Singapore
  • Hong Kong
  • UK
  1. Osome Blog Singapore
  2. A Guide to Tax Evasion Penalties in Singapore

A Guide to Tax Evasion Penalties in Singapore

In Singapore, tax evasion or fraud is considered a criminal offence that is punishable by law. Have you ever wondered what the consequences of tax evasion are?

By the way, if you’re looking for legal ways to reduce your taxes, our experienced accountants can help you to do this. Drop us a chat any time of the day to reduce your paperwork.

What is Punishable in Tax Evasion?

Tax evasion involves unlawful ways to avoid paying taxes and is a criminal offence. This includes things like under-reporting or not reporting income, misrepresentation of tax reporting, and/or the transferring of profits without commercial reason, and/or over-claiming of expenses.

For IRAS to prove that someone is evading tax, there must be sufficient evidence to show that the taxpayer has an intention to pay less tax illegally. If it is his carelessness which resulted in paying less tax, it is not considered tax evasion but negligence.

Creating fictitious invoices, posting false entries, using phantom employees, etc. may be an indication of a plan and intention to evade tax.

What Are the Penalties for Evading Tax?

Evading tax in Singapore is no laughing matter. If you are found guilty of any tax evasion act, you may face one or more of the following punishments meted out by IRAS:

  • Penalisation of 300% of the tax undercharged, falling in line with Section 96 of the Singapore Income Tax Act
  • A fine of S$10,000, three years of imprisonment, or both
  • Penalised with 300% of the GST undercharged, should it be found to be owing or not paying taxes under the GST Act.
  • If documents were falsified, the criminal will be made to pay up to 400% of the tax undercharged. If found guilty they may face a fine of up to S$50,000, five years of imprisonment, or both.

Isabelle and Rebecca, two business partners of a beauty product company, have been convicted for under-reporting $3.6 million in net income in Income Tax returns for Years of Assessment 2010 to 2014, leading to $359,549 and $24,542 in taxes undercharged for Isabelle and Rebecca respectively. Additionally, they were found responsible for understating UNILOW's net GST payable amounting to S$45,245 in GST.

Isabelle was sentenced to fines and penalties twice the amount of taxes undercharged after she pleaded guilty to sixteen proceeded charges. Rebecca pleaded guilty to six proceeded charges and had her hearing adjourned for sentencing. They’ve got to be accountable for their mistakes!

  • Up to S$10,000 fine for the company, while the guilty individuals may face up to seven years of imprisonment.

Lilian and Elizabeth started Little Tots Tuition Centre and failed to declare their salary income to evade income tax. They were convicted for tax offences and the tuition centre was sentenced to a fine of S$1,459 and a penalty of S$6,484 for their failure to register for GST when its taxable supplies exceeded S$1 million. Both of them were found to make incorrect returns through understating income in their tax returns and thus sentenced to pay penalties twice the amount of tax undercharged.

The Difference Between Tax Evasion and Tax Avoidance

Tax laws are created by the Singapore government to make sure that the citizens pay the right amount of tax. While most citizens are compliant, some may attempt to get around the system via tax evasion or tax avoidance. These are two different concepts, tax avoidance is legal, while tax evasion, well that’s an offence.

Tax avoidance is when an individual secures a tax advantage via legal means. To achieve this, the individual must know about the tax regulation and tax system to get an allowable tax benefit.

On the flip side, tax evasion involves unlawful ways to avoid paying taxes and is a criminal offence. This includes things like under-reporting or not reporting income, misrepresentation of tax reporting, and/or the transferring of profits without commercial reason, and/or over-claiming of expenses.

The Inland Revenue Authority of Singapore (IRAS) frowns upon both tax evasion and aggressive tax avoidance. Together with other tax regulatory bodies around the world, these authorities would actively tackle tax evasion through investigations and auditing, to ensure that taxes are paid up and punishments for tax evaders.

9 Steps to Avoid Committing Tax Evasion for Companies

A company will be held responsible for the actions of its staff if they were found to be carrying out any activities that are seen as evading taxes.  If you own a company in Singapore, here are the things you should look out for to avoid committing tax evasion.

  • Conduct checks. If the company is lenient against those who have committed tax offences, it can also be held responsible for not taking legal actions.
  • Encourage staff to report any acts of tax evasion within the company to you or your HR team.
  • Make sure that the company has documents including audits to show that it has adopted measures to deter tax evasion from being committed.
  • Send your employees for training so they understand the penalties of tax evasion.
  • Inform your employees the differences between tax avoidance and tax evasion, one is legal, the other is not.
  • Make sure that your staff are fully aware of the government penalties and legal actions that can be taken against them or the company, if they try to evade taxes.
  • Make it a point to screen your customers' tax compliance status, or do a check with government authorities.
  • Assess who you go into business with, to avoid possible penalties as a result of such partnerships.

Conclusion

The tax system is in place to maintain a country's economy and create a socio-economic balance among people of different statuses. To combat tax evasion, harsh penalties are necessary to deter individuals or companies.  Make sure you stay on top of things to avoid being charged with tax evasion penalties. From registering your company to getting help with  Corporate Secretarial services, you’ll get your papers in order and eliminate chaos. We track deadlines, file reports and make sure you don’t have to worry about compliance.

Share this post:

Tips to run your business smarter.
Delivered to you monthly.

You'll receive a verification email you'll have to open and confirm the subscription.

You might like it

E-commerce

Which Is The Better Payment Gateway: Paypal or Stripe?

As an e-commerce business owner, you would have heard of payment gateways PayPal and Stripe. With these two big platforms being the most popular online payment gateways, you may face a dilemma when it comes to deciding which payment gateway to use.

E-commerce

Tips For Amazon Sellers To Manage Your Inventory Better

Brand owners and sellers of all scales struggle to seek a well-balanced supply chain. Additionally, Amazon has its own inventory management rules, which makes everything even tougher.

E-commerce

Top 10 Best E-commerce Hosting Services in 2021

When you are setting up your e-commerce shop, the right hosting provider can make all the difference. However, with a variety of options out there, choosing the best one can be confusing.

E-commerce

What You Need To Include In An Invoice for E-commerce

For business owners who own and run an online store, you probably already know that invoices must be sent to your customers for the services you provide or the goods you sell, as a form of purchase proof.

E-commerce

Guide to E-commerce Fulfillment & Shipping for Singapore E-commerce Sellers

E-commerce fulfilment and shipping for your Singapore-based business matters. This guide unpacks how the right strategy can influence your bottom line and help you find what’ll work best for you - whether it’s in-house fulfilment, dropshipping or a solid partnership with a 3PL.

E-commerce

E-commerce Tips: How To Use Packaging Inserts to Increase Revenue

Improving customer retention is one of the effective ways to create brand awareness. Additionally, placing your focus on existing customers also means that you do not have to splurge extra dollars on marketing.

Entrepreneur's Bootcamp

The Cost of Living as a Foreign Business Owner in Singapore

When choosing Singapore as a base to run your business is the cost of living, you need to consider the cost of living.

E-commerce

5 Most Lucrative E-Commerce Niches In 2021

If you’re just starting or looking to go in a new direction, finding a lucrative niche will make every part of running your e-commerce business easier. This article will look at the trending e-commerce niches to consider.

Entrepreneur's Bootcamp

How To Pick the Right Company Name

Choosing a business name is not that simple, and you may wreck your brains over choosing one, only to find out that ACRA did not approve its registration.

Running My Business

Should You Consider Using Cryptocurrency in Your Business Operations?

There are more than 4,000 cryptocurrencies that exist. Before you jump on the bandwagon, assess whether cryptocurrencies are suitable to be used in your business.

E-commerce

7 Ways To Accept Payments For Your Online Store

Many payment options allow you to accept credit cards and other payment types. How do you choose which method to include on your website?

E-commerce

Customer Retention: How To Keep Customers Coming Back Repeatedly

Every business likes new customers, especially when the customer uses their services again and again. Existing customers help in creating a solid foundation of your business that provides a steady revenue stream that costs less than acquiring new customers.

Tips to run your business smarter. Delivered to you monthly.

You'll receive a verification email you'll have to open and confirm the subscription.

We’re using cookies! What does it mean?