Singapore Government Sets Small Business Controllers Astir As AEOI Comes Knocking

singapore registered controllers red tape
Image by James Petts
Until now the controllers of most local businesses could sit quietly in the background, passively earning money. To the world at large they appeare to be unconnected with the company providing their income or wealth. In the new world of AEOI and FATCA, goverments no longer condone such anonymity. These folks are now deemed Registerable Controllers” whom we describe in more detail further on.

For government departments to learn who actually controls the business is a significant chore today. So legislation will now go into effect on 31 March 2017 to rectify that problem.

From that time forward, some companies must maintain a register of their “Registerable Controllers”. Government owned companies, financial institutions and companies traded on a stock exchange are exempt.
Their registrar’s office or the registered address will keep a new document known as the “Register of Controllers”. You can find more detail on it here

Registerable Controllers

The legislation is interesting in that it doesn’t say who IS a registerable controller; it defines who isn’t one.
If you (either as a person or a company) control a company indirectly through one or more controllers, you aren’t a controller. In that case, don’t have to appear on the register. In other words, for example:

  1. If you are company A and own or have a significant interest in company B and
  2. company B owns company C,
  3. then B would have to register with C as its controller and
  4. A would have to register with B as its controller.

Because 25% interest in the company or in its voting shares is the cut-off. A company could have up to four registered controllers, if they each controlled 25% of the voting shares.

More Information

This is just a brief summary of how the law works. There are more details for the immense variety of ownership and control structures that could exist, but the principal is always the same:

  1. If the company is already statutorily required to keep a record of its controllers somewhere, it isn’t required to maintain a second copy.
  2. If an individual or legal person controls a company indirectly through one or more companies, they need only be listed at the directly owned company(ies) subject to a above.

As always, the devil is in the details, which you can find here.

AEOI vs FATCA Don’t Let Preconceptions Mislead You

OECT Logo

By Nzeemin [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

AEOI, FATCA, CRS and BEPS,not to mention the OECD and the IMF are impacting you in ways they never have before. It is a fair bet that the almost daily changes that are occurring in the banking world today have most people who read this column behind the curve. When that happens to us we tend to fall back on old patterns of thinking. That’s not because of some innate character flaw but because that’s one of the ways the body conserves energy.
Thinking is hard work and your brain is predisposed to be lazy. This is one of those times that you need to give it a swift kick in the behind, so to speak. Old patterns of thinking can end up being very costly to you.
“My life is just fine,” your brain thinks, “I don’t need to be thinking about my bank accounts. It’s just too bothersome and things are going okay.”
A cow’s brain is thinking the same way the day before it heads to the slaughter-house. Life is pleasant until it suddenly isn’t.

Behind the Scenes of AEOI

Virtually every country is in some degree of financial trouble. Misspending, greying populations and crafty citizens are just three of the many causes. When politicians have a problem, their first reaction is to reach for the chequebook but often these days the bank account is overdrawn. Because they want to be re-elected, politicians will do almost anything before they raise taxes. So they cast around for ways to get money without raising tax rates.
A few years ago the search for taxes led the U.S. to implement FATCA to make it hard for its citizens to hide untaxed money abroad. OECD politicians said “Hey! What a great idea!” and so they came up with a similar plan for their own citizens called the Automatic Exchange of Information (AEOI).

FATCA is born

When the U.S. was trying to implement its early form of international tax reporting the project was an utter failure. Governments refused to co-operate as they all saw an advantage for their banks if they just stuck with the old ways. So the U.S. strong-armed individual banks. “Co-operate with us,” they said, “or you’ll never be able to transfer money or deal in dollars again!”
Unsurprisingly, the banks all stood up, saluted and cheerily waved their little American Flags. It didn’t really matter, they thought, it was only the American taxpayers who were in trouble. Sell them out and everything else will be just fine.

AEOI arrives

That fine state lasted only a couple of years when all the other industrialised countries realised that they could do it too. So they came up with AEOI which, because of the number of nations backing it, is a really big deal. Nearly every country that matters is moving quickly down the road to implementation. By the end of 2019, the world is going to be a very inhospitable place for those who want to minimise their taxes or keep their wealth out of the hands of distant relatives, Even those who simply want to do business efficiently and economically now find their jobs more difficult.

Surprise Winners

Not every country is one where you want to put your money… exchange rates are volatile, governments are fickle and bank staff are unhelpful. And as for the safety of the banks themselves, well that’s a whole story unto itself. There are plenty of offshore banks that take your money and charge you for the privilege. Then they take most of it and invest it, keeping the profits for themselves.
There is no bank authority worth the name to tell you how safe those banks are. Their countries have joined AEOI so they will report your balances and deposits to whatever country you are a tax resident of.
Surprisingly, though, the country that kicked this off, the United States, may now be the best place to put your money. It already has FATCA in place and has no need to participate in AEOI to collect its taxes. It has states that provide a fair level of privacy and its banking regulation is among the world’s best.
For the moment Singapore has advantages like the U.S. Its banks are among the worlds strongest and the MAS is one of the world’s most stringent regulators. For the present, Singapore is slow-walking its participation in AEOI and may ultimately have little more than token participation.
We have taken the time to do a financial and jurisdictional analysis of a number of banks around the world. Contact us for our recommendations and assistance.

CRS/AEOI Strikes: Singapore & Australia Will Exchange Banking Info.

National Australia Bank, Queen St. implements CRS/AEOI

Effective 1 July, 2017 Australians in Singapore and Singaporeans in Australia will find their tax information is now being shared with their home governments [via CRS/AEOI], or rather, the countries in which they are “tax residents”.  Australia has taken what is referred to as the “wide approach” [to CRS/AEOI] which means that up front the financial institutions will be asking their customers to list all of the countries in which they are tax residents and will report this information to the Australian Tax Office (ATO) along with the tax information.  The ATO will make a determination as to whether this information will be shared with any particular country, but it will not be up to the financial institution to make this determination.

Under CRS/AEOI in Australia, there is no minimum account balance required for reporting… i.e. if the account exists, it will be reported. This affects not only Australians and Singaporeans, it also affects Americans with accounts in Australia as, for ease of implementation, the ATO has decided the apply the same rules to FATCA (the one-way reporting of American accounts to the US IRS) as it applies to CRS in terms of financial institution reporting.  Financial institutions aren’t required to apply the CRS guidelines but it is anticipated that they will do so voluntarily in order to ease their own regulatory burden. If misery loves company then Aussies and Singaporeans will probably cheer the joining them in their pain.

To be clear, the ATO has classified the following types of organisations as financial institutions:

  • a Custodial Institution
  • a Depository Institution
  • an Investment Entity
  • a Specified Insurance Company
  • certain Trusts

The ATO has issued these guidelines which, although intended for financial institutions, can be useful for individuals trying to control their tax exposure resulting from CRS/AEOI. If you think that you may have any tax exposure in Australia, you should read through the guidelines; you may find that you are less (or more) exposed than you think.