Genuine Incorporation or Tax Avoidance?

The Business Times, 21 May 2020

4 Pages Posted: 16 Jun 2020 Last revised: 2 Jul 2020

See all articles by Liu Hern Kuan

Liu Hern Kuan

Inland Revenue Authority of Singapore

Vincent Ooi

Singapore Management University - School of Law; Singapore Management University - Centre for AI & Data Governance

Date Written: May 21, 2020

Abstract

In 2018, two articles in The Straits Times described how some professionals were incorporating one or more companies in an attempt to gain tax advantages. The issue was the difference between the highest personal income tax rate of 22 per cent and the corporate tax rate of 17 per cent, which provided an opportunity for tax arbitrage. The Start-Up Tax Exemption Scheme and Partial Tax Exemption and the availability of corporate tax rebates (typically announced during the Budget) also contributed to making incorporating one or more companies more attractive. Since the articles were published, many professionals have attempted to justify their structures and arrangements to the IRAS, arguing that they were not engaged in tax avoidance.

In the recent case of GCL v Comptroller of Income Tax, the Income Tax Board of Review (ITBR) laid down several principles that may help clarify the legal position here. The case is a very significant one as it addresses head-on several important questions about professionals incorporating companies and tax avoidance. We caution that none of our comments is intended to be taken as legal advice and that, especially in the context of tax avoidance, cases often turn on very specific facts. Nevertheless, it may be useful to look at the GCL case.

Keywords: Tax Law; Taxation; Tax Avoidance

Suggested Citation

Hern Kuan, Liu and Ooi, Vincent, Genuine Incorporation or Tax Avoidance? (May 21, 2020). The Business Times, 21 May 2020, Available at SSRN: https://ssrn.com/abstract=3606957

Liu Hern Kuan

Inland Revenue Authority of Singapore ( email )

55 Newton Road
Revenue House
Singapore, 307987
Singapore
+65 6351 2030 (Phone)
+65 6351 2077 (Fax)

HOME PAGE: http://www.iras.gov.sg

Vincent Ooi (Contact Author)

Singapore Management University - School of Law ( email )

55 Armenian Street
Singapore, 179943
Singapore

HOME PAGE: http://vincentooi.com

Singapore Management University - Centre for AI & Data Governance ( email )

55 Armenian Street
Singapore
Singapore

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