Singapore and the United States have signed a long-awaited FATCA Model 1 inter-governmental agreement or IGA.

The 'Model 1' treaty was concluded on 9 December and the island government is claiming that it will "help ease Singapore-based financial institutions' FATCA compliance burden."

Singaporean entities are required to perform 'duly diligent' procedures in relation to new individuals' accounts and new entities accounts (newly opened on or after 1 July 2014) as set out in Section III and Section V respectively in Annex I of the agreement. They may apply a set of alternative procedures to certain of these accounts - details are set out in Sections VI(G) to H in Annex I of the IGA.

SGFIs will have to submit data to the Inland Revenue Authority of Singapore in 'version 1.1' - no other data format will be accepted. The first submission to IRAS is due on 31 May 2015. It, along with the Monetary Authority of Singapore and the Ministry of Finance, will provide financial institutions with further guidance about how to comply with FATCA by January. This is subsidiary legislation to be issued pursuant to the Income Tax Act (Cap. 134).

Since 5 May, the US has treated Singapore as though it already has an IGA in effect. With this in mind, the MOF, MAS and IRAS have published a draft Income Tax (International Tax Compliance Agreements) (United States Of America) Regulations 2014 and a draft e-Tax Guide on Compliance Requirements of the Singapore-US Intergovernmental Agreement on Foreign Account Tax Compliance Act, releasing them for a public consultative exercise that closed in October.

A paper by Baker & McKenzie in Singapore explains: "The draft regulations seek to implement the IGA and adopt into Singapore law the concepts and terms used in [it]. It sets [i.e. they set] out a regime covering the identification and reporting obligations of FIs in relation to financial accounts and payments made to other FIs which are 'non-participating' and [they] contain statutory provisions which are to be read with the SG-US IGA in determining whether certain parties and financial accounts are exempt from reporting obligations.

"The draft e-Tax Guide is designed to provide...interpretation of the IGA and the regulations. Whilst not binding under Singapore law, [it] represents the opinion...of IRAS."

The report goes on to say that the e-Tax Guide covers:

* The classification of FIs, which determines their obligations and/or exemptions therefrom. It contains guidance in relation to entities and structures that the IGA or the Regulations do not cover expressly, such as trusts.

* The identification and classification of financial accounts in relation to which 'due diligence' and reporting requirements must be met.

* 'Duly diligent' procedures to pick out the financial accounts that carry a reporting obligation.

* Ways of making reports to IRAS, with some vague guidance about how to answer questions from the IRS and resolve cases of non-compliance.

The Congress of the US enacted the Foreign Account Tax Compliance Act (FATCA) as part of the Hire Act in March 2010 to target non-compliance with US tax laws by US persons using foreign accounts. FATCA requires all financial institutions (FIs) outside the US to transmit information about financial accounts held by US persons to the US periodically. FIs that fail to do so face a 30% FATCA-related withholding tax on certain payments made from the US. To oblige FIs in foreign countries to comply with FATCA:

* Model 1 forces FIs in a signatory country to report information about the accounts of US persons to the relevant domestic authority, which will in turn provide the information to the US Internal Revenue Service;

* Model 2 forces them to report such information directly to the IRS, which, in the words of the Inland Revenue Authority of Singapore, "is supplemented by information exchange upon request between the US and its relevant government counterpart."