Income Tax – Boss of interior design firm to pay penalty of more than $400,000 for under-declaring income

It was reported on IRAS’ website on 5 October 2018 that Lim Hong Hee, a proprietor of Classic Furniture Design and Renovation Works (“Classic”), an interior design firm, has been convicted for filing incorrect income tax returns for Years of Assessment (YAs) 2006 to 2009 and 2011, which had resulted in $293,977 in taxes undercharged.

IRAS detected anomalies in the declarations made in Lim’s income tax returns during one of its regular audit programmes. Investigations revealed that Lim did not report a total of $1,772,704 of Classic’s trade income in his income tax returns for YAs 2006 to 2009 and 2011. Instead, Lim paid himself a salary from Classic and only declared that employment income to IRAS for the relevant YAs, which was significantly lower than Lim’s actual trade income from Classic. This resulted in $293,977 in taxes undercharged.

Lim used Classic’s trade income for his own household expenses, as well as to purchase properties and shares. This included an investment by Lim of $845,000 in shares between 12 January 2009 and 3 October 2011.

Lim faced a total of five charges of filing incorrect income tax returns for YAs 2006 to 2009 and 2011. He pleaded guilty to two out of the five charges, involving a total of $210,673 in taxes undercharged, with the three other charges being taken into consideration for the purposes of sentencing. The Court sentenced Lim to a total fine of $10,000 ($5,000 per charge) and a penalty of $421,347, which is two times the amount of tax undercharged.

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. Jail terms may also be imposed.

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