Tax evasion is a serious tax crime which occurs in Singapore from time to time. For this reason, IRAS takes occurrences of tax evasion in Singapore very seriously indeed. It will even go so far as to monitor the books of accounts and other accounting records of Singapore’s companies in order to deter acts of tax evasion from being committed.

Are You in Danger of Tax Evasion

Definition of Tax Evasion

Tax evasion can be defined as an occurrence during which a company or the person involved has been either evading tax or paying a lower amount than what should be remitted to the taxation authorities of a particular country. In Singapore, the authority which has been tasked with the collection of taxes is the Inland Revenue Authority of Singapore (IRAS). IRAS has several means of detecting instances of tax evasion because since they have to provide sufficient evidence that the taxpayer has committed such an offense. Some of the actions of a taxpayer which may lead IRAS to conclude that a taxpayer has been intentionally evading tax include the creation of fictitious invoices, the making of false entries or incorrect figures in the books of accounts, or the use of fictitious employee names. Regardless of whether such acts are committed deliberately or inadvertently, they are considered to be acts of tax evasion which is illegal in Singapore and will cause suitable punishments to be imposed.

 

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Punishments for Tax Evasion

Tax evasion will be punished accordingly as stated by the Singapore Income Tax Act. Tax evasion may bring about a fine of up to 300% of the amount of tax which had been evaded. Tax evasion might also cause one to be fined an amount of up to S$10,000, jailed for up to three years, or both. Serious acts of tax evasion as defined by Section 96A will bring about a fine of up to S$50,000, a jail term of up to five years, or both. These harsh punishments provide evidence that tax evasion is regarded as an extremely grievous crime in Singapore. Although an offender might benefit at first when the company’s profits are under-reported to the taxation authorities, as soon as IRAS realize that an act of tax evasion has taken place, the offender will be found and punished according to the severity of the offense which has been committed. It is therefore necessary to always declare a company’s profits and an individual’s taxable income honestly and accurately in order to remain in the good graces of IRAS.

 

Accounting Records and How They Relate to Taxation in Singapore

Every Singapore company’s accounting records are to be overseen by the company’s accounting managers. All accounting managers ought to note that if the company has intentionally been keeping falsified records, such an act is a violation of Singaporean laws and will cause severe punishments to be imposed on the company. There are several methods by which the authorities will understand if the company records presented for taxation are genuine. In certain situations, IRAS might suspect that tax evasion has taken place. If IRAS believes that such is the case, the decision to conduct a full-scale investigation might be made. During such an investigation, IRAS will often raid the office and conduct the parallel tax audit by assessing the company’s books of accounts. Therefore, if a company has not been keeping proper records in its books of accounts, the company runs the risk of being charged with tax evasion and extremely negative circumstances may soon follow.

If you are uncertain if the records which are currently being kept by your company are correct, it is advisable to use the services of an external professional auditor or another independent figure to manage the company’s bookkeeping on your behalf. We at Paul Hype Page & Co are able and willing to help you with any such matters. In this way, you and your company will remain compliant with the laws of Singapore.

If there were previous errors which may have been made by the company or an individual within the company while filing or declaring taxes, the correct course of action to be taken is that of voluntarily informing the IRAS that there had been an error. Those who recognize that such errors have been made and voluntarily inform IRAS about such errors will nevertheless be punished; however, the punishment which will be imposed will be one which is much less severe than the usual punishment for such offenses. Doing so is not difficult because to do so, one only has to inform IRAS that an error had been made when declaring the taxable income of the company while also providing IRAS with all required information.

 

Differences Between Tax Evasion and Tax Avoidance

There is a difference between tax avoidance and tax evasion in their legality. Tax evasion is illegal whereas tax avoidance is legal. The details of tax evasion have already been established in the prior paragraphs. Tax avoidance, on the other hand, involves the legal use of existing laws in order to reduce the amount of tax an individual or a company is expected to pay in a manner which is within the confines of the law. Tax avoidance may be conducted by one who has sufficient knowledge of the tax system. However, if due care is not taken by one who intends to engage in tax avoidance, an act of tax evasion might instead take place.

 

How IRAS Prevents Tax Evasion

IRAS is tasked with preventing acts of tax evasion from taking place in Singapore. For that purpose, there are certain measures used by IRAS. Through these measures, the rate of tax evasion in Singapore may be significantly reduced. IRAS deters the practice of tax evasion through the enforcement of laws and regulations. It also detects the identity of those who have committed acts of tax evasion by conducting accounting audits on the incomes or books of accounts of offenders. Those who are found guilty will be punished accordingly.

 

Conclusion

The tax authorities and government of Singapore are very clear that tax evasion is illegal and should never be committed. In Singapore, all tax evaders are dealt with accordingly. Therefore, to remain on the right side of the law, one must adhere to the existing taxation rules and regulations. Keeping proper books of accounts is the first step towards maintaining integrity when declaring the tax returns. It is also possible to work with tax professionals in order to gain a more complete understanding of one’s tax situation. This is especially true of those who have recently started a company in Singapore and may be unsure of their corporate tax obligations. Doing so will ensure that the person in question will have no issues regarding their company operations. The company owner will also avoid the risk of facing tax evasion charges in the future.