Guidelines for Companies to Avoid Tax Evasion in Singapore

Small enterprises, particularly those with significant cash transactions and poor record-keeping, are more vulnerable to tax evasion. Furthermore, some internet company owners may be unaware that they must record their income from online sales for tax purposes. In truth, taxation actually applies in all areas, including the sale of products via online platforms such as a website or social media.

Tax evasion occurs when an individual intentionally provides Inland Revenue Authority of Singapore (“IRAS”)  with misleading or insufficient information about their actions to decrease their tax burden or gain improper tax credits and refunds. Tax evasion damages a country’s economy by increasing inequality among residents or firms of different socioeconomic groups. It is critical to take action against tax evaders in order to combat the epidemic of tax evading. Penalties for tax evasion in Singapore are intended to deter any individual taxpayer or corporation from participating in such behavior.

Furthermore, IRAS has been actively encouraging Singaporeans to report any instances of tax evasion that may have happened. To encourage as many people as possible to follow suit and report any instances of tax avoidance to IRAS, all whistleblowers will be compensated generously.

What are the actions included in tax evasion?

1. 1. Income tax evasion examples include neglecting to disclose all assessable income, requesting deductions for costs that were not incurred or are not legally deductible, and seeking personal relief on fictional dependents.
   2. Examples of GST (Goods and Services Tax) evasion include claiming input tax on fictional purchases, failing to pay output tax on local taxable supplies, and claiming tourist refunds when they are not due.

What are the signs an entity is involved in tax evasion?

1. 1. Some indicators that a person or organization may be evading income tax, include: maintaining two sets of accounts, issuing falsified invoices to justify fabricated spending, and refusing to deliver invoices.
   2. Some indicators that a person or corporation may be evading GST, include: keeping two sets of books, issuing fraudulent invoices to support bogus costs or purchases, issuing fabricated export paperwork to support the zero-rated supply of products, issuing false customer and supplier information, and refusing to produce a receipt or a tax invoice.

Are there any companies that got punished due to tax evasion?

Not all citizens or firms who exhibit these signs are attempting to avoid paying taxes on purpose. However, by informing us of what you know, IRAS may investigate to determine the facts and act against individuals who have committed tax evasion. There are tax evasion cases that are posted by IRAS in their websites. For example, Loh Chia Wei (“Loh”), 48, a director of Print Orient Pte Ltd (“Print Orient”), was sentenced to 9 months in jail and forced to pay penalties of $253,195 after being found guilty of Goods and Services Tax (“GST”) evasion, Corporate Income Tax evasion, money laundering, and deception. Despite Print Orient’s GST registration, Loh made cash sales to Print Orient’s clients without accounting for them in Print Orient’s Income Tax and GST filings. He purposefully did not do so to avoid paying taxes. This resulted in $110,119 in GST undercharged between 1 May 2011 and 31 October 2017 and $69,391 in Corporate Income Tax undercharged between Year of Assessment (“YA”) 2013 and YA 2017. Loh faced a total of 31 tax-related accusations, of which 10 were pursued and the rest 21 were considered in the sentence.

Next, Ang Leong Siong (“Ang”), a 44-year-old business owner of Nice Vision Optical (“NVO”) and a partner of Eyes to Eyes (“E2E”), has been convicted of multiple offenses, including Income Tax and Goods and Services Tax (“GST”) evasion, failing to notify the IRAS of E2E’s GST liability, and submitting false Productivity and Innovation Credit (“PIC”) claims. Ang pleaded guilty to two charges of income tax evasion totaling $151,725 in undercharged tax, one count of failing to inform IRAS of his need to register for GST, three counts of GST evasion totaling $24,299 in undercharged tax, and one case of fraudulent PIC claims totaling $6,000 in cash compensation. The Court condemned him to 6 months and 3 weeks in jail and ordered him to pay a total of $561,800 in fines and penalties.

Then, how a company can avoid tax evasion in Singapore?

A business will be held liable for the behavior of its employees if they are proven to be engaging in tax evasion operations. Businesses want recognition to increase sales, but you surely don’t want your company to be known for anything illegal and humiliating, as previously mentioned companies on IRAS websites. Here are some things to look out for if you own a company in Singapore to avoid tax evasion.

1. 1. Good quality control. If the corporation is indulgent toward people who have committed tax evasion, it may be held liable for failing to take legal action.
   2. Encourage employees to report any instances of tax evasion inside the organization to you or your human resources department.
   3. Always determined that the corporation has papers, including audits, demonstrating that it has implemented efforts to discourage tax avoidance or evasion. All enterprises and self-employed individuals must guarantee that their company revenue and costs are appropriately reported in tax filings. Individuals who make additional money from conducting a side company must also report the additional revenue.
   4. Send your personnel to tax evasion training to ensure they understand the consequences. Inform your staff of the distinctions between tax avoidance and tax evasion; one is lawful and the other is not.
   5. Businesses should meticulously track their yearly income to determine whether they need to register for GST. Businesses must register for GST at the end of each calendar year if their taxable turnover for that year exceeds $1 million, or at any time if they may reasonably expect their taxable turnover in the next 12 months to reach $1 million.
   6. Make a point of checking your clients’ tax compliance status or contacting federal officials.
   7. Always examine thoroughly whom you do business with to prevent any fines because of such collaborations. Ensure that your employees are constantly mindful of the government fines and legal actions that can be taken against them or the firm if they attempt to avoid paying taxes.

Conclusions

All enterprises including entrepreneurs must keep adequate records, and supporting documentation such as invoices must be retained for a minimum of five years. These can be used to back up their assertions if necessary. Unless the firm qualifies for simplified record-keeping, it should also retain a comprehensive and complete physical or digital record of revenue and spending such as invoices, receipts, proof of receipts and payments, and other documented evidence.

Make sure you file your taxes meticulously or you can ask for a tax consultant’s help. Please contact us at +65 8940 3532 (Kelly) for any questions. We are delighted to help you keep track of deadlines, produce reports, and ensure that you are always in compliance!