Pang Chuan Wah (“Pang”), a 61-year-old businessman involved in the operations of K.B. Luxury Watch and Jewellery (“KBLW”), has been convicted of Income Tax and Goods and Services Tax (“GST”) offences. Although KBLW was registered as a sole proprietorship under his son's name, Pang managed and directed the business's operations and tax matters and instigated his son to provide false information to IRAS, resulting in significant under-declaration of income and GST liabilities. This is the first prosecution involving a business in the pre-owned luxury watch industry.

Pang was sentenced to 14 months’ imprisonment and ordered to pay a penalty of $1,426,808. 

Case Highlights

Income Tax Offences

For Years of Assessment (“YAs”) 2018 to 2020, Pang instigated his son, the sole proprietor of KBLW, to wilfully with intent to evade tax, make false entries in his son’s individual income tax returns. Pang provided his son with understated income figures for KBLW, which were entered and stated in the said returns. This resulted in $351,787.20 of income tax being undercharged.

GST Offences

Pang also instigated his son to, wilfully with intent to evade tax, make use of fraud by deliberately concealing his son’s liability to register for GST, even though Pang knew that KBLW’s sales had exceeded the $1 million threshold and that his son was liable to be registered for GST. This resulted in $108,619.81 in GST being undercharged for the period from 1 June 2017 to 30 December 2018. 

Pang further instigated his son to, wilfully with intent to evade tax, make a false entry in his son’s GST F5 return for the accounting period from 1 April 2019 to 30 June 2019, resulting in $15,195.83 in GST being undercharged.

IRAS Warns Against Tax Evasion

IRAS takes a serious view of non-compliance and tax evasion. There will be severe penalties for those who wilfully evade tax. The authority will not hesitate to bring offenders to court. Offenders may face a penalty of up to four times the amount of tax evaded. Jail terms may also be imposed.

GST Registration Required for Businesses Exceeding $1 Million Annual Turnover

All businesses, including individuals deriving income from their trade, profession or vocation, should closely monitor their income on a calendar year basis to assess if they need to register for GST.

• If a business’s taxable turnover for the past 12 months exceeds $1 million at the end of the calendar year, it must apply for GST registration by 30 January.
• If a business reasonably expects its turnover to exceed $1 million in the next 12 months, it must register within 30 days from the date of its forecast.
• Sole proprietors are required to register once the combined turnover from all their sole-proprietorship businesses and income from any trade, profession or vocation exceeds or is expected to exceed $1 million in the next 12 months.

Any business that fails to register for GST is still required to pay GST on all its past transactions from the date the business becomes liable for GST registration. GST is payable even if the amount is not collected from customers. Failure to register for GST is an offence and businesses may face penalties of 10% of GST and fines of up to $10,000.

Giving Incorrect Information in GST Registration Form or Return

Any business that gives incorrect information in its GST registration form or return without reasonable excuse or through negligence 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 Tax Malpractices

Businesses or individuals are encouraged to immediately disclose any past tax mistakes. IRAS will treat such disclosures as mitigating factors when considering actions to be taken. Please refer to the IRAS website for more information on how to disclose past mistakes. Those who wish to report malpractices may make their submissions via this form.

Cash Rewards for Informants

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