Income Tax and GST – Managing Partner Guilty of Tax Evasion, Sentenced to Jail


It was reported on IRAS’ website on 29 August 2014 that Mdm Chua Guat (蔡月), former managing partner of Chuan Kok Trading Co (“CKTC”), a business in wholesale trade of general hardware, pleaded guilty to two charges of making false entries in her individual income tax returns for the Years of Assessment (“YA“) 2005 and 2006.   mdm Chua was sentenced to 10 days imprisonment per charge, which she will serve concurrently, and ordered to pay back taxes and penalties of $236,000 In default of paying the penalty of $177,000, which is 3 times the amount of income tax evaded.

Mdm Chua also committed other income tax and GST offences which were compounded by IRAS.  As a result, she had to pay $110,000 in back taxes and $437,000 in penalties for these tax offences.

What happened?

This case was the result of Information provided by an anonymous informant.  IRAS’ investigations revealed that Mdm Chua under-reported her income in her YA 2005 and 2006 individual income tax returns.  For both YA, Mdm Chua engaged an accounting firm to prepare CKTC’s statement of accounts and income tax returns. Although she Chua had full knowledge of the business activities and kept detailed records of the Partnership’s sales in CKTC’s “2004 and 2005 Sales Books”, she deliberately omitted some of the sales when passing CKTC’s accounts to the accounting firm for their preparation of CKTC’s statement of accounts and income tax returns.

By failing to declare CKTC’s sales in full and declaring only partial amounts in the partnership’s statement of accounts and tax returns to IRAS, CKTC’s income was understated by $483,000 and $481,000 in YA 2005 and YA 2006 respectively.  This in turn reduced Mdm Chua’s share of divisible profit from the partnership and she wilfully declared only these lower amounts of income in her individual income tax returns.  Two other partners of CKTC,  while not involved in the operations and preparations of accounts for CKTC, also under-reported their share of partnership income in their individual income tax returns. Their offences were compounded by IRAS and they had to pay a total of $253,000 in back taxes and $257,000 in penalties.

IRAS also uncovered other income tax offences committed by CKTC. Mdm Chua inflated business expenses in the accounts of CKTC so as to claim more tax deductions than CKTC was entitled to. This also resulted in Mdm Chua under-reporting her share of partnership income by another $278,000 and she had to pay $220,000 in additional taxes and penalties.

As a GST-registered business, CKTC was required to file GST returns but due to Mdm Chua’s omission of CKTC’s sales, she consequently failed to report the GST output tax for the omitted sales of CKTC. For this offence, she had to pay $327,000 in penal tax and the GST that has not been accounted for.

For all the tax offences that Mdm Chua has committed, she had to pay a total of $784,000 in taxes and penalties.

If you have any questions regarding the above, please contact support@whm-constulting.com.

Be Well!
Jack:)

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