The Inland Revenue Authority of Singapore (IRAS) has identified 279 high-income earners who utilized sham arrangements to minimize their tax liabilities. These individuals attempted to circumvent higher personal income tax rates by channeling their earnings through private companies, a practice that has drawn increased scrutiny from the tax authority.
This enforcement action highlights the ongoing efforts by IRAS to maintain the integrity of Singapore’s tax system. Between 2021 and 2025, the authority investigated 124 of these cases, successfully recovering $49 million in additional taxes. The findings were disclosed in Parliament on July 7, underscoring the scale of tax avoidance among certain high-net-worth segments.
Many of the identified taxpayers sought to exploit the gap between personal income tax rates, which can reach 24 per cent for those earning over $1 million, and the corporate tax rate of 17 per cent. By routing income through private entities, these individuals often extracted profits as tax-exempt dividends or interest-free shareholder loans to avoid personal tax obligations.
While tax avoidance through such arrangements is not a criminal offense, IRAS is empowered under Section 33 of the Income Tax Act to disregard transactions that lack commercial substance and are designed solely to reduce tax payments. The authority can then impose the appropriate taxes and surcharges on the errant taxpayers.
Recent legal developments have reinforced the authority's stance, including a High Court decision that dismissed a challenge from three doctors against IRAS's decision to levy additional taxes on their income. As the taxman continues its audits, these cases serve as a reminder of the risks associated with aggressive tax planning strategies that lack genuine business purpose.