IRAS nabs 279 high-income earners over sham arrangements to pay less tax

The taxman said 279 high-income earners were caught for sham arrangements to avoid paying more tax.

SINGAPORE – The taxman has caught 279 high-income earners to date for using sham arrangements such as setting up private companies to receive their income to avoid paying more tax.

Out of this group, the Inland Revenue Authority of Singapore (IRAS) probed 124 cases from 2021 to 2025 and clawed back $49 million in additional tax.

All but one of these cases involved taxpayers extracting profits as tax-exempt dividends or interest-free shareholder loans.

Unlike tax evasion, which is a crime involving hiding and falsifying income, tax avoidance by channelling funds through various arrangements is not an offence, but these moves can result in additional taxes and surcharges being levied if there is no real purpose for these transactions other than paying less tax.

Cases involving such taxpayers were highlighted recently when the High Court dismissed the bid of three doctors to challenge the decision of IRAS to levy more taxes on their total incomes.

Some of these errant taxpayers thought they could avoid the higher personal tax rate – 24 per cent for those with income exceeding $1 million – by channelling the bulk of their earnings to their companies because corporate profits are taxed at just 17 per cent here.

After-tax profits can be declared as dividends and paid to shareholders, who do not have to pay personal income tax on them.

These private outfits paid even less corporate taxes in reality because companies enjoy various concessions aimed at spurring growth and entrepreneurship.

But instead of using profits to expand business and hire more employees, these high-income earners merely used the structure to channel “tax-exempt” dividends and even non-genuine “shareholders’ loans” to themselves.

To deal with these taxpayers, IRAS took action under Section 33 of the Income Tax Act, which empowers it to disregard or vary any contrived arrangement and claw back the taxes that should have been paid.

In the recent dispute, the doctors challenged IRAS’ decision to conduct further tax assessments on their dividends and shareholders’ loans they paid to themselves from 2013 to 2018 through various private companies they had set up.