A company and its finance manager were found guilty of tax evasion and abuse of tax exemption scheme. Alphalog (Singapore) Pte Ltd (“ASPL”), a warehousing and logistics company, and the company’s finance manager, Foo Tiew Heng, were each ordered to pay a penalty of $211,110.84 after pleading guilty to four tax evasion charges. ASPL was fined $14,000 and Foo Tiew Heng jailed for two weeks for helping the company evade tax.

ASPL is the second company to be convicted of abusing the Tax Exemption Scheme for New Companies. In October 2009, Steel Forming and Rolling Specialists (SFRS) was fined $24,000 and ordered to pay a penalty of $988,934 for similar offences. SFRS’ managing director Gan Oh Boon was jailed for two weeks, fined $8,000 and also ordered to pay a penalty of $988,934 for helping SFRS evade tax.

Tax exemption scheme abused to lower taxes

The Tax Exemption Scheme for New Companies, which took effect from Year of Assessment 2005, was introduced to support entrepreneurship and encourage growth of local enterprises. Newly incorporated companies can enjoy a tax exemption on the first $100,000 of normal chargeable income for the first 3 consecutive Years of Assessment from the year of incorporation. Starting from Year of Assessment 2008, newly incorporated companies can claim a further 50% exemption on the next $200,000 of normal chargeable income.

ASPL set up Vida Enterprise Pte Ltd (“VEPL”) in May 2004. VEPL had no employees except for the ASPL’s directors themselves. Investigations revealed that in order to take advantage of the tax exemption scheme for newly set-up companies, ASPL claimed fictitious expenses amounting to $1.2 million as management fees paid to VEPL when no such services had been performed by VEPL. VEPL reported the management fees in its returns and paid a lower amount of tax under the tax exemption scheme while ASPL under-reported its profits by $1.2 million in its income tax returns for the Years of Assessment 2008 and 2009. In doing this, both companies had lowered their overall tax liabilities and abused the tax exemption scheme.

ASPL and Foo Tiew Heng pleaded guilty to tax evasion by under-reporting the profits of $1.2 million in the company’s income tax returns for the Years of Assessment 2008 and 2009.

Voluntary Disclosure Pays, Tax Crime Does Not

Tax evasion/fraud is a criminal offence punishable under the law and the Court imposes severe penalties for such offences. Businesses or individuals should disclose any past tax evasion immediately. IRAS will treat such disclosure as a mitigating factor when considering the penal charges.

IRAS is also aware that some businesses and individuals could be negligent or unaware of their tax obligations, resulting in mistakes. IRAS views such mistakes differently from tax evasion. In the spirit of encouraging voluntary compliance, IRAS imposes lower penalties for such mistakes disclosed voluntarily by taxpayers.

Those who wish to disclose past mistakes or evasion or report malpractices that might indicate tax evasion should write to:

Investigation & Forensics Division Inland Revenue Authority of Singapore 55 Newton Road, Revenue House Singapore 307987

Email: [email protected]

IRAS will ensure that the identities of informants are kept confidential.

More information on voluntary disclosure of mistakes is available in IRAS’ e-Tax Guide (PDF, 476KB).

Inland Revenue Authority of Singapore