In Singapore, as in many other jurisdictions, a new reporting regime designed to weed out tax evaders and foster more transparency has come into force.

One of the most significant international regimes to affect the financial services industry in recent years starts to bite this year in Singapore as the Common Reporting Standard takes effect.

Starting from 1 January, banks and depository institutions must clearly establish the tax residency status of all those who have accounts.

The CRS, which covers more than 100 jurisdictions including Singapore, Switzerland, Hong Kong, Dubai and the UK, but not the US, is a blow to bank secrecy and seen as part of moves by countries to break down barriers to hunting tax evaders. The CRS is part of a package of measures taken in recent years to stem outflows of revenues to secretive locations and curb illicit money flows. 

Depository institutions such as banks, specified insurance companies, investment entities and custodial institutions must establish the tax residency status of all their account holders, and report to the Inland Revenue Authority of Singapore, IRAS said in a statement on its website late last week.

All account holders of significant global financial institutions, when requested, must provide such institutions with information and supporting documents to establish their tax residency status. For accounts opened before 1 January 2017, financial institutions may contact the account holders to confirm their tax residency status if the FIs hold information that indicates they could be foreign tax residents. 

For new accounts opened on or after 1 January 2017, financial institutions will use a self-certification form, to be filled in by account holders, to collect tax residency information, the statement said.

“If the account holders do not respond to their FIs’ requests to confirm their tax residency status, the FIs will have to treat the account holders as tax residents in the respective foreign jurisdictions, based on the information available to the FIs,” the statement continued.

The CRS takes effect in Singapore at a time when the jurisdiction has felt the chill of a recent Indonesian tax amnesty – seen as pulling billions of dollars out of the financial hub – and controversy over how several banks dealt in questionable money from 1MDB, the Malaysian state-run fund. Falcon Private Bank and BSI, both headquartered in Switzerland, have been kicked out of Singapore by the local financial regulator.

Ironically, while it has taken an aggressive stance in chasing after clients using bank accounts in offshore centres, the US is not a signatory to CRS. The US has its own extra-territorial enforcement system to deal with expat Americans, the Foreign Account Taxation Compliance Act, which in some ways resembles the CRS regime, although it is argued the latter is broader in scope.