Court overrules tax authority

can you pick up customers in yellow box?

What is the issue in dispute?
The company is in the business of leasing aircrafts. The company has subsidiary firms in Cayman Island. The subsidiary firms bought aircrafts with loans pegged to floating interest rates. The aircrafts are rented out to airlines on fixed rental rates.

The subsidiary firms are supposed to use the rental proceeds to service the interest obligations. Often, the firms face revenue shortfall to meet those obligations.

The Singapore parent then entered into interest rate swap arrangements with banks in Singapore to hedge against the risk of floating interest rates on behalf of its subsidiaries. During the 17-month period from October 2006, the Singapore parent company made payments to its subsidiaries overseas as part of interest rate swap arrangements. 

IRAS’s position

  • IRAS has taken the position that these interest payments overseas are subject to withholding tax under provisions dealing with loans borne by the parent firm.
  • The Comptroller argued that such broad interpretation of the relevant section for such payments to be taxable has been accepted by tax advisers, practitioners and businesses in the past.

P/S – The name of legal counsel representing IRAS was not mentioned by K.C. Vijayan, the ST law correspondent.

The Singapore parent’s position

  • The tax authority has taken a too broad an interpretation of the law.
  • Such braod interpretation may actually discourage foreign investors from doing business in Singapore.

P/S – Leung Yew Kwong / Tan Shao Tong from WongPartnership represented the plaintiff.

High Court – Justice Andrew Ang
The Court ruled in favour of the Singapore parent on the following grounds:-

  • interest rate swap payments are not subject to withholding tax under s12(6)(a) of Income Tax Act
  • the payments were not in relation to any loan borne by the firm here
  • IRAS has taken a too broad an interpretation of the law
  • past acceptances by tax advisers, practitioners etc should not be cited to justify an interpretation of the law

The ruling would mean that the Comptroller of Income would have to make substantial refund and pay costs to the Singapore company. The costs to IRAS could go higher when business entities which were involved in similar situations and had paid the taxes may now seek a review with IRAS given the ruling.

Reference – K.C Vijayan, “Court overrules taxman, orders refund for firm”, Straits Times, Nov 6, 2010.

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Singapore to have own accountancy qualification. Why?

who says accountants are boring?

What will be happening in 2011?

Singapore will soon have its own post-university professional accountancy qualification.

The Pro-Tem Singapore Accountancy Council is currently developing the programme with the Institute of Certified Public Accountants of Singapore (ICPAS) in consultation with accounting bodies in the UK, Australia and the Association of Chartered Certified Accountants.

Why is described as “post-university… qualification”?

The certification process will be open to GRADUATES from non-accountancy backgrounds and foreign students. Theoretically a history graduate could go through a “bar exam” before being officially conferred the title of being a “qualified accountant”. [ACCA has done that for me and probably for majority of the accountants in Singapore ie. allows an Economics graduate to become a trained accountant which is internationally recognised.]

Why are we doing this?

Firstly, this is supposed to help Singapore to achieve a leading global accountancy hub status in Asia Pacific by 2020.

In the words of Second Finance Minister Lim Hwee Hua, she said accountancy professionals here and in the region will have an avenue to develop their careers by obtaining credentials that are globally recognised. [Singapore should become the top of mind place to get an accounting qualification that would be recognised by countries in the region.]

She said: “The objective is to develop accounting professionals who are not just deep problem solvers in the core area of accountancy. We also want our accountancy professionals to be equipped with the skills to interact with other specialists and understand technical issues from a wide range of disciplines and functional areas.”

Secondly, the Pro-Tem Singapore Accountancy Council is also looking into alternative niche areas for accountants here to specialise in instead of just focusing on the traditional areas of auditing, accounting and tax.

“We’ve already formed a committee to look at the different specialisation pathways in terms of risk management, for instance, development of CFOs (Chief Financial Officers), internal audit, valuation, taxation. These will be the specialisation, so called qualifications, that we can look at,” said Bobby Chin, chairman of Pro-Tem Singapore Accountancy Council.

Other areas of specialisation such as management accounting or forensic accounting may be introduced later.

Singapore wants to achieve the status of being a talent hub where “travellers from universe can land in Singapore and seek the necessary talents to perform whatever tasks needed”. Remember Han Solo in Star Wars? So if you are looking for a pilot to fly a interglactic spaceship or people to value a tree or to perform due diligence on a nuclear plant acquisition, we should have them here.

Source – http://www.channelnewsasia.com/ / Jonathan Peeris