The Inland Revenue Authority of Singapore (IRAS) updated its guidelines on general anti-avoidance on 31 March 2023, with the release of the IRAS e-Tax Guide: “Income Tax: The General Anti-Avoidance Provision and its Application (Second Edition)” (“Revised Anti-Avoidance ETG”).
The Revised Anti-Avoidance ETG sets out additional examples of arrangements that IRAS considers to fall under the general anti-avoidance provision set out in Section 33 of the Income Tax Act 1947 (ITA). It is helpful in providing taxpayers with greater clarity on IRAS’ approach to Section 33.
More importantly, the Revised Anti-Avoidance ETG also elaborates how the surcharge under Section 33A of the ITA will be imposed and when a remission on a surcharge may be granted. This is important for taxpayers to note as the Section 33A surcharge is computed based on 50% of the tax or additional tax arising from the adjustment under Section 33. Further, the surcharge generally must be paid within one month after the date of the written notice of the Section 33A surcharge, notwithstanding any objection to the underlying Section 33 adjustment.
In addition, taxpayers should note that while the surcharge is only imposed on any tax or additional tax arising from a Section 33 adjustment made for year of assessment (YA) 2023 or a subsequent YA, the surcharge is applicable to tax avoidance arrangements entered into before the basis period of YA 2023.
In this alert, we discuss the salient aspects of the Revised Anti-Avoidance ETG and consider its impact on taxpayers.
- New categories of tax avoidance explicitly identified by IRAS help clarify IRAS’ position on certain transactions as falling afoul of the Section 33 anti-avoidance provision.
- Taxpayers should take note of the surcharge provision under Section 33A, which is computed at 50% of the tax or additional tax arising from the adjustment under Section 33.
- In particular, the surcharge generally must be paid within one month after the date of the written notice of the Section 33A surcharge, notwithstanding any objection to the underlying Section 33 adjustment.
- Further, the surcharge can apply to arrangements prior to YA 2023, although the surcharge will only be imposed in respect of adjustments made from YA 2023.
- Taxpayers should thoroughly review their tax planning and transactions to ensure that there are bona fide commercial reasons for the transactions and that these do not have the main objective of reducing or avoiding tax to avoid falling afoul of the anti-avoidance rules and triggering the surcharge under Section 33A of the ITA.
- While a remission may be available, this is subject to conditions, and the surcharge will have to be paid upfront unless the comptroller agrees otherwise.
Read the full alert here.
© 2023 Baker & McKenzie.Wong & Leow. All rights reserved. Baker & McKenzie.Wong & Leow is incorporated with limited liability and is a member firm of Baker & McKenzie International, a global law firm with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a “principal” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm. This may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.