Tag Archives: IRAS

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.

 

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Singapore GST – Businessman Guilty of GST Fraud, Sentenced to 24 Weeks’ Imprisonment


It was reported in the IRAS’  website on 20 October 2017 that
Foo Tee Suan (“Foo”), who was the sole-proprietor of FTH Enterprise (“FTH”), partner of F&T Top System Enterprise (“F&T”) and Hwa Rong Import & Export (“HRIE”) and director of Hwa Rong Enterprise Pte Ltd (“HREPL”), has been convicted of making false entries in the GST returns of the four business entities which resulted in GST refunds totalling $458,019.69.

One of Foo’s business entities, F&T, was audited by IRAS during one of its regular audits of GST-registered businesses. During the course of the audit, IRAS’ auditors discovered that Foo had made false entries in the GST returns of F&T. The audit further discovered that Foo had also made false entries in the GST returns of three other business entities that he was involved in.

Foo’s scheme to commit GST tax fraud first began with a suggestion from Eric Chia Puay Yeoh (“Chia”), who was convicted in July 2014 of masterminding a complex GST scam using multiple shell entities. Chia suggested to Foo to voluntarily register his export business, FTH Enterprise (FTH), for GST so that FTH could claim fictitious GST refunds. Thereafter, Foo set up three other entities that were all shell companies without any business transactions.

Foo, with willful intent to evade tax, signed blank GST return forms for the four business entities and provided Chia with his SingPass in order for Chia to e-file the GST return forms for the four business entities. To illegally obtain GST refunds, Chia declared fictitious figures in the GST returns and fraudulently claimed a total of $457,749.59 in GST refunds. Foo benefitted from the fictitious GST refunds that Chia obtained and used some of the GST refund monies for his own personal expenses.

Foo faced a total of 54 GST charges of wilful intent to evade tax by making false entries in the GST returns of the four business entities. He pleaded guilty to 18 out of the 54 GST evasion charges, involving a total GST amount of $172,314.90 undercharged, with the other 36 remaining GST evasion charges being taken into consideration for the purposes of sentencing. The Court sentenced Foo to 24 weeks’ imprisonment and ordered him to pay a penalty of $516,944.70, three times the amount of tax undercharged.

What does this mean to you?

GST-registered businesses are allowed to offset the GST they pay for their purchases (input tax) against the GST they collect from sales (output tax). They pay the net difference to IRAS. Those that incur more GST on purchases than they collect from their sales can claim the difference from IRAS in the form of GST refunds.

It is a serious offense to claim GST input tax on fictitious purchases or understate output tax on sales. Offenders face a penalty of three times the amount of tax undercharged, a fine not exceeding $10,000, and/or imprisonment of up to seven years.

If you have any questions, please contact support@whm-consulting.com

 

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.

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 support@whm-consulting.com.

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 support@whm-consulting.com.