Responsible Tax Management

REsponsible Tax Management

OCBC is committed to complying with applicable tax laws, regulations and requirements and respects the intent of the laws and regulations by paying our fair share of taxes across all countries in which we operate. These include all taxes that we incur on our business operations, as well as tax that we collect on behalf of the government, such as withholding taxes.

We recognise the key role that tax plays in society and the development of the countries where we operate. A responsible approach to tax is essential to the long-term sustainability of these societies.

This statement complies with the requirements under the United Kingdom Finance Act 2016, Schedule 19, Paragraph 19.

Tax governance structure

OCBC Group CFO, assisted by the Head of Group Tax, oversees the tax function which is responsible for tax compliance and tax risk management. Given that tax legislation is complex and varies across the countries in which we operate, tax risk can arise due to differences in the interpretation of such legislation.

To address this, we apply our Tax Risk Management (TRM) Framework which is designed to help us monitor, manage and mitigate our tax risks in a structured manner. The TRM Framework applies to OCBC Head Office, its subsidiaries and branches and updates are provided to relevant stakeholders when changes to the Framework are made. The Framework is updated when there are material changes or at least once every three years. The TRM Framework is approved by Group CFO, endorsed by Group CEO, with the Audit Committee having oversight of the Framework (as delegated by the Board).

Approach to Tax Risk Management

Our TRM Framework is founded on the following principles:

  • Defining Roles and Responsibilities to Manage Tax Risks

    We have a formalised tax governance structure, which defines the roles and responsibilities of key personnel in relevant functions within the Group. Each party is aware of their roles and responsibilities in driving and managing the tax risk management practices in the Group.

    OCBC employs qualified in-house tax professionals to support tax compliance and advisory. We have a system of controls and processes, as well as people with the necessary skills and knowledge to comply and advise on all tax related matters including preparing and filing local tax returns in a timely manner. To the extent that there is significant tax uncertainty or complexity, we will seek external professional advice or where applicable, consult with or seek ruling from the relevant tax authority.

    We constantly monitor updates and changes to tax legislations to assess the impact on the Group and ensure compliance with any new rules/requirements. In addition, training and guidance is provided to non-tax specialist personnel on tax matters relevant to their roles in managing tax compliance and tax risks.

  • Setting Tax Risk Tolerance Level

    We do not use tax haven jurisdictions to avoid taxes as entities established in such jurisdictions are for commercial reasons. We have no tolerance for any transaction that is motivated by tax avoidance or tax evasion. We only undertake transactions which are grounded in genuine commercial activities. We will not undertake transactions whose sole purpose is to create a tax benefit which is beyond what is reasonably understood to be intended by relevant tax rules.

    We pay taxes according to where value is created within the normal course of commercial activity and do not use artificially fragmented structures or contracts to avoid establishing a taxable presence in jurisdictions where we do business.

  • Managing Tax Risk Management Process

    The TRM process comprises three components to manage tax risks in a structured, systematic and consistent manner:

    1. Risk Identification and Measurement: We established baseline controls to identify potential or actual tax risks to ensure that such risks can be understood, assessed and quantified for monitoring purposes.
    2. Risk Mitigation and Management: We ensure that positions taken in our tax returns are supported by sound technical basis in law or regulation. As part of the control framework, we perform periodic reviews of our tax filings and put in place a Tax Control Testing Framework to identify gaps in our business processes and rectify them in a timely manner. The Group’s Internal Audit team also provides an independent periodic review of the tax processes and filings.
    3. Risk Monitoring, Reporting and Response: We have in place a process to ensure that the responsible party reports any key activities where there could be potential or actual tax risks, to the Head of Group Tax. Where there are tax risks which may give rise to substantial tax exposure or affect reputation of Group, such risks are escalated to the Group CFO, Group CEO, Audit Committee and Board.
  • Compliance

    As OCBC is committed to complying with applicable tax laws, regulations and requirements, our relevant policies and procedures are updated periodically or when necessary to reflect changes in relevant tax laws and the business environment.

    We aim for certainty on tax positions. Where the law is unclear or subject to interpretation, we will, where appropriate, seek opinion from external tax consultant or obtain agreement on tax treatment with tax authorities.

Approach towards dealings with tax authorities

OCBC seeks to maintain a collaborative and transparent relationship with tax authorities in the jurisdictions we operate. Our dealings with tax authorities are based on mutual trust, transparency and respect. We respond to tax queries in a timely manner and are forthcoming with information.

Where appropriate and possible, we seek to enter into an early dialogue with tax authorities or apply for advanced rulings where there is significant uncertainty about how the tax rules apply to our business. We also participate actively in industry forums to collectively surface issues, provide feedback and discuss commercially viable solutions with tax authorities.

Governments often implement tax rules to incentivise certain activities such as encouraging companies to increase investments, stimulate growth or promote job creation. OCBC is primarily in the financial services industry which contributes meaningfully to the growth of Singapore as a financial hub. Such growth requires continuous investments for which the Government may provide tax incentives such as the Financial Sector Incentive. We welcome such incentives as they encourage the strengthening of the robustness of the financial economy. We therefore make use of incentives where they apply in areas where we have commercial substance.

We are happy to support the tax authorities’ ongoing initiatives to enhance the robustness of the local tax system. In Singapore, we participate in the Enhanced Taxpayer Relationship Programme introduced by the Inland Revenue of Singapore to facilitate timely resolution of our tax matters.

Approach towards international tax developments

We support the international tax reform work by international organisations such as the Organisation for Economic Co-operation and Development (OECD).

Base Erosion and Profit Shifting (BEPS) refers to tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to locations with no/low tax rate and no/little economic activity. Singapore is a member of the OECD/Group of Twenty (G20) Inclusive Framework that supports the key principle that profits should be taxed where the real economic activities generating the profits are performed and where value is created. The Singapore Finance Minister announced during Budget 2024 that Singapore will be implementing BEPS Pillar Two for businesses’ financial years starting on or after 1 January 2025.

Approach towards transfer pricing

Our transfer pricing guiding principle is that intra-group dealings must be in accordance with the arm’s length standard and transfer pricing outcomes should be consistent with value creation. We proactively examine our approach in line with the latest international developments such as the BEPS Project.