Apple South Asia Pte Ltd, however, its Singapore entity, booked $14.9 billion in revenue for the 12 months to September 2012 - more than it would have received had the country's entire 5.3 million population each bought an iPhone 5S, an iPad Air and a MacBook Pro.

There is nothing illegal about the accounting practices employed by the computer giant, which, like many multinational companies ranging from Google Inc and Microsoft Corp to BHP Billiton and Huawei Technology Co, uses the city-state as a key hub for its Asia business.

Singapore has so far largely stayed out of the debate raging in Europe and the United States about the ways multinationals try to lower their tax bills.

But revenue-hungry governments are looking to impose tougher rules on so-called transfer pricing that could make it harder for firms to trade goods, services or assets between their Singapore and overseas entities.

As a result, accountants warn that the city-state will need to review the level of transparency in its tax incentive schemes and get stronger justifications from companies on their transfer pricing arrangements to fend off challenges from other jurisdictions.

"Singapore's challenge is to ensure that it stands ready to adequately address any kind of unilateral tax action taken by other countries," said Abhijit Ghosh, a partner at PricewaterhouseCoopers in Singapore.

"In this brave new world of fiscal competition for the tax dollar, dispute resolution will be on the increase and Singapore will need to focus more resources on enforcing and defending its principles of value creation in international forums."

The city-state's government says it is against artificially contrived arrangements constructed "solely for the purpose of flouting or exploiting loopholes in tax rules", according to a spokeswoman from the Ministry of Finance.

However Singapore is also arguing that it should not be singled out because it has low tax rates.

"We must guard against new forms of protectionism masquerading as tax harmonisation," the spokeswoman said. "We should avoid converging on high taxes globally as this would only hurt growth and jobs."

Companies justify booking significant amounts of revenue and profits in Singapore by the fact they often run key business functions such as finance and operations, hold intellectual property rights there or base regional executives in the city.

Apple says its Singapore base includes finance, operations, online sales and customer support functions.

LOW TAX DRAW

Singapore lures international companies with its reliable legal system, skilled, English-speaking workforce and high living standards.

However, its low tax rates and generous tax incentive programmes are one of the biggest draws and have been a key driver behind the economic success story of the island.

The Group of 20 (G20) big developed and emerging economies has backed a draft OECD plan that would give tax authorities greater rights to "re-characterise" transactions and ignore inter-company contracts if they believe they are aimed at channeling profits into low tax countries.

Although its size pales as a consumer market in comparison with the likes of India or Australia, Apple's Singapore-booked revenues for the year to September last year exceeded the $10.7 billion of net sales it recorded in the rest of Asia-Pacific, excluding Greater China and Japan.

It recorded a post-tax profit on its continuing operations of $186 million that year, with an effective tax rate of 6 percent, according to company filings lodged with Singapore accounting authorities.

Apple's Singapore operations featured in a U.S. Senate report detailing how U.S. companies structured their operations to book the majority of their non-U.S. profits in low tax jurisdictions.

The report, published in May, described the circuitous legal trip taken by a batch of Apple products made in China and destined for Asian markets.

The "title", or legal ownership, of the shipment is bought first by a unit in Ireland called Apple Sales International, before being sold on to Apple South Asia Pte Ltd in Singapore.

The Singapore unit, which is owned by another Irish entity - Apple Operations International - then sells the products to other Apple subsidiaries in Asia, third-party resellers or internet customers. The gadgets may never even touch Singapore shores, according to the Senate report.

Another Senate report in 2012 said Microsoft Corp had shifted some of its intellectual property to a Singapore subsidiary, as well as entities in Puerto Rico and Ireland, to take advantage of lower tax rates.

Microsoft Singapore Holdings Pte Ltd owns a Bermuda company called Microsoft Asia Island Limited (MAIL), an entity that has no employees but shares 10 percent of the software giant's research and development activities, according to the report.

MAIL holds the right to sell Microsoft products in Asia, and then licenses those rights to another Singapore entity, Microsoft Operations Ltd (MOPL), which then sells Microsoft products across Asia.

In 2012 MOPL earned around $6.3 billion according to company accounts filed in Singapore, posted a profit from its continuing operations of $368.7 million and paid an effective tax rate of 12 percent.

Such legal arrangements are part of the focus of the G20 and OECD project's to ensure that companies do not book profits in low-tax jurisdictions when most of the activity that generated those earnings went on elsewhere.

Apple said in a statement to Reuters that it has had a significant presence in Singapore since 1989 and employs more than 2,000 people.

"In every country where we do business we pay all the taxes we owe and uphold the highest ethical standards," it said.

Microsoft declined to comment on its tax arrangements.

The company opened its first Singapore office in 1990 and bases its regional headquarters, its Singapore sales and marketing operations and its Asia Pacific operations centre there. It employs around 1,500 full-time and contract employees.

BEHIND CLOSED DOORS

Singapore is not a member of the OECD, a 34-nation association of mostly rich countries, but has said it will support the Base Erosion and Profit Shifting (BEPS) Report the OECD published in July this year.

Its headline corporate tax rate is 17 percent - low, but not remarkably so, by international standards. Many multinationals moving to the city-state will pay a lower rate, however, as they are able to take advantage of tax incentives offered in return for undertakings such as providing jobs and capital investment.

"Tax incentives are given only if substantive economic activities are conducted in Singapore and the incentive recipient can add value considerably to our economy, such as bringing in new capabilities into Singapore or creating good jobs for Singaporeans," the finance ministry spokeswoman said.

Incentives have been especially targeted at companies in industries Singapore has wanted to become a "hub" for - from shipping and commodity trading to funds management and biotechnology.

In 2001 it also toughened further its strict banking secrecy rules, which helped boost the growth of its wealth management industry.

But as Western economies started pushing back against rich people hiding money offshore after the 2008 financial crisis, the city-state was quick to start signing exchange of information agreements with other governments including Japan, Australia and Britain, eager to protect its reputation as a clean financial centre.

Now, as the net starts to fall on aggressive corporate tax avoidance, Singapore is under pressure to move swiftly again.

"We never thought exchange of information would come here, but it did," said a former official from Singapore's tax authority, who declined to be named due to the sensitive nature of the matter.