Lack of equal tax treatment a stumbling block to cross-border fund deal: MAS

The Monetary Authority of Singapore.
The Monetary Authority of Singapore.ST PHOTO: KEVIN LIM

SINGAPORE - Singapore regulators have been involved in talks to allow cross-border selling of mutual funds and unit trusts across Asia Pacific, but the lack of a fair taxation arrangement is now proving to be a stumbling block.

The so-called Asia Region Funds Passport (ARFP), to be launched next year, will allow fund managers operating in one member country to offer their funds in another member country that has signed on to the ARFP, under a streamlined authorisation process.

Singapore signed a Statement of Intent on the ARFP and has been involved in drafting the framework for the ARFP since 2013.

However, last Friday (Sept 11), Singapore decided not to sign a Statement on Understanding (SOU) on the deal at the Asia Pacific Economic Cooperation (Apec) finance ministers meeting in Cebu, the Philippines.

Six other nations signed the statement - Japan, Australia, South Korea, the Philippines, Thailand and New Zealand.

The Monetary Authority of Singapore (MAS) told AsianInvestor magazine that taxation arrangements that had been committed to previously had not been included in the SOU.

"When we signed the Statement of Intent in 2013, the signatories explicitly committed to reduce the potential impact of taxation arrangements which would otherwise impede the success of the ARFP," the MAS said.

"This was consistent with the feedback that the industry gave, where for the ARFP to be successful there needs to be a level playing field. This means that foreign funds offered to investors in a jurisdiction should be suject to similar tax treatments as funds managed locally."

The SOU did not address this issue and did not provide any commitment to addressing the impediment of unequal tax treatment, the MAS noted, adding that signing the statement now would not be beneficial to fund managers in Singapore.

However, the MAS said it remains open to participating in the ARFP, when there is commitment to resolve this tax issue.

In the meantime, it said Singapore will continue to develop and finalise the arrangements for the ARFP, including drafting the regulatory framework.