Singapore and Hong Kong to Benefit from German-Swiss Tax Treaty

If media reports are to be believed, there will be a large inflow of funds into Singapore assets which may concentrate in purchasing of real estates and also local shares. This will have a positive effect on SGD, weighing down USD/SGD further.

However, Singapore is also trying hard to shed its Tax Haven image, which could result in more Tax Treaties with other countries, hence negating all the potential tax savings foreign investors may have should they park their funds in Singapore rather than their home country.

Hence the question becomes a matter of “When will it happen?”. Based on current evidence, we could be a few years away minimally before Singapore becomes the current Switzerland. That few critical years could still be attractive enough for foreigners to channel funds into the island city.

Amid German concerns that its wealthy citizens are moving funds from Switzerland before a new German-Swiss tax treaty takes effect next year, Singapore and Germany said on Sunday they had agreed to bolster their double-taxation agreement with internationally agreed standards on information sharing.

“Banking secrecy will not constitute an obstacle to exchanging information,” said the joint statement, which came at the end of German Finance Minister Wolfgang Schaeuble's weekend visit to Singapore.

Media reports have put the amount of German money moving to Singapore in the double-digit billions.

“The perception is that Swiss banks have concluded Switzerland is unlikely to remain a tax haven for much longer and Singapore is the new place to do business,” said Ronen Palan, a professor at City University London who has conducted numerous studies on offshore finance.

Swiss banks could see assets from Western European clients fall 28 per cent to 623 billion Swiss francs (S$814 billion) by 2014 because of the deals to tax undeclared accounts, the Boston Consulting Group said in a report in May.

Singapore and its rival Hong Kong look set to benefit.

Together, the two Asian hubs manage US$1 trillion (S$1.2 trillion) in offshore funds, with about 75 per cent of that coming from within the region. But Singapore and Hong Kong may overtake Switzerland – now the largest offshore wealth centre with assets of about US$2.1 trillion – in 15 to 20 years, Boston Consulting said.

Singapore, with tax rates that top out at 20 per cent and no capital gains tax, is already synonymous with wealth. BMW and Mercedes were the top two brands among all cars sold in the first eight months of this year, bestsellingcarsblog.com says.

Safe and clean, the city-state bills itself as a tropical refuge with exclusive residential enclaves, a marina for super-yachts, two casinos, fine dining, high-end boutiques and an annual Formula One race that brings in the global jet-set.

Rich residents include Eduardo Saverin, the co-founder of Facebook, who has called Singapore home since 2009.

Via – Asiaone