Proposed Tax Changes announced by Mrs Carrie Lam, Chief Executive of HK SAR on 11 Oct 2017

Hong Kong Chief Executive, Mrs Carrie Lam, delivered her maiden Policy Address a while ago and the following tax changes have been proposed:

– To provide tax relief to the SMEs, the profits tax rate for the first HK$2M of profits to be lowered to 8.25% and thereafter the profits exceeding that amount would continue to be subject to HK Profits Tax at 16.5%. Only one enterprise nominated by each business group will be eligible for the lower tax rate.

– To encourage R&D investment by enterprises, a 300% tax deduction for the first HK$2M eligible R&D expenditure is proposed, with the remainder at 200%

– Increase the total number of comprehensive avoidance of double taxation agreements to be signed with other tax jurisdictions to 50 in the next few years.


Singapore GST – Research Fellow Convicted of GST Tourist Refund Fraud

It was reported in IRAS’ website on 9 October 2017 that a research fellow, Bai Jiaming was convicted of the following GST offenses:

  • Engaging the help of a tourist to claim a GST refund of $1,543.93 for a $23,600 Tiffany & Co. diamond ring (the “ring”) purchased by him; and
  • Obtaining a Prada bag (the “handbag”) and the ring from the tourist after a GST refund of $1,791.87 had been claimed on the two items.

Investigations revealed that Bai colluded with his colleague, Zhang Baicheng and his colleague’s father, Zhang Yaoqun (“co-accused persons”) to carry out the GST refund fraud. Bai, the purchaser of the ring did not qualify for a GST refund under the Electronic Tourist Refund Scheme (“eTRS”) as he was not a tourist and was in fact, working in Singapore.  At Zhang Baicheng’s suggestion, Bai procured Zhang Yaoqun to obtain approval for a GST refund even though Zhang Yaoqun was not entitled to the said GST refund as he was not the purchaser of the ring.

On 11 Mar 2017, Bai, with a one-way air ticket to Jakarta bought on the previous day,  went with Zhang Baicheng and Zhang Yaoqun to the Singapore Changi International Airport. Zhang Baicheng and Zhang Yaoqun had return air tickets for Bangkok. All three checked in at their respective ticket counters and entered the transit area. Thereafter, Zhang Yaoqun made the GST refund claim for the handbag and the ring at the transit area in Changi International Airport, Terminal 3. Zhang Yaoqun had the said handbag and ring in his possession at the time that the GST refund was approved.

After obtaining approval for a GST refund, Zhang Yaoqun gave the handbag and ring to Zhang Baicheng who in turn gave them to Bai. Bai knew that Zhang Yaoqun had obtained approval for a GST refund of $1,791.87 under the eTRS in respect of both the handbag and ring. Bai then attempted to leave the transit area with the handbag and ring and was stopped by an ICA officer for suspected misuse of a boarding pass.

Both Zhang Baicheng and Zhang Yaoqun were charged on 28 Jul 2017 for their offenses and their cases are still pending before the court.

The court sentenced Bai to a total fine of $7,000. If he defaults on payment of the fine, he will have to serve four weeks’ imprisonment.

What does this mean to you?

IRAS takes a serious view of anyone who makes false declarations to seek GST refunds under the tourist refund scheme and abuses the scheme.    Under the GST Regulation, a person commits an offense for receiving goods from a tourist, directly or indirectly, knowing that the tourist has obtained approval for the refund. The person also commits an offense for engaging another person to seek or obtain an approval for a refund under the tourist refund scheme. Offenders shall be liable on conviction to a fine not exceeding $5,000 and in default of payment to an imprisonment for a term not exceeding 6 months.

If you have any questions regarding the above, contact

Income Tax – Former Director of Engineering Company Sentenced to Jail and a Penalty for Assisting in Income Tax Evasion

It was reported in IRAS’ website on 8 September 2017 that Kuah Pong Guan (“Kuah”), a former director of Wesco Engineering Pte Ltd (“WEPL”), a company involved in fabrication of metal works, has been convicted of assisting WEPL to evade tax by not reporting a total of 81 cash sales made to its customers in WEPL’s income tax returns for Years of Assessment (“YAs“) 2009 and 2010.

Investigations revealed that for these two YAs, Kuah sold metal parts to customers on a cash basis without issuing any invoices, and did not report the earnings from such sales in WEPL’s income tax returns.  Kuah did so to pocket these earnings for gambling and to pay off his own creditors.  By doing so, Kuah had also assisted WEPL to evade income tax by under-declaring WEPL’s income earned.

For YA 2009, Kuah declared WEPL’s sales income to be $62,253, understating actual income by $730,697, which resulted in income tax being undercharged by $114,109.02. For YA2010, he declared a loss of $205,475 for WEPL’s sales income, when it had, in fact, earned a profit of $77,246. This resulted in income tax being undercharged by $3,906.09.

Kuah was charged and convicted for assisting WEPL to evade income tax by providing false information in WEPL’s income tax returns for YAs 2009 and 2010. The Court ordered Kuah to pay a penalty of $354,045.33, three times the amount of tax undercharged for both YAs, and sentenced him to two weeks imprisonment.

What does this mean to you?

IRAS takes a serious view of non-compliance and tax evasion. There will be severe penalties for those who wilfully evade tax. Taxpayers are ultimately responsible for the information declared in their income tax returns. The authority will not hesitate to bring offenders to court. Penalties for tax evasion can be up to four times the amount of tax evaded. In certain situations, jail terms may also be imposed.

If you have any questions, contact

Singapore GST – ASK Annual Review Guide (5th Edition) Updated

IRAS has updated its GST ASK Annual Review e-Tax Guide (5th Edition) on 5 September 2017.   One of the major amendment to the 5th Edition is summarised below:

 Introduction of the administrative concession for common errors disclosed through the ASK Annual Review

IRAS has introduced a list of administrative concession for common errors discovered in the course of ASK Annual Review, which can be found here.  Taxpayers may consider taking advantage of these administrative concessions if their errors fall within the scenarios described and if the prescribed conditions (if any) are satisfied without the need of seeking any advance approval from the Comptroller of GST.

Take note that unless otherwise stated, the administrative concessions will only apply to past errors and businesses are required to take remedial actions to prevent recurrence of the errors.

Taxpayers who adopt any of the administrative concessions are required to complete the “ASK: Declaration Form on ASK Administrative Concessions” and submit it to IRAS and retain the declaration for at least 5 years.

If IRAS discovers that a business has either wrongly applied, abused any concession, made a false or incorrect declaration or failed to take remedial actions, enforcement actions (such as the recovery of tax and the imposition of penalties) may be taken against the business.

The scenarios cited in the administrative concessions list are not exhaustive. For scenarios not covered in the guide or other publications issued by IRAS (e.g. other GST guides or Practice Notes), taxpayers are advised to write to IRAS, providing full details of the errors. It is not necessary to write in for situations already covered in IRAS’ publications.

If you have any questions, contact

Income Tax – Wholesale Trader and Company to Pay Penalties of $169,194.60 and Fine of $5,000 for False PIC Claim

It was reported in IRAS’ website on 21 July 2017 that Chin Jin Han (“Chin“), who was running a wholesale trading company, Mah Sing Pte. Ltd (“Mah Sing”), has been convicted of providing false information in the company’s Productivity and Innovation Credit (“PIC”) cash payout application form.

Chin submitted a PIC cash payout application form to IRAS, under Mah Sing’s name, in Apr 2013. He obtained the signature of Mah Sing’s sole director, his mother-in-law who left the running of the business to him, and completed all the required fields in the PIC cash payout application form.

IRAS’ Investigations revealed that Mah Sing did not purchase the two servers and three workstations (“the equipment”) at the purported cost of $93,997, as declared in the PIC cash payout application form. The invoices that showed the purchase of the equipment were false.

Both Mah Sing and Chin were convicted of giving false information to the Comptroller of Income Tax, in order to obtain a PIC cash payout and Bonus which the company was not entitled to.

The court ordered the company to pay a penalty of $56,398.20 which is a one-time penalty of the amount of the PIC cash payout that was wrongfully claimed.

Chin was convicted of giving false information to the Comptroller of Income Tax to assist Mah Sing to obtain a PIC cash payout, which Mah Sing was not entitled to when no such purchase had in fact taken place. The court ordered Chin Jin Han to pay a penalty of $112,796.40, which is two times the amount of PIC cash payout that was wrongfully claimed, and a fine of $5,000.

What does this mean to you?

IRAS takes a serious view of any attempt by claimants, vendors or consultants to defraud the Government. Under the Income Tax Act, anyone convicted of an offence of abusing the PIC scheme will have to pay a penalty of up to four times the amount of PIC cash payout fraudulently obtained or which would have been obtained if the offence had not been detected, and a fine of up to $50,000 and/or imprisonment of up to five years.

If you have any questions, contact

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