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There are differences between legal tax planning and illegal tax evasion. Tax planning has helped many people save money which would have been spent on personal income tax as well as corporate income tax.

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“International Tax Planning” or “Tax Avoidance” is International Tax terms which are normally used by international companies or highly wealthy individuals entering or arranging their business affairs so that their taxes shall be as low as possible.

Tax Avoidance, Tax Planning or Tax Evasion

In many instances, it means a dollar of lost tax revenue through Tax Avoidance or International Tax planning has the same effect as a dollar of lost tax revenue through “Tax Evasion”

The result is the same from a financial point of view to the tax payer but there is a significant difference between the two methods: Tax Evasion is illegal whereas tax planning or avoidance is legal. In most cases, it is not so difficult to define “Tax Evasion”, it is widely known as “Taxpayer avoids the payment of tax without avoiding the tax liability, so that he escapes the payment of tax that is unquestionably due accordingly to the law of the taxing jurisdiction and even breaks the law.

However to distinguish between “Tax avoidance” and “Tax planning” proves to be more difficult where the latter also known as “Acceptable Tax Avoidance”. Although many OECD reports do not specifically define these terms. It mentioned that “Tax Avoidance (…) is of concern to governments because such practices are contrary to fiscal equity, having serious budgetary effects and distort international competition and capital flows.”

OECD also reports many OECD governments wish to combat against a range of “Tax avoidance” that has the following three elements in it:

1) Almost invariably present an element of artificiality to it or, to put this way, the various arrangements in a scheme do not have business or economic aims as their primary purpose;

2) Secrecy may also be a feature of modern avoidance; and

3) Tax avoidance often takes advantages of loopholes in the law or of applying legal provisions, for purposes for which they were not intended.

As such it is important to define the terms to avoid falling into OECD government of undesirable tax planning or avoidance. An acceptable definition of these two terms is where the taxpayer reducing or removing tax liability by choosing the tax reliefs and incentives that are most advantageous at yet most consistent with normal business transactions.

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Why does it mean to your company in a new business environment or country?

All International Tax Planning, Avoidance and Evasion resulted in the same effect meaning that it is lost tax revenue to the local tax authority which is generally counteracted with legislative or judicial provisions. It is advisable to engage a professional Certified Public Accountants (CPA) to help your company in a new business environment to analyze the difference between tax planning, avoidance and evasion to avoid direct violation of tax provision. Source: International Tax Avoidance and Evasion – Four Related Studies, OECD Paris, 1987 Para 10, 11

Contact Paul and Hype Page Co. for a FREE consultation on tax planning.

We provide the following services:

  1. Instant online company registration in Singapore
  2. International tax planning and advice
  3. Professional company secretary service at affordable price

Tax Avoidance, Tax Planning or Tax Evasion? Know how to Protect Your Wealth FAQs

How to claim for tax exemption?2020-06-23T15:16:44+08:00

You are required to make a declaration in your income tax returns by giving the nature and amount of the foreign-sourced income that was remitted to Singapore. You are also required to complete the Declaration Form for Foreign-Sourced Income Received in Singapore From 22 Jan 2009 to 21 Jan 2010 (60KB) for submission to IRAS. Although you have to state the use of the foreign income in the declaration form, the usage of such foreign income will not affect the claim for tax exemption.

Where to apply for some tax incentives?2020-06-23T15:16:25+08:00

There are various types of tax incentives available to companies and these are provided in the Singapore Income Tax Act (ITA) and Economic Expansion Incentives Act (EEIA). Some of the tax incentives available are listed in the table below.

Governing legislationTypes of incentivesWhere to apply
ITA/S13FApproved International Shipping EnterpriseMPA
ITA/S13HApproved Venture CompanyEDB
ITA/S14BFurther deduction of expenses relating to Approved Trade Fairs, Trade Exhibitions, Trade Missions or to maintain overseas Trade OfficeIE Singapore
ITA/S14EFurther deduction of expenses on Research and Development ProjectEDB
ITA/S14OTax deduction of special reserves for catastrophic risks of approved general insurersMAS
ITA/S19CWriting down allowance for cost sharing agreementEDB
ITA/S43(9)Concessionary rate of tax for income of life insurance companies apportioned to policyholders
ITA/S43CConcessionary rate of tax for approved offshore general insurance companiesMAS
ITA/S43CConcessionary rate of tax for approved offshore life insurance companiesMAS
ITA/S43CConcessionary rate of tax for approved offshore composite insurance companiesMAS
ITA/S43CExemption of tax for approved marine hull and liability insurer (onshore and offshore business)MAS
ITA/S43CExemption of tax for approved offshore captive insurance companiesMAS
ITA/S43CExemption of tax for approved insurer underwriting offshore qualifying specialised insurance riskMAS
ITA/S43EConcessionary rate of tax for Approved Operational Headquarters (OHQs)EDB
ITA/S43GConcessionary rate of tax for Approved Finance and Treasury CentreEDB
ITA/S43QConcessionary rate of tax for Financial Sector Incentive CompaniesMAS
ITA/S43PApproved Global Trading CompanyIE Singapore
EEIA/ Part IIPioneer IndustriesEDB
EEIA/ Part IIIPioneer Service CompaniesEDB
EEIA/Part IIIBApproved Shipping Logistics EnterpriseMPA
EEIA/ Part IIIBDevelopment & Expansion IncentiveEDB
EEIA/Part XInvestment AllowancesEDB
EEIA/Part XIIIBOverseas Enterprise IncentiveIE Singapore
EEIA/Part VIAExport Service CompanyEDB


What is the procedure of taxing a company(both foreign and local) in Singapore?2020-06-23T15:16:03+08:00

A company, regardless of whether it is a local or a foreign company, will be taxed on its:  

  • income accruing in or derived from Singapore; or
  • income received in Singapore from outside Singapore
2021-02-05T09:25:35+08:00January 7, 2015|Comments Off on Tax Avoidance, Tax Planning or Tax Evasion? Know how to Protect Your Wealth.
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