Category Archives: Inland Revenue Authority of Singapore

Singapore GST – Company Director Convicted for Unlawful GST Collection


It was reported in IRAS’ website on 19 Jan 2018 that Kumarselvam S/O Veejay Koumar, who was a director of MV Global Trading Pte Ltd, flouted the law when his company unlawfully charged GST on a total of 102 sales invoices issued to its customers.

IRAS’ investigations revealed that MV was not GST-registered and Kumarselvam knew that this is the case.  The offenses were detected only because of IRAS’ efforts in conducting checks on businesses before allowing any business to register for GST. Investigations further revealed that Kumarselvam was the person in charge of managing and overseeing MV’s operations at the relevant time.  He had personally prepared and issued 3 of the 34 sales invoices and instructed his staff to prepare and issue the other sales invoices to customers, which charged the prevailing rate of GST on these sales. The “GST” amount was reflected on the said invoices issued.

As MV was not GST-registered, it did not file any GST returns or account for the “GST” collected from MV’s customers to the Comptroller of GST.

In the end, Kumarsalvam pleaded guilty to the 34 charges proceeded on. For being a director when MV unlawfully charged $3,791.21 as GST, the court sentenced Kumarselvam to a penalty of $11,373.63, which is 3X the amount shown as tax, and a fine totaling $51,000. In default of paying the penalty and fine, he has to serve a total of 125 days’ imprisonment. Another 68 similar charges were taken into consideration in sentencing.

What does this mean to you? 

It is a serious offense for businesses that are not GST-registered to charge and collect GST from their customers. Offenders face a penalty of three times the amount of tax unlawfully collected and a fine of up to $10,000 for each offense.

Please take note that IRAS conducts audits to identify non-compliance with GST laws, including checks on whether businesses charge and collect GST correctly.

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Income Tax – Income Tax Treatment Arising from Adoption of FRS 115 – Revenue from Contracts with Customers


IRAS issued an e-Tax Guide on 12 January 2018 pertaining to the  Income Tax Treatment Arising from Adoption of Financial Reporting Standards (“FRS“) 115 – Revenue from Contracts with Customers.

What is FRS 115?

FRS 115 was developed with the objective of removing inconsistencies and weaknesses in previous revenue requirements, establishing a more robust framework for addressing revenue issues, streamlining the volume of accounting guidance, as well as improving comparability and disclosure requirements.

It applies to contracts which an entity has with its customers. Under the Standard, an entity is required to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, by applying the following steps:

  • Step 1: Identify the contract(s) with a customer;
  • Step 2: Identify the performance obligations in the contract;
  • Step 3: Determine the transaction price;
  • Step 4: Allocate the transaction price to the performance obligations in the contract and
  • Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation.

Singapore income tax treatment 

1.   For Singapore income tax purposes, the accounting revenue as determined in accordance with FRS 115 would continue to be accepted as the revenue in most cases except where specific tax treatment has been established through case law or provided under the law, (see point 3 below)  or where the accounting treatment deviates significantly from tax principles.

2.   Any upward transitional adjustment that is revenue in nature would be subject to tax and any downward transitional adjustment that is revenue in nature would be deducted from the amount of exempt income or allowed as a deduction (as the case may be), in the year of assessment (“YA”) relating to the basis period in which the FRS 115 is adopted for the first time (hereafter referred to as “initial YA”).

3.  Profits of property developers are recognized for tax purposes when a property development project is substantially completed, i.e. when the Temporary Occupation Permit is granted, regardless of the revenue recognition method adopted for accounting purposes under current accounting standards.  The existing tax treatment for property developers is retained with the adoption of FRS 115.

Have a question regarding the above?

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Singapore GST – ASK Review: Declaration Form On ASK Administrative Concession


In 2017, the Inland Revenue Authority of Singapore had shared that it was reviewing the commonly encountered ASK issues /requests so that the GST: Assisted Self-Help Kit (ASK) Annual Review Guide can be issued to allow businesses to self-assess without the need to disclose such issues to IRAS as long as certain conditions are satisfied.

On 5 September 2017, IRAS issued the revised e-Tax Guide and stated that a list of administrative concessions for common erros discovered in the course of ASK Annual REview can be found in the “ASK: Declaration Form on ASK Administrative Concessions”.  The IRAS states that businesses may enjoy these concessions if the errors fall within the prescribed scenarios.  No approval is required to be sought from the Comptroller for the purpose of enjoying these concessions which would only apply to past errors.   Businesses are required to take remedial actions to prevent recurrence of these errors and submit the “ASK: Declaration Form on ASK Administrative Concessions” to IRAS and retain the declaration for at least 5 years.

However, 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.

Finally, the scenarios cited in the administrative concessions list are not exhaustive. If the scenarios not covered in the guide or other publications issued by IRAS (e.g. other GST guides or Practice Notes), businesses are advised to write to IRAS, providing full details of the errors.

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Singapore GST – Clarification on “Directly in Connection With” and “Directly Benefit”


IRAS has recently updated its e-Tax Guide on “Clarification on “Directly in Connection With” and “Directly Benefit”.   We highlight the major amendment to this  e-Tax Guide below:

  1.   An example was added to illustrate what constitutes a supply of service that is directly in connection with goods or land:
  • Fire insurance for a building. In the event of a fire, the policyholder is compensated for the damages to the building caused by the fire. The service provided by the insurance company protects the value of the building.
  • Interior design services for a specific property.

2.   The provision of a mortgage loan is considered a supply that is directly in connection with the land when the loan is provided specifically to enable the purchaser to own the property.

3.    Services supplied are regarded as directly in connection with goods or land only if:

(a) the goods or land exist at the time the services are performed. For example, the granting of a right to a patent (which is a supply of service) cannot be regarded as supplied directly in connection with goods manufactured using the patent as the goods do not yet exist when the patent is granted; and

(b)  the services relate to identifiable goods or land. Goods are identifiable by model, type or serial number whereas land is identifiable by address or legal description. Hence, if the services relate to goods or land in general, the services will not be regarded as directly in connection with any goods or land.

4.   Where a transaction comprises multiple supplies of services, each supply should be examined on its own to determine whether the supply of services is considered directly in connection with goods or lands.  If it is a single supply of services consisting of a number of service elements, the entire supply would be directly in connection with goods or land if the dominant service element is regarded as directly in connection with goods or land.

5.   A local beneficiary who wishes to avail himself of the administrative concession that allows him to claim the GST charged by the local supplier to the overseas customer as its input tax claim is required to self-assess and ensure the prescribed conditions are satisfied and it’s been clarified that the claim should be made within 5 years from the end of the prescribed accounting period in which the payment of the tax was made or the date when the invoice was issued, whichever is the later.

Contact support@whm-consulting.com if you have any questions regarding the above.

 

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 support@whm-consulting.com.