Tax Evasion in Singapore: Penalties and Examples
There is a saying that the only two certainties in life are death and taxes. Nonetheless, there is a small percentage of people in Singapore who evade their taxes, intentionally or otherwise.
This article will help you understand more about what is considered tax evasion and the penalties for evading taxes in Singapore. It will cover:
What is Tax Evasion?
In Singapore, tax evasion happens when a person intentionally gives the tax authority, the Inland Revenue Authority of Singapore (IRAS), false or incomplete information to illegally reduce his or her tax liability and/or obtain undue tax credits and refunds.
Under the Income Tax Act, tax evasion may occur when a person intentionally:
- Fails to accurately report all assessable income when filing taxes, such as by under-reporting or not reporting his or her income;
- Claims tax deductions for expenses that were not incurred (e.g. creating fake invoices or false entries, or hiring phantom employees);
- Claims tax deductions for expenses that do not qualify for tax deductions (e.g. deductions on private motor car expenses or inflated payments to related parties of the company); or
- Claiming personal relief for dependents who do not exist.
For example, two Singaporean directors of a plastic card company were convicted of tax evasion for under-declaring their income. This resulted in $188,622 in tax lapses for one director, and $53,021 for the other, between 2009 and 2016. The first director received a 12-week jail term and a penalty of $208,309, while the second director received a 4-week jail term and a penalty of $63,585. They were also each ordered to pay $3,332 in penalties and fined $2,000 for failing to register their company for GST.
Under the Goods and Services Tax (GST) Act, tax evasion may also occur when a person:
- Claims input tax on fictitious purchases;
- Omits output tax charged on local taxable supplies;
- Prepares false books of accounts or records; or
- Claims tourist refunds when not entitled to do so.
For instance, a furniture business partner was convicted of tax evasion for failing to register her furniture company for GST. This caused an undercharging of $246,490’s worth of GST, for which she was sentenced to 10 weeks’ jail and ordered to pay a penalty of $237,426. For failing to register her company for GST, she was additionally ordered to pay a penalty of $24,649 and a fine of $4,000.
You are also reminded that there is no time bar for tax evasion crimes. This means that IRAS can investigate you for tax evasion even if it is alleged to have happened many years ago. While the statutory time limit for IRAS to conduct assessments is 4 years, this time limit does not apply to fraud, such as where there is intention to evade tax.
Tax Evasion vs Tax Avoidance: What’s the Difference?
While tax evasion is illegal, tax avoidance generally is not as it uses legal methods to obtain tax advantages or legally reduce tax liability.
Nevertheless, IRAS does not view aggressive tax avoidance favourably, and is empowered to disregard or alter any arrangements with the main purposes of tax avoidance. Arrangements with the main purposes of tax avoidance include:
- Circular flow or round-tripping of funds;
- Setup of more than one entity for the only purpose of receiving tax advantages;
- Changes in the form of business entity for the sole purpose of receiving tax advantages; and
- Attribution of income that is not aligned with economic reality (e.g. if the person receiving income has not done anything to justify receiving it).
However, bona fide commercial arrangements are excluded from tax avoidance scrutiny so long as they had not been carried out with the objective of exploiting tax exemptions or concessions. Bona fide arrangements include genuine commercial transactions such as:
- Placing monies in a local bank or a bank outside Singapore;
- Providing housing accommodation to employees directly rather than giving a taxable housing allowance; or
- Not remitting foreign income.
What are the Penalties For Evading Tax in Singapore?
For tax evasion
IRAS takes a serious stance on tax evasion and non-compliance with tax laws.
If you are found guilty of tax evasion, you will be liable to a penalty of 3 times the amount of tax undercharged and/or the amount of tax benefit obtained. This is in addition to a fine of up to $10,000 and/or a jail term of up to 3 years.
For serious fraudulent tax evasion
Falsification of books of accounts and records, or committing any kind of fraud to evade tax, are considered more serious forms of tax evasion.
If you are found guilty of such serious fraudulent tax evasion, you will be liable to a penalty of 4 times the amount of tax undercharged and/or the tax benefit obtained. You will also face a fine of up to $50,000 and/or a jail term of up to 5 years.
For GST evasion
If you are found guilty of GST evasion, you will be liable to a penalty of 3 times the amount of tax undercharged. You will also be liable to a fine of up to $10,000 and/or a jail term of up to 7 years.
For giving incorrect information about tax liability
Even if you had no intention to evade taxes, you may still be penalised for giving incorrect information about tax liabilities. It is an offence to make an incorrect tax return or give any incorrect information about your, or any other person’s, tax liabilities negligently or without reasonable excuse.
If found guilty of giving incorrect information about your tax liabilities, you will be liable to a penalty of 2 times the amount of tax undercharged and/or the tax benefit obtained, a fine of up to $5,000 and/or a jail term of up to 3 years.
How are Tax Evaders Sentenced in Singapore?
Upon receiving information internally or through an informer, IRAS will first investigate to determine if any tax offences have been committed. If you are suspected to have committed tax evasion offences, you may be arrested and convicted.
Since June 2021, the High Court in Tan Song Cheng v Public Prosecutor has imposed a five-step sentencing framework to sentence persons convicted of tax evasion. The framework is as follows:
Step 1: Identify the level of harm and the level of culpability
The court will look at the following non-exhaustive factors to determine the severity of harm caused to the State (as the State suffers if people do not pay the rightful amount of tax), and the culpability of the offender.
|Factors relating to harm caused:
||Factors relating to culpability:
For example, furniture business partner Lin Shaohua had instructed her employee to reduce reported sales below the $1 million threshold. Her reported partnership income was thus correspondingly reduced, and her personal income was under-reported, resulting in $79,142.13 tax undercharged.
However, since Lin had merely reduced the sales figures rather than use deceit to disguise the figures, her scheme was considered to be unsophisticated, and she was hence considered to have low culpability.
The court further classified the amount of tax evaded into 3 bands of:
- Level 1 harm: Less than $75,000;
- Level 2 harm: $75,000-$150,000; and
- Level 3 harm: More than $150,000.
For example, silkscreen company director Tan Song Cheng was hauled up to court for evading tax of between $34,000 to $35,000, which was labelled as Level 1 harm.
The harm level may be recalibrated in the third step of the framework later.
Separately, as there can be significant overlap between various factors going towards culpability, the court will not double count the culpability factors such that the offender will be punished twice for the same crime.
Step 2: Identify the applicable indicative sentencing range
The court used the sentencing matrix below, but also recognised that the matrix is not fixed as the average income of the population will change over time.
|Culpability / Harm||Level 1 harm
(below $75,000 tax evaded)
|Level 2 Harm
($75,000 – $150,000 tax evaded)
|Level 3 Harm
(Above $150,000 tax evaded)
|Low culpability||Fine or up to 6 months’ jail||6 – 12 months’ jail||12 – 18 months’ jail|
|Moderate culpability||6 – 12 months’ jail||12 – 18 months’ jail||18 – 24 months’ jail|
|High culpability||12 – 18 months’ jail||18 – 24 months’ jail||24 – 36 months’ jail|
A fine would be imposed where the mandatory treble penalty (3 times the tax evaded) has a sufficient deterrent effect on the offender, such as when the amount of tax evaded is in the lower range.
While a jail term may not necessarily be imposed, a jail term would normally be imposed to deter offenders where the fine would have little or no deterrent effect. This could be where the amount of tax evaded would result in a mandatory penalty that exceeds the maximum fine, diminishing the deterrent effect of the maximum fine.
Step 3: Identify the appropriate starting point within the indicative sentencing range
The court will identify the appropriate starting point in the matrix and then re-examine the offence-specific factors to determine the indicative starting sentence.
For example, the tax evasion committed by Lin Shaohua offence was characterised as “Level 2 harm”, which would have attracted a jail term of 6-12 months. However, due to her low culpability, her indicative starting sentence was adjusted downwards to 16 weeks, even though this was outside the indicative sentencing range.
Step 4: Make adjustments to the starting point to take into account offender-specific factors
The following non-exhaustive offender-specific aggravating and mitigating factors can then be used to further adjust the indicative starting sentence (identified following the first 3 steps):
For Lin Shaohua, she had had an additional charge of tax evasion taken into consideration for the purpose of sentencing, which acted as an aggravating factor. However, her plea of guilt, cooperation during investigations, and making of full restitution all served as mitigating factors, resulting in her 16-week jail term being reduced to 10 weeks.
Step 5: Make further adjustments to take into account the totality principle
Lastly, the court will consider the totality principle, which is to take a final look at all the facts and circumstances to ensure that the aggregate sentence is sufficient and proportionate to the offender’s overall wrongdoing.
This involves examining if the aggregate sentence is substantially above the sentences normally meted out for the most serious of individual sentences committed. The court would then consider whether the effect of the sentence on the offender is overly excessive and not commensurate with his or her past record and future prospects.
As only one charge had been proceeded with in Lin’s case, the court did not see a need to further adjust her 10-week sentence based on the totality principle.
How Can You Report Suspected Cases of Tax Evasion?
If you want to report someone who has evaded tax in Singapore, or you have information about tax-related fraudulent activities, you may contact IRAS by email or post. Information you can provide include the:
- Particulars of the tax-evading individual or business;
- Method of tax evasion and how the activities were conducted;
- Amount evaded and year(s) involved;
- Supporting documentary evidence showing tax evasion (e.g. ledger accounts, invoices, payment records, etc.) or a description or locations of such evidence; and
- Explanation of how and when you became aware of the tax evasion.
Your identity and all information provided would be kept confidential. IRAS will then review all information provided and decide whether to investigate the matter further. However, it will not be able to provide you with updates on whether it has decided to launch tax offence investigations, or how its investigations are going.
You may also specifically request for a reward in relation to the information provided. The reward is pegged at 15% of the tax recovered and capped at $100,000. However, it will be given only if the information you provided had led to the recovery of tax that would otherwise have been lost.
Voluntary Disclosure of Past Actions to Evade Tax
Such conditions include you voluntarily coming forward to correct your errors. You would also have to make the disclosure accurately, completely and in a timely manner i.e. before you receive a query from IRAS relating to your tax matter, or before you receive notifications from IRAS on the commencement of an audit or investigation on your tax matters.
Lastly, you must cooperate fully with IRAS to correct the errors made and pay the additional amount and/or any penalties imposed.
If your matter is compounded, your charge would be settled, and you would be effectively acquitted of the offence. IRAS may also reduce your penalties depending on when the voluntary disclosure was made and whether the qualifying conditions are met.
For instance, if you voluntarily disclose errors inadvertently made in your tax filings within 1 year from the statutory filing deadline, no penalty would be imposed on you. On the other hand, for voluntary error disclosures made after this 1-year period, a reduced penalty of 5% of the income tax undercharged will be imposed.
Separately, if you voluntarily disclose your intention to evade taxes or obtain excessive tax benefits, you may be able to compound the matter at a penalty rate of 200% in lieu of prosecution. However, if you do not meet the qualifying conditions (mentioned above), you may still be prosecuted for tax evasion.
Tax evasion is a serious offence that is not condoned by the IRAS. You are reminded to file your taxes correctly (or correct them voluntarily if they are false or inaccurate) and be mindful of the offences and penalties that may be imposed for tax evasion. If you need assistance with filing your taxes correctly, you are encouraged to consult a tax specialist.
On the other hand, if you have been charged with tax evasion, you may wish to engage a criminal defence lawyer who will be able to advise you on your next steps and, if necessary, represent you in court to seek a fair outcome for your case.
- Your Right to a Lawyer After Being Arrested in Singapore
- What to Do If Your Loved One is Under Police Investigation
- How to Write a Letter of Representation to AGC in Singapore
- What is Entrapment and is It Legal in Singapore?
- What Happens When You Voluntarily Surrender to the Police
- Juvenile Crime: What If Your Child is Arrested in Singapore?
- Police Investigation Process for Crimes in Singapore (4 Steps)
- Arrest Warrant Issued Against You in Singapore: What to Do
- Police Arrest Procedure in Singapore
- Arrestable and Non-Arrestable Offences in Singapore
- What Should You Do If You Witness a Crime in Singapore?
- Can the Public Make a Citizen's Arrest in Singapore?
- What to Do If You’re Being Investigated for a Criminal Offence in Singapore
- "Right to Remain Silent" to Singapore Police: Does It Exist?
- Police Custody in Singapore: What You Should Know
- Search Warrant: The Issuance and Execution of It in Singapore
- Penalties for Lying to the Authorities in Singapore
- Can You Say No to a Lie Detector Test in Singapore? And Other FAQs
- Surrender of Passport to the Police and How to Get It Back
- Extradition: What If I Flee After Committing Crime in Singapore
- Making Objections at Trial in the Singapore Courts
- When is a Witness Testimony Unreliable in Singapore?
- Burden of Proof in Criminal and Civil Cases in Singapore
- Falsely Accused of a Crime in Singapore: Your Next Steps
- What is Acquittal & How Can One Be Acquitted in Singapore?
- Using the Defence of Diminished Responsibility in Singapore
- Death of a Party in a Legal Case in Singapore: What Happens?
- The "Unusually Convincing" Test in "He Said, She Said" Cases
- How to Adjourn or Postpone a Criminal Court Hearing
- TIC: Guide to Charges Taken Into Consideration in Singapore
- Can I Use the Defence of Intoxication in Singapore?
- When Can I Raise the Defence of Provocation in Singapore?
- Can I Represent Myself in a Criminal Court Case in Singapore and How?
- Claiming Trial as an Accused
- Pleading Guilty in Singapore: Consequences & Withdrawal of Plea
- The Defence of Unsound Mind in Singapore: What is It?
- Gag Orders in Singapore: Whose Identity Can be Protected?
- Mitigation Plea: How to Plead for Leniency in Court in Singapore
- Recidivism: What Happens If You Reoffend in Singapore?
- Guide to Filing a Criminal Appeal in Singapore
- Criminal Motion: What is It and How to File One in Singapore
- Guide to Filing a Criminal Revision in Singapore
- Presidential Clemency in Singapore
- Repatriation or Deportation from Singapore: How Does It Work?
- Criminal Records in Singapore
- Visiting a Loved One in Prison or On Death Row in Singapore
- Getting Parole (Early Prison Release) in Singapore
- Fined for an Offence: What to Do If I Can't Afford to Pay Them?
- How Long Is Life Imprisonment in Singapore? And Other FAQs
- Corrective Training and Its Consequences in Singapore
- Consequences of Receiving a Stern Warning in Singapore
- Probation: Eligibility and Whether It Leaves a Criminal Record
- How Can Adult Offenders Get Probation in Singapore?
- Reformative Training in Singapore: When Will It be Ordered?
- Are You Eligible for a Mandatory Treatment Order (MTO)?
- Caning in Singapore: Judicial, School & Parental Corporal Punishment
- 7 Detention Orders in Singapore: When Will They be Ordered?
- Day Reporting Order: Eligibility and Offender's Obligations
- Ragging and Bullying: Their Penalties and What Victims Can Do
- Laws Protecting Informers/Whistleblowers in Singapore
- Counterfeit Medicine/Health Products: Redress for Victims in Singapore
- Breach of Protection Orders: What Can Victims Do?
- Using Your Right to Self-Defence When Attacked in Singapore
- Compensation for Crime Victims in Singapore: How to Obtain
- Rape Laws in Singapore and How Offenders Can Be Punished
- Sexual Misconduct in Singapore: Offences and What Victims Can Do
- Falsely Accused of Rape in Singapore: What to Do
- Incest and Family Sexual Abuse: Penalties and Victim Protection
- How are Sexual Offenders with Special Needs Penalised?
- Cybersexual Crimes in Singapore and Their Penalties
- Legal Age for Sex in Singapore and Common Sexual Offences
- Consent in Sexual Offences in Singapore and What Victims Can Do
- Accused of Molest: Outrage of Modesty in Singapore
- What Can Victims of Sexual Harassment in Singapore Do?
- What is the Law on Sexting in Singapore?
- Revenge Porn: What If Your Nudes are Leaked in Singapore?
- Crime of Voyeurism in Singapore (Penalties and Defences)
- Date Rape: What to Do If Your Drink Has Been Unlawfully Spiked?
- STDs: Can I Go to the Police If a Partner Infected Me in Singapore?
- Alcohol Breathalyser Test in Singapore: Can You Refuse it?
- Singapore's Legal Smoking Age & Common Smoking Offences
- Is Vaping Illegal in Singapore?
- Legal Drinking Age and Drinking-Related Laws in Singapore
- Is Watching, Downloading or Filming Porn Illegal in Singapore?
- Child Pornography in Singapore: Offences and Penalties
- Laws on Procuring Sex Workers & Sexual Services in Singapore
- Singapore's Drug Laws: Possession, Consumption and Trafficking
- Gambling Legally (at Home, in Public or Online) in Singapore
- The Offence of Human Trafficking in Singapore and Its Penalties
- Penalties for Committing Theft in Singapore
- Committing Robbery in Singapore: What are the Penalties?
- Penalties for Dishonest Misappropriation of Property in Singapore
- Vandalism Laws: Penalties for Damaging Property in Singapore
- Criminal Trespass in Singapore: What Happens If You’re Caught?
- Penalties for Littering and Killer Litter Offences in Singapore
- What is a POFMA Correction Direction and How to Appeal
- Penalties for Cheating/Scamming and What Victims Can Do
- Penalties for Impersonating Someone and Victim Redress
- Singapore Fake News Laws: Guide to POFMA (Protection from Online Falsehoods and Manipulation Act)
- Laws and Penalties for Doxxing in Singapore (With Examples)
- Tax Evasion in Singapore: Penalties and Examples
- Criminal Breach of Trust (CBT) in Singapore: What is It?
- All You Need to Know About Corruption in Singapore
- Anti-Money Laundering Laws and You
- 5 Things You Need to Know about Insider Trading
- Dishonest Assistance and Knowing Receipt: The Case of David Rasif
- Charged with a Traffic Offence in Singapore: What to Do
- DUI: Here are the Penalties for Drink-Driving in Singapore
- What Happens If You’re Caught Speeding in Singapore?
- Road Rage: What is It and How are Offenders Sentenced in Singapore
- Penalties for Dangerous Driving for Singapore Drivers
- Fatal Traffic Accidents: Are Drivers Always Punished?
- Guide to E-Scooter and PMD Laws for Singapore Riders
- Is it Legal for Drivers to Carpool in Singapore?
- Radicalisation and Terror Attack-Related Penalties in Singapore
- Causing a Public Nuisance in Singapore: What are the Penalties?
- Causing Public Alarm in Singapore: Examples & Penalties
- Public Assemblies and Processions in Singapore
- Misbehaving in Public: 5 Things You Need to Know
- Racial Enmity: Sections 298 and 298A Penal Code Explained
- Religious Cults in Singapore: Are they Illegal? Penalties & More
- Penalties for Financing Terrorist Operations in Singapore
- Penalties for Abetting Minors or Committing Crimes Against Them
- Here are the Penalties for Committing Forgery in Singapore
- Arson and Fire-Related Offences and Their Penalties in Singapore
- Offences Against the Dead and What Family Members Can Do
- Laws on Prohibited, Replica and Self-Defence Weapons
- Penalties for Attempting to Commit a Crime in Singapore
- Penalties for Assaulting a Person in Singapore
- Expats Charged With Offences in Singapore: What to Expect
- What are the Penalties for Hiring Phantom Workers in Singapore?
- What Are Ponzi Schemes? Are They Illegal in Singapore?
- Modification of Cars, Motorcycles, Etc: Is It Legal in Singapore?
- Penalties for Illegal Immigration and Overstaying in Singapore
- Criminal Intimidation: Penalties for Making Threats in Singapore