Genuine incorporation or tax avoidance?

• Main Authors: LIU Hern Kuan, OOI, Vincent
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2020
• Subjects: Tax Law; Taxation; Tax Avoidance; Business Organizations Law; Tax Law
• Online Access: https://ink.library.smu.edu.sg/sol_research/3134; https://ink.library.smu.edu.sg/context/sol_research/article/5092/viewcontent/O037._Genuine_Incorporation_or_Tax_Avoidance.pdf
• Institution: Singapore Management University

In 2018, two articles in The Straits Times described how some professionals were incorporating one or more companies in an attempt to gain tax advantages. The issue was the difference between the highest personal income tax rate of 22 per cent and the corporate tax rate of 17 per cent, which provided an opportunity for tax arbitrage. The Start-Up Tax Exemption Scheme and Partial Tax Exemption and the availability of corporate tax rebates (typically announced during the Budget) also contributed to making incorporating one or more companies more attractive. Since the articles were published, many professionals have attempted to justify their structures and arrangements to the IRAS, arguing that they were not engaged in tax avoidance.In the recent case of GCL v Comptroller of Income Tax, the Income Tax Board of Review (ITBR) laid down several principles that may help clarify the legal position here. The case is a very significant one as it addresses head-on several important questions about professionals incorporating companies and tax avoidance. We caution that none of our comments is intended to be taken as legal advice and that, especially in the context of tax avoidance, cases often turn on very specific facts. Nevertheless, it may be useful to look at the GCL case.