By Eugene Lim & Janus Lim, Taxise Asia LLC (WTS Global member)
Singapore’s Ministry of Finance on 20 July proposed a number of amendments to the Income Tax Act, including changes to the general anti-avoidance rule (GAAR) regime.
The proposed changes aim to reinforce and clarify the GAAR and introduce a new 50% surcharge on tax avoidance.
This marks a significant upgrade of the taxman’s toolkit to deal with tax avoidance.
The current version of section 33 of the Income Tax Act, which sets out Singapore’s GAAR, was promulgated in 1988 to deal with increasingly complex and bespoke tax avoidance schemes.
This provision gives the Comptroller of Income Tax the discretion to disregard or vary any taxpayer arrangement to counteract any tax advantage obtained as a consequence of it.
The proposed amendments remove the discretion of the Comptroller in deciding whether to exercise counteracting powers. The Comptroller must disregard or vary arrangements to counteract any tax advantage once the taxpayer is deemed to have avoided tax.
Additionally, the introduction of a new 50% tax avoidance surcharge from year of assessment 2023 (or calendar year 2022) further raises the stakes since taxpayers would be subject to a hefty financial penalty where found to have avoided tax.
The draft bill proposes similar changes to the Stamp Duties Act. We understand plans may also be underway to propose a similar amendment in the draft Goods and Services Tax (Amendment) Bill 2020.
These amendments will require taxpayers to exercise greater care and consideration when organising their tax affairs, given the moves to strengthen Singapore’s anti-avoidance principles.
— Eugene Lim is Co-Founder and Principal, Taxise Asia LLC, Singapore (WTS Global member).
— Janus Lim is Associate, Taxise Asia LLC, Singapore (WTS Global member).
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