Tax investigation involves the inspection of the tax declaration of a taxpayer who is suspected of tax evasion. In Singapore, it is performed by the Inland Revenue Authority of Singapore (IRAS).
IRAS tax investigation can be emotionally, psychologically and financially stressful because of the heavy penalties and imprisonment if one is found guilty of tax evasion or negligence. It is usually triggered by IRAS’ internal information or an informer. An informer can be rewarded handsomely by IRAS (i.e. 15% of tax recovered capped at $100,000) for providing reliable information and this makes it attractive for ex-business partners or disgruntled employees to report any incorrect tax filing to the IRAS.
Unlike desk audit or field audit where prior notice is given to the taxpayer, tax investigation usually comes as a surprise visit at the taxpayer’s office & residence, accountant’s office and/or other relevant premises simultaneously. During the raid, the IRAS investigators or officers gather all relevant documents and the computer forensic experts “clone” the computer records to preserve the necessary evidence for prosecution in court. The cash in taxpayer’s safe deposit box may be counted and recorded for off-the-books cash transactions.
After the raid, IRAS investigators willl interview all parties involved (i.e. suppliers, customers, employees, etc), record statements and gather more evidence from different sources in addition to the evidence gathered during the raid. Taxpayer who has wrongfully reported the income or expenses can either be charged in court or settled out-of-court.
Tax Investigation Process
Penalties for Filing Incorrect Tax Return Negligently or Intentionally
| S37J, S95 & S96 of Singapore Income Tax Act | Negligence / Carelessness | Evasion |
| Max Penalty (% of tax undercharged or PIC cash payment or bonus) | 200% | 400% |
| Max Fine | $5,000 | $50,000 |
| Max Jail Term | 3 years | 5 years |
Penalties for filing incorrect GST tax return is different from that of Individual and Corporate Tax Return (which is shown above).
What to do when you are under tax investigation in Singapore?
It is natural for anyone to be worried when IRAS raided their premises. No matter what happens, please give the tax investigators your cooperation and do not obstruct them from performing their duties as it is an offence to do so under the law. The tax investigators may ask questions or record statements during the raid. If you are sure of the answers, you can tell them on the spot. If you are unsure or unable to recall, you have the right to confirm with them later. It is extremely important that you are absolutely sure before you confirm because any inconsistency in your answers may work against you later.
After the raid or visit by IRAS, it is critical that you appoint a tax professional who is experienced in handling tax investigation cases because such cases are complex and require the right support in order to effectively mitigate the detrimental consequences of non-compliance and resolve the issues with IRAS. You should not risk engaging an inexperienced tax agent and jeopardizing your chances of resolving it out-of-court.
Our team at A Tax Advisor Pte Ltd is led by a former IRAS Senior Tax Investigator with more than 15 years of experience in handling tax investigation cases and would be able to assist you in resolving tax investigation issues with IRAS. If you are worried that you may be the target of tax investigation by IRAS in the future, we can also conduct a Self-Review or “Health Check” on your tax affairs to surface any improper filing for voluntary disclosure and give you a peace of mind. Contact us now to discuss your tax investigation issue as soon as possible.