There is an adage that states the only two things in life that can be depended on are death and taxes. In spite of this, there is a very minor percentage of the population in Singapore that dodges their tax duties, either consciously or unwittingly.
When it comes to taxes, what precisely do we mean when we say “dodging?”
Tax evasion happens in Singapore when a taxpayer knowingly submits incorrect or incomplete information to the Inland Revenue Authority of Singapore (IRAS) in order to fraudulently lower his or her tax bill and/or to fraudulently claim tax credits and refunds. This individual is engaging in dishonest means of lowering his or her taxable income. You must have heard about the Night Club Operator Sentenced to Jail and Penalties for GST Evasion and Money Laundering. So you should be careful.
For purposes of the Income Tax Act, tax evasion is defined as the intentional commission of any of the following acts:
- Underreports income or fails to record any income at all while filing taxes, both of which constitute failure to reveal all assessable income.
- Makes false claims for tax deductions (such as for private motor vehicle expenses or inflated payments to related parties of the company)
- Makes false claims (such as for personal relief for dependents who do not exist). Two Singaporean directors of a plastic cards manufacturer, for instance, were convicted of tax fraud for failing to disclose millions of dollars in income.
According to the GST Act, tax evasions may also occur when a person:
Producing fake books of accounts or records; claiming tourist reimbursements when they are not entitled to do so; claiming input tax on phony purchases, skipping the local sales tax on taxable items.
You are also reminded that tax evasion-related crimes have no expiration date. This means that IRAS may investigate you for tax evasion even if the alleged offence happened many years ago. Even though IRAS has a four-year window in which to conduct an assessment, the window is not applicable in cases of fraud, which includes circumstances in which the intent is to evade tax payment. The Annual Compliance Package would be useful here.
How Is It Different From Simply Not Paying Taxes?
Using illegal measures to get tax advantages or to minimize tax burden is illegal, while tax avoidance is not. Unlike tax evasion, tax avoidance is not punishable by law.
However, the IRAS does not look warmly upon aggressive tax avoidance, and it has the right to disregard or amend any agreements that have the main goal of avoiding taxes.
Among the various varieties of agreements whose main purpose is tax avoidance are
Round-tripping, or the circular movement of funds, the creation of many organisations for the express purpose of gaining favourable tax treatment, and changes to the corporate structure made purely for the purpose of achieving favourable tax treatment all fall under the category of tax avoidance.
However, in the case that the bona genuine commercial agreements in issue were not carried out with the goal of taking advantage of tax exemptions or concessions, they are immune from the investigation that is intended against tax avoidance.
In contrast, respectable commercial deals are referred to as “bona fide agreements,”
Some common methods of evading taxes in Singapore include not reporting foreign-earned income, providing employees with their own accommodation instead of a taxable housing allowance, and keeping money in banks outside of Singapore.
