All posts by Jack Wong

Singapore GST – Revised e-Tax Guide on ACAP


The Inland Revenue Authority of Singapore (“IRAS”) revised the e-Tax Guide on the Assisted Compliance Assurance Programme (“ACAP”) on 2 April 2018 by extending the current penalty waiver from 31 March 2019 to a final extension date of 31 March 2024.

In other words, IRAS will be prepared to waiver penalties for genuine non-wilful GST errors in the course of ACAP review when the taxpayer

  •  notify IRAS by 31 Mar 2024 of his intention to embark on your first ACAP;
  • settle the additional taxes; and
  • attain ‘ACAP Premium’ or ‘ACAP Merit’ status.

According to the e-Tax Guide, this is a one-time of the normal 1-year grace period under the IRAS’ Voluntary Disclosure Programme (VDP), as recognition of your efforts to strengthen the effectiveness of the overall GST controls to ensure continual GST compliance. If any of the above conditions is not satisfied, IRAS may impose a reduced penalty under the normal VDP rules, for non-wilful GST errors made.

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Income Tax – Three individuals to be charged for tax evasion of rental income


It was reported on IRAS’ website on 16 March 2018 that 3 individuals were charged in the court in 2 separate cases for tax evasion on their rental income.

  • 2 persons were charged on 16 March 2018, for the omission of rental income from their tax returns.  More specifically, one of them faced 4 charges involving omitted rental income amounting to $411,252 for Years of Assessment (YAs) 2010 to 2013 which resulted in a total of $69,065.20 in tax undercharged. The other faced 3 charges involving omitted rental income amounting to $299,769 for YAs 2012 to 2014 which resulted in a total of $52,854.75 in tax undercharged. In addition, this individual will face another charge for the non-filing of his income tax returns.
  • One would be charged on 13 April 2018  for submitting falsified invoices to IRAS to support claims made for rental expenses between YAs 2009 to 2013. The individual will face 5 charges involving the submission of falsified invoices that amounted to $284,308.52. This resulted in a total of $56,499.91 in taxes undercharged.

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Hong Kong Profits Tax – Two-Tier Profits Tax Rate Comes Into Effect on 1 April 2018


On 29 March 2018, the  Inland Revenue (Amendment) (No. 3) Ordinance 2018 (“the Ordinance”) was gazetted to implement the two-tiered profits tax rates regime announced in the 2017 Policy Address by Ms. Carrie Lam, the Chief Executive of HK SAR.

The new two-tier profits tax structure will be effective to any year of assessment commencing on or after 1 April 2018

  • The profits tax rate for the first HK$2 million of profits of corporations will be lowered to 8.25%.  Profits above that amount will continue to be subject to the tax rate of 16.5%
  •  For unincorporated businesses (i.e. partnerships and sole proprietorships), the two-tiered tax rates will correspondingly be set at 7.5% and 15% 

The above two-tiered profits tax rates regime is implemented to benefit the most to the small and medium enterprises (SMEs).  Large corporations should not that the regime is restricted to only one enterprise nominated among connected entities.

A Comparison of the Effective Tax Rate between Singapore and Hong Kong

Let’s do a comparison between Hong Kong and Singapore based on the scenario of a company having an assessable profit of HKD3,000,000 (or SGD500,000).

Effective tax rate if the company is incorporated in Hong Kong – 11%
Effective tax rate if the company is incorporated in Singapore – 12% (and this will be increased to 14% as a result of the revision of the Partial Tax Exemption Scheme).

Our comments:  Although Taxation is never the only factor for a company to consider the location of setting up the business, it certainly becomes slightly more attractive for the business to be set up in Hong Kong from an effective rate perspective unless the same business can obtain more tax breaks or reliefs from a Singapore tax perspective.  The Singapore Government has to work harder on this to maintain its competitiveness with Hong Kong.

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Income Tax – Director of metal stamping company to be charged for tax evasion


It was reported in IRAS’ website on 22 March 2018 that a company director was charged in court for assisting his company to evade tax.  He faced 5 charges involving the making of false entries in his company’s income tax returns from Years of Assessment (YAs) 2009 to 2013, which resulted in $648,427.90 in tax undercharged.

In addition, he will face 17 charges for without reasonable excuse, making an incorrect return by understating output tax in his company’s GST returns amounting to $266,870.58 during the same period.

What does this mean to you?

Upon conviction, he may face a penalty of two times the amount of tax undercharged, and a fine not exceeding $5,000 or to imprisonment for a term not exceeding 3 years or to both.

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Income Tax – Revised Transfer Pricing Guidelines (5th Edition)


The Inland Revenue Authority of Singapore (“IRAS“)  has issued the fifth edition of the Transfer Pricing Guidelines on 23 February 2018 and we summarise below the major amendment to the e-Tax Guide as follows:

  1.  Additional guidance on related parties for the Singapore Permanent Establishment (“PE”)

The IRAS has clarified that for the purpose of attributing profits to the Singapore PE, the Singapore PE and other PEs outside Singapore of the non-resident person would be considered realted parties and therefore, the arm’s length principle applies to them when attributing profits to the SIngpaore PE.   The profits to be attributable to the Singapore PE will be based on the profits that PE would have derived if it were to be a separate and independent enterprise engaged in the same or similar activities under the same or similar conditions.

2.  Arm’s length adjustment by IRAS – Section 34D(1A) of the ITA

Paragraphs 5.117 to 5.124 have been inserted in which to explain how IRAS were to be effected the transfer pricing adjustment pursuant to Section 34D(1A) of the ITA.   Take note:

  • Once a TP adjustment is made, the amount of income increased is treated as accruing in or derived from Singapore or received in Singapore from outside Singapore.  If such an adjustment involves reducing a loss, the amount of loss reduced is treated as not having been incurred.
  • Where a taxpayer engages in a transaction with its related party that independent parties would not undertake, IRAS would not disregard the transaction merely because the transaction may not be seen between independent parties without considering if the transaction has characteristics of an arm’s length arrangement.
  • IRAS would disregard an actual related party transaction or replace it with an alternative transaction only in exceptional circumstances where: (a) the arrangements made in relation to the transaction lack the commercial rationality that would be agreed between independent parties under comparable circumstances; and (b) the arrangements prevent determination of a price that would be acceptable to both of the parties taking into account their respective perspectives and the options realistically available to them at the time of entering into the transaction.

3.  TP Documentation Requirement has been rewritten

Paragraph 6 of the Guidelines has been rewritten due to the insertion of the new provision under Section 34F of the ITA.

4.  Application of arm’s length principles for re-financing

For TP purposes, the IRAS considers a new loan from a related party will be obtained with the refinancing or extension of the tenture of the existing loan.  In such a case, the taxpayer is required to establish the arm’s length terms and interest rate for the new loan following the guidance nd prepare TP documentation accordingly.

5.   TP Surcharge and Penalty

The IRAS has provided explanations and examples of how the TP surcharge and penalty are imposed pursuant to Section 34E of the ITA.

 

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