The Anti-Avoidance Response to Professionals Incorporating Companies in Singapore

Posted: 1 Jul 2020 Last revised: 24 Feb 2021

See all articles by Vincent Ooi

Vincent Ooi

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

Date Written: June 8, 2020

Abstract

The issue of whether the incorporating of companies by professionals in Singapore constitutes tax avoidance has attracted considerable attention. The recent case of GCL v. CIT provides some guidance in this area. It reaffirms the general two-part test in CIT v. AQQ, requiring one to first apply the objective predication principle before moving on to consider the subjective bona fides commercial reason exception. It establishes that the mere fact that a professional incorporated a company through which to practise would not be sufficient to constitute tax avoidance, since such an arrangement is common and widely used, with established commercial benefits. However, the salary paid to a professional is subject to scrutiny and cannot be artificially reduced. Doing so may constitute tax avoidance and/or attract an ‘arm’s length’ adjustment under section 34D of the ITA. It also establishes that the ‘personal exertion principle’ has no basis in Singapore.

Keywords: Tax Law; Taxation; Tax Avoidance

Suggested Citation

Ooi, Vincent, The Anti-Avoidance Response to Professionals Incorporating Companies in Singapore (June 8, 2020). (2020) 26(2) Asia-Pacific Tax Bulletin 1, Singapore Management University School of Law Research Paper No. 19/2020, Available at SSRN: https://ssrn.com/abstract=3622810

Vincent Ooi (Contact Author)

Singapore Management University - School of Law ( email )

55 Armenian Street
Singapore, 179943
Singapore

HOME PAGE: http://law.smu.edu.sg/faculty/profile/156436/Vincent-OOI

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

55 Armenian Street
Singapore
Singapore

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