tan@sg.ey.com Teh Swee Thiam +65 6309 8770 swee-thiam.teh@sg.ey.com Chester Wee +65 6309 8230 chester.wee@sg.ey.com Financial Services Organization Chong Lee Siang +65 6309 8202 lee.siang.chong@sg.ey.com Amy Ang +65 6309 8347 amy.ang@sg.ey.com Stephen Bruce +65 6309 8898 stephen.bruce@sg.ey.com Kang Choon Pin +65 6309 8204 choon.pin.kang@sg.ey.com Desmond Teo +65 6309 6111 desmond.teo@sg.ey.com Human Capital Grahame Wright +65 6309 8701 grahame.k.wright@sg.ey.com Kerrie Chang +65 6309 8341 kerrie.chang@sg.ey.com Tina Chua +65 6309 8823 tina.chua@sg.ey.com Stephanie King +65 6309 8800 stephanie.king@sg.ey.com Grenda Pua +65 6309 8753 grenda.pua@sg.ey.com Jeffrey Teong +65 6309 8610 jeffrey.teong@sg.ey.com Wu Soo Mee +65 6309 8917 soo.mee.wu@sg.ey.com Indirect Tax Customs and International Trade Shubhendu Misra +65 6309 8676 shubhendu.misra@sg.ey.com GST Services Yeo Kai Eng +65 6309 8208 kai.eng.yeo@sg.ey.com Kor Bing Keong +65 6309 8606 bing-keong.kor@sg.ey.com Transaction Tax Russell Aubrey +65 6309 8690 russell.aubrey@sg.ey.com International Tax Services Andy Baik +65 6309 8268 andy.baik@sg.ey.com Transfer Pricing Luis Coronado +65 6309 8826 luis.coronado@sg.ey.com Henry Syrett +65 6309 8157 henry.syrett@sg.ey.com Asia Pacific Tax Centre Jonathan Stuart-Smith +65 6309 6022 jonathan.stuart-smith@sg.ey.com Matthew Andrew +65 6309 8038 matthew.andrew@sg.ey.com Gagan Malik +65 6309 8524 gagan.malik@sg.ey.com Christine Schwarzl +65 6309 8256 christine.schwarzl@sg.ey.com Asean Country Tax Leaders Asean and Singapore Adrian Ball +65 6309 8787 adrian.r.ball@sg.ey.com Guam Lance Kamigaki +1 671 649 3700 lance.kamigaki@gu.ey.com Indonesia Ben Koesmoeljana +62 21 5289 5030 ben.koesmoeljana@id.ey.com Malaysia Yeo Eng Ping +603 7495 8214 eng-ping.yeo@my.ey.com Philippines Emmanuel Alcantara +632 894 8143 emmanuel.c.alcantara@ph.ey.com Sri Lanka Duminda Hulangamuwa +94 11 5578101 duminda.hulangamuwa@lk.ey.com Thailand Yupa Wichitkraisorn +66 2264 0777 (Ext. 55003) yupa.wichitkraisorn@th.ey.com Vietnam Christopher Butler +84 8 3824 5252 christopher.butler@vn.ey.com Asean Specialty Practice Leaders Business Tax Services Chung-Sim Siew Moon +65 6309 8807 siew-moon.sim@sg.ey.com Human Capital Grahame Wright +65 6309 8701 grahame.k.wright@sg.ey.com Indirect Tax Yeo Kai Eng +65 6309 8208 kai.eng.yeo@sg.ey.com International Tax Services Andy Baik +65 6309 8268 andy.baik@sg.ey.com Transaction Tax Russell Aubrey +65 6309 8690 russell.aubrey@sg.ey.com Transfer Pricing Luis Coronado +65 6309 8826 luis.coronado@sg.ey.com Issue 1, 2013 27

About our tax services Our tax professionals in Singapore provide you with deep technical knowledge, both global and local, combined with practical, commercial and industry experience. We draw on our global insight and perspectives to build proactive, truly integrated direct and indirect tax strategies that help you recognise the potential of business change and build sustainable growth, in Singapore and wherever else you are in the world. We draw on extensive accounting and compliance experience and tried-and-tested methodologies that allow you to manage your direct and indirect tax compliance and reporting obligations effectively. We help you assess, improve and monitor your tax function s processes, controls and risk management and maintain effective relationships with the tax authorities. Our talented people, consistent methodologies and unwavering commitment to quality service help you to build the strong compliance and reporting foundations and sustainable tax strategies that help your business achieve its ambitions. It s how we make a difference. Business Tax Services Our Business Tax Services in Singapore are designed to meet your business tax compliance and advisory needs. Our tax professionals draw on their diverse perspectives and skills to give you a seamless service through all the challenges of planning, financial accounting, tax compliance and maintaining effective relationships with tax authorities. Our holistic approach: Builds sustainable tax strategies based on technical, practical, commercial and industry knowledge Provides the deep accounting and compliance knowledge and tried-andtested methodologies you need for efficient reporting Helps you assess, improve and monitor your tax function s processes, controls and risk management Supports you in managing your relationships with tax authorities effectively. Human Capital Our global mobility team advises many of the world s largest global employers as well as those just venturing into their first foreign country. With teams specialising in Singapore and US taxes, business immigration and global mobility policy and processes, we help you meet your executive compliance obligations, stay on top of regulatory change and manage your global talent effectively. Indirect Tax Customs and International Trade We bring you a global perspective on Customs and International Trade (CIT). Our CIT professionals can help you develop strategies to manage your costs, speed your supply chain and reduce the risks of international trade. We can help to increase trade compliance, improve import and export operations, reduce customs and excise duties and enhance supply chain security. We help you to address the challenges of doing business in today s global environment to help your business achieve its potential. GST Services Our indirect tax professionals identify risk areas and sustainable planning opportunities for indirect taxes throughout the tax life cycle, helping you meet your compliance obligations and your business goals around the world. Our globally integrated teams give you the perspective and support you need to manage indirect taxes effectively. 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. International Tax Services International Tax Our integrated global network of international tax professionals helps you manage your business tax burden by uncovering opportunities, managing global tax risks and meeting cross-border reporting obligations. Our multidisciplinary teams help you assess your tax strategies and exposures, assisting you with international tax issues, from forward planning, through reporting, to maintaining effective relationships with the tax authorities Transfer pricing and tax effective supply chain management (TESCM) Our transfer pricing professionals help you review, document, manage and defend your transfer pricing policies and processes aligning them with your business strategy. Whether you are changing business structures or models, managing the impact of major transactions or negotiating with the tax authorities, we bring you a global perspective based on our long-standing experience of what really works. Our multidisciplinary TESCM teams work with you on supply chain design, business restructuring, systems implications, transfer pricing, direct and indirect tax, customs and accounting. We can help you build and implement the structure that makes sense for your business, improve your processes and manage the cost of trade. Transaction tax By combining diverse cross-border transaction experience with local tax knowledge across a broad spectrum of industry sectors, we can help you make informed decisions and navigate the tax implications of your transaction. We mobilise wherever needed, assembling a personalised integrated global team to work with you through the transaction life cycle, from initial due diligence to post-deal implementation. We can suggest structuring alternatives to balance investor sensitivities, promote exit readiness and raising opportunities for improved returns. 28 Issue 1, 2013 28

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. Issue 4, 2012 Issue 3, 2012 Issue 2, 2012 Issue 1, 2012 Issue 3, 2011 Issue 2, 2011 Q1 2011 November/December 2010 September/October 2010 July/August 2010 May/June 2010 March/April 2010 January/February 2010 November/December 2009 September/October 2009 July/August 2009 May/June 2009 March/April 2009 January/February 2009 Past issues of can be downloaded from http://www.ey.com/sg/en/services/tax/library---you-and-the-taxman