The Inland Revenue Authority of Singapore (IRAS) has identified 279 high-income earners who used artificial arrangements to reduce their tax liabilities. These individuals set up private companies to receive their professional income, allowing them to pay lower corporate tax rates instead of the higher personal income tax rates that apply to high earners. By channeling earnings through these entities, they extracted profits as tax-exempt dividends or non-genuine shareholder loans, effectively bypassing the top personal tax bracket of 24 per cent.
Between 2021 and 2025, IRAS investigated 124 of these cases, successfully recovering $49 million in additional taxes. The authority utilized Section 33 of the Income Tax Act, which grants it the power to disregard or adjust any transaction that lacks commercial substance and is designed primarily to avoid tax. While tax avoidance is not a criminal offence like tax evasion, it remains subject to significant financial penalties and surcharges when deemed artificial.
Recent high-profile cases have highlighted the scale of these schemes. One dentist attempted to hide $765,000 in income by routing his clinic salary through a private company, while a doctor who earned millions annually reported monthly salaries of only $5,000 to $6,000. In both instances, the individuals argued their company structures served legitimate business purposes, but the courts and tax authorities found the arrangements were created mainly to minimize tax payments.
This enforcement drive serves as a clear signal to high-net-worth professionals that IRAS is closely monitoring complex financial structures. As the authority continues to align its practices with international standards, it remains committed to ensuring that all taxpayers contribute their fair share. Moving forward, the public can expect continued scrutiny of arrangements that appear to lack genuine economic rationale.