Governments create tax laws to ensure that citizens pay all taxes which they owe. However, some attempt to circumvent such payments of taxes through the use of either tax evasion or tax avoidance. However, these concepts are not the same. The primary difference lies in the fact that tax avoidance is legal while tax evasion is a criminal offense. Through the use of tax avoidance, a person may obtain a tax advantage through legal means. On the other hand, tax evasion is illegal because it involves the use of unlawful means to avoid paying taxes. It also involves the claiming of non-existent assets. Therefore, governments of countries all over the world have created specific tax laws which punish any offenders accordingly.

Tax Evasion Laws in Singapore

Any Singapore taxpayer who has wrongly declared the taxes to be paid or reported inaccurate information to the Inland Revenue Authority of Singapore (IRAS) to obtain undue refunds or tax credits can be legally charged. The primary tax evasion laws of Singapore are related to both the Goods and Services Tax (GST) and Income Tax Acts. Tax evasion offenses which are governed by the Income Tax Act include the claiming deductions for expenses which are either non-deductible or were not incurred by the taxpayer, the failure to declare assessable income, or the claiming of tax relief for fictitious dependants. Tax evasion offenses which are governed by the Goods and Services Tax Act include the claiming input tax relief on fictitious assets, the claiming of tourist refunds by one who is not entitled to them, the omission of the output tax which is charged on local taxable supplies, the supply of false export documents which support zero-rated supplies, the non-issuance of a tax invoice or receipt, or the keeping of multiple sets of accounts.

On a related note, it might be the case that you or your company might have been experiencing difficulties related to the management of your Singapore tax obligations and requirements. Should such happen to be the case, we at Paul Hype Page are always willing and ready to assist you with such issues. Our tax experts understand all of the most important details of Singapore’s tax laws. We will ensure that you will always be completely compliant with the tax laws of Singapore today.

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How Individual Taxpayers in Singapore Can Avoid Committing Tax Evasion

Individual taxpayers in Singapore are to disclose their income accurately and pay their tax returns in a timely manner in order to avoid any punishments imposed by the government. There are several ways to ensure that one does not commit any acts of tax evasion. One of these is by neither submitting falsified rent receipts nor tax receipts in order to request any claim or exemption. One who has not been residing in the residence for which loans are being sought may also be found guilty of committing acts of tax evasion. Another way by which individuals may ensure that they do not commit acts of tax evasion is by producing the appropriate loan documents. Those who have already paid a loan to any bank or financial institution must not ask for any undue tax claims. Any Singapore taxpayer who has been earning any interest income must also ensure that the government has been informed accordingly.

How Companies in Singapore Can Avoid Committing Tax Evasion

Companies in Singapore can ensure that they do not commit any acts of tax evasion by taking the necessary steps. If any company is not aware of any employee or associated person who has been evading tax, the company can be held liable for tax evasion offenses. Companies in Singapore can also be held accountable if they have not been carrying out any legal proceedings against those who are guilty.

As an aside, perhaps you may be interested in owning a company based in Singapore. If you are, contact us at Paul Hype Page & Co and we will do all we can to serve your needs. We will guide you throughout the process of company incorporation in Singapore. If you require us to do so for you, we will also contact government or other authorities during the process of incorporation.

If any Singapore company is not to be held liable for tax evasion offenses, it must produce documents which show that it has taken reasonable steps to prevent tax evasion from being committed. One method by which companies can ensure that no acts of tax evasion are committed by a Singapore company is the conducting of training courses for the company’s staff members. Such courses will help them understand the ill effects of evading taxes. Companies must also ensure that employees know about the government penalties and strict actions which are to be taken should the employees or associated people of the company avoid paying taxes. Companies are also to carry out a risk assessment of third parties which are involved in conducting business with the companies in order to avoid any punishments to be faced because of such partnerships. Company owners in Singapore can screen the tax compliance status of customers in order to protect the company. They can also check customers’ tax status with government authorities. Company owners should also ensure that their staff members can differentiate between legal tax avoidance and illegal tax evasion. They must also encourage their employees to report any acts tax evasion activities to the company.

Punishments Imposed on Tax Evaders in Singapore

Anyone who commits any act of tax evasion in Singapore may receive one or more of several punishments from IRAS. According to Section 96 of the Singapore Income Tax Act, tax evaders will be penalized 300% of the tax undercharged. They may also be punished by way of three years of imprisonment, a fine of S$10,000, or both. Should any falsified documents have been provided, the offender will be forced to pay an amount of up to 400% of the tax undercharged. Such offenders may also be punished by five years of imprisonment, a fine of up to S$50,000, or both. Any taxes which are owed and unpaid according to the GST Act which have been evaded by Singapore businesses will cause the business to be penalized with 300% of the GST undercharged. Such businesses may also be fined up to S$10,000 while the individuals who were personally responsible for the offense may be jailed for up to seven years.

Conclusion

Tax evasion damages the economy of any country because such acts create an imbalance between the people belonging to different economic statuses. Therefore, it is necessary to take action against tax evaders in order to combat the scourge of tax evasion. In Singapore, the punishments which are imposed for acts of tax evasion serve to deter any individual taxpayer or company from committing any such acts. Furthermore, IRAS has been openly encouraging people to inform them about any acts of tax evasion which have been committed in Singapore. All whistleblowers are also to be paid a considerable reward in order to encourage as many people as possible to follow suit and report any act of tax evasion to IRAS.

FAQs

What is the procedure of taxing a company(both foreign and local) in Singapore?2020-07-01T10:51:38+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
How to claim for tax exemption?2020-07-01T10:51:12+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.

What is an Avoidance of Double Tax Agreement?2020-07-01T10:39:59+08:00

An Avoidance of Double Taxation Agreement (DTA) is an agreement signed between Singapore and another country (a treaty country) which serves to relieve double taxation of income that is earned in one country by a resident of the other country.

It makes clear the taxing rights between Singapore and her treaty partner on the different types of income arising from cross-border economic activities between the two countries.

The DTA also provides for reduction or exemption of tax on certain types of income.

Only Singapore tax residents and tax residents of the treaty country can enjoy the benefits of a DTA. To find out who are our treaty partners, please refer to the List of Avoidance of Double Tax Agreements.

How income is assessed?2020-07-01T10:39:31+08:00

Income is assessed on a preceding year basis. This means that the basis period for any Year of Assessment (YA) generally refers to the financial year ending in the year preceding the YA.

Where to apply for some tax incentives?2020-07-01T10:38:30+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
www.mpa.gov.sg
ITA/S13HApproved Venture CompanyEDB
www.edb.gov.sg
ITA/S14BFurther deduction of expenses relating to Approved Trade Fairs, Trade Exhibitions, Trade Missions or to maintain overseas Trade OfficeIE Singapore
www.iesingapore.gov.sg
ITA/S14EFurther deduction of expenses on Research and Development ProjectEDB
www.edb.gov.sg
ITA/S14OTax deduction of special reserves for catastrophic risks of approved general insurersMAS
www.mas.gov.sg
ITA/S19CWriting down allowance for cost sharing agreementEDB
www.edb.gov.sg
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
www.mas.gov.sg
ITA/S43CConcessionary rate of tax for approved offshore life insurance companiesMAS
www.mas.gov.sg
ITA/S43CConcessionary rate of tax for approved offshore composite insurance companiesMAS
www.mas.gov.sg
ITA/S43CExemption of tax for approved marine hull and liability insurer (onshore and offshore business)MAS
www.mas.gov.sg
ITA/S43CExemption of tax for approved offshore captive insurance companiesMAS
www.mas.gov.sg
ITA/S43CExemption of tax for approved insurer underwriting offshore qualifying specialised insurance riskMAS
www.mas.gov.sg
ITA/S43EConcessionary rate of tax for Approved Operational Headquarters (OHQs)EDB
www.edb.gov.sg
ITA/S43GConcessionary rate of tax for Approved Finance and Treasury CentreEDB
www.edb.gov.sg
ITA/S43QConcessionary rate of tax for Financial Sector Incentive CompaniesMAS
www.mas.gov.sg
ITA/S43PApproved Global Trading CompanyIE Singapore
www.iesingapore.gov.sg
EEIA/ Part IIPioneer IndustriesEDB
www.edb.gov.sg
EEIA/ Part IIIPioneer Service CompaniesEDB
www.edb.gov.sg
EEIA/Part IIIBApproved Shipping Logistics EnterpriseMPA
www.mpa.gov.sg
EEIA/ Part IIIBDevelopment & Expansion IncentiveEDB
www.edb.gov.sg
EEIA/Part XInvestment AllowancesEDB
www.edb.gov.sg
EEIA/Part XIIIBOverseas Enterprise IncentiveIE Singapore
www.iesingapore.gov.sg
EEIA/Part VIAExport Service CompanyEDB
www.edb.gov.sg

 

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