Banks and other financial firms now have to establish the tax residency status of all their clients under new rules to fight tax evasion.
The move comes as Singapore began complying with the Common Reporting Standard (CRS) from Jan 1.
The international standard, endorsed by the Organisation for Economic Cooperation and Development (OECD), allows countries that have agreements with each other to automatically exchange financial data for tax purposes. PwC Singapore tax partner Brendan Egan said the "CRS is a global standard designed to detect and deter tax evasion through non-reporting of income from offshore accounts".
Financial institutions must also report to the Inland Revenue Authority of Singapore (Iras) the financial account information of account holders who are tax residents of jurisdictions with which Singapore has a Competent Authority Agreement (CAA) to exchange the information. Singapore has so far signed CAAs with Australia, Britain and Japan, among others.
This means, for example, that once the agreement takes effect, Singapore will automatically share with Australia the financial account information of accounts in Singapore held by Australian tax residents. Australia, in turn, will do the same with Singapore for the financial account information of accounts in Australia held by Singapore tax residents.
The idea is that as countries automatically report such data to each other, it would act as a deterrent to anyone who wants to evade taxes or park illicit funds by using offshore accounts.
Singapore has made an international commitment to commence automatic exchange of information under the CRS next year.
Iras said the information will be disclosed and used only for tax purposes such as assessment. It will not be used for other purposes unless such disclosure is permitted in Singapore and with approval from Singapore.