Tax Evasion is unacceptable in Singapore and will be severely punished. Inland Revenue Authority of Singapore (IRAS) has been prosecuting taxpayers who have intentionally or negligently filed an incorrect tax return. It is necessary for IRAS to send a strong message that erroneous tax filing and tax evasion should not be tolerated in Singapore.
Penalties for Filing an Incorrect Tax Return Intentionally
Section 96 of the Singapore Income Tax Act penalizes tax evader 300% of the tax undercharged, and/or $10,000 fine and/or 3 years imprisonment if convicted. Section 96A of the Act reinforces the seriousness of tax evasion especially on the falsification of documents by increasing the penalty for serious tax evasion to 400% of the tax undercharged with a fine of up to $50,000 and/or imprisonment of up to 5 years if convicted. The recent abuse of Productivity and Innovation Credit (PIC) also led to the introduction of S37J which imposes a penalty as heavy as that of S96 and S96A for businesses who abuse the PIC. A person who assists in the tax evasion scheme may also be liable to the same level of punishment as the tax evader.
Though tax evasion is most commonly linked to corporate income tax, it can also be related to goods & services tax (GST) and employment/personal income tax. For GST evasion, the period of imprisonment can go up to 7 years if convicted.
Tax evasion aside, IRAS also prosecutes taxpayers in court for filing an incorrect tax return negligently or carelessly. Despite a lighter penalty as compared to filing an incorrect tax return intentionally, taxpayers should be reminded that carelessness or ignorance is not an acceptable excuse for submitting an incorrect tax return and heavy penalty will still be imposed to the extent of facing imprisonment if convicted.
Avoid Heavy Penalties
Precaution is better than cure. Early detection is better than ugly surprises. It is a good practice for companies to engage tax professionals to conduct internal tax audit to uncover tax irregularities even before IRAS comes knocking on your door. By doing so, you can voluntarily disclose your incorrect income tax and GST filing to IRAS for a lighter penalty (i.e. 5% per year of delay). So why risk it? Engage our Self-Review or “Health Check” services and perform a voluntarily disclosure exercise to give you a peace of mind.