Investment Company and its Director Fined for Incorrect Declaration of Directors’ Fees in Tax Returns

27 Jul 2020

Hwa Luck Investments Pte Ltd (“Hwa Luck Investments”) and its controlling director, Dr. Tan Hwa Luck (“Dr Tan”), were convicted for declaring incorrect expenses of directors’ fees in Hwa Luck Investments’ Corporate Income Tax returns for Years of Assessment (“YA”) 1995 to 2007.

Incorrect Declaration of Directors’ Fees

Hwa Luck Investments had declared in its Corporate Income Tax returns that directors’ fees amounting to a total of $3,386,000 had been incurred as expenditures between YA 1995 to YA 2007. During an IRAS’ audit, Dr. Tan claimed that the directors’ fees were paid out to four directors and that the directors’ fees had already been paid out to them in two lump-sum payments in Financial Year 2006 and 2009. To substantiate his claims, Dr. Tan presented cheques, payment vouchers and bank statements to IRAS.

However, investigations revealed that the four directors did not receive any lump-sum payment of directors’ fees, and that the payee of the lump-sum directors’ fees was Dr. Tan. The monies were eventually routed back into Hwa Luck Investment’s corporate bank account. Hwa Luck Investments and Dr. Tan had given incorrect information in Hwa Luck Investments’ Corporate Income Tax returns, resulting in a total tax undercharged of $763,285 from YA 1995 to YA 2007.

Court Sentences

For the five proceeded charges of giving incorrect information without any reasonable excuse in the company’s Corporate Income Tax returns, Dr. Tan was ordered to pay a fine of $25,000 and a penalty of $955,580, two times the amount of tax undercharged. The remaining eight charges were being taken into consideration for the purposes of sentencing.

The Court sentenced Hwa Luck Investments to a fine of $25,000 and a penalty of $955,580, two times the amount of tax undercharged.

Penalties for Non-Compliance - Giving Incorrect Information in Income Tax Returns

Any business that gives incorrect information in its Income Tax Returns without reasonable excuse may be liable to a penalty that is twice the amount of tax undercharged. A fine and/or a jail term may also be imposed.

Reporting of Malpractices

Businesses or individuals are encouraged to immediately disclose any past tax mistakes. IRAS will treat such disclosures as mitigating factors when considering action to be taken. Those who wish to disclose past mistakes, reveal evaded taxes, or report malpractices that might indicate tax evasion, can write to:

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

Email: ifd@iras.gov.sg

Cash Rewards for Informant

A reward based on 15% of the tax recovered, capped at $100,000, will be given to informants if the information and/or documents provided lead to a recovery of tax that would have otherwise been lost. All payments are at the discretion of the Comptroller. IRAS will ensure that the identities of informants are kept strictly confidential.

Inland Revenue Authority of Singapore