Severity of Tax Evasion
Tax evasion or fraud is a criminal offence, punishable under the law. In fairness to the majority of people who meet their obligations, and to ensure that public confidence is maintained in the tax system, we are strongly committed to deterring, detecting and dealing with tax evasion and fraud.
Tax Evasion Investigation Programme
Our investigation programme swiftly and effectively detects and corrects such behaviour. We deal with tax evasion and fraud by:
- Gathering and analysing intelligence on risks and threats to the tax system;
- Investigating suspected cases with a view to prosecution;
- Complementing our criminal investigation work with civil audit work and the application of tax penalties;
- Publicising the outcomes of this work to raise community awareness; and
- Reporting deliberate wrongdoings of tax practitioners to their respective professional bodies.
Fraud and Statutory Limits
Where there is fraud, the statutory limitation provided under Section 74(1) of the Income Tax Act and Section 45(5) of the GST Act is not applicable. Tax assessment may be made at any time beyond the following statutory limitation:
Income Tax Fraud
- Six years, if the year of assessment is 2007 and earlier; or
- Four years, if the year of assessment is 2008 onwards.
- Seven years, from the end of the prescribed accounting period, in the case of a prescribed accounting period ending before 1 Jan 2007; and
- Five years, from the end of the prescribed accounting period, in the case of a prescribed accounting period ending on or after 1 Jan 2007.
Conduct of Tax Investigations
Scope of Investigation
The investigation may cover issues on Individual Income tax, Corporate Company Income Tax, GST and other tax types administered by IRAS. The investigation aims to uncover the full facts to determine whether any tax offences have been committed.
Length of Investigation
The length of investigation depends on the scope of investigation, complexity of the issues and the level of cooperation you render during the investigation. Under normal circumstances, an investigation may take about 15 to 24 months to complete.
An investigation may be conducted in the following manner:
- A surprise visit to your business premises to ask for your accounting records, source documents and other relevant records, both paper and electronic;
- A surprise visit may also be conducted simultaneously to your residence and to the premises of your tax agent or representative and any relevant third parties;
- Searches may be conducted during the surprise visit, if necessary;
- Interviews with you, your family members, your staff, your tax agent or representative, your suppliers and any relevant third parties; and
- Obtaining information from or verifying information with other third parties such as other government agencies, banks and financial institutions, foreign tax authorities etc.
If you are under investigation for potential tax offences, you will usually be approached in person by our tax investigators.
When our investigators meet with you, they will identify themselves with their authority cards, which will indicate their full name as well as the legislative powers which they are able to exercise. Their contact details will be provided so that you can contact them if you need further information.
They will also provide you a letter stating the purpose of visit and what is required of you. Should you require confirmation on the identity of the authority card holder, please call IRAS on 6351 2044 or 6351 2046.
Confidentiality of Taxpayers
You have a right to the same high degree of confidentiality as all taxpayers- we will not divulge any information you have provided to third parties, except as allowed under the law. It may be necessary for us to seek information about you or your business from other people or organisations. If this is the case, we will be as discreet as possible about the reasons for our enquiries.
However, in the case of seeking information from the banks, we will need to inform them, as required by the Banking Act, that the request is in relation to our investigation of a criminal offence.
Principle of Fairness
We will keep an open mind to the possibility that there may be a legitimate explanation for the suspected irregularities. We undertake to treat you fairly, professionally, courteously and in accordance with tax laws.
Expectations of Taxpayers Under Investigation
The investigation will be undertaken with or without your voluntary cooperation. Nonetheless, your conduct and level of cooperativeness will be taken into consideration for the appropriate course of action to be taken during the course of the investigation, as well as the outcome of the investigation.
2. Access to Premises and Information
Section 65B of Income Tax Act and Section 84 of GST Act set out the powers of our officers to obtain information, specifically the power to have full and free access to your premises, records, data and documents. Persons found in the premises may also be searched for evidence relevant to the investigation.
The officers may inspect, copy and take possession of the books, records, data and documents, and download relevant information from all electronic storage media, where necessary.
The officers may secure, take possession, photograph and record statements from the users/owners where computers are identified. The electronic data residing in the computers may be captured and preserved as admissible evidence in court.
It is an offence to hinder or obstruct the officers in carrying out their duties under the tax laws. A person guilty of such offence, shall be liable on conviction to a fine not exceeding $10,000 or to imprisonment for a term not exceeding twelve months or both.
3. Arrest of Individuals
Our investigators have the power to arrest individuals suspected to have committed serious tax fraud, or anyone who obstructs the seizure of evidence:
- When making an arrest, the tax investigator will inform the person being arrested of the offence for which he is being arrested.
- An arrested person will be searched upon arrest. Any searches on women will be conducted by female investigators.
- A person arrested can be detained for up to 48 hours, following which he may be charged in Court or released on bail pending further investigations.
4. Provide Information
You are required to provide any information and documents that IRAS requests.
You should ensure that all the information provided by you is true and correct. It is important that you provide complete disclosure of all relevant facts.
False statements or information provided can result in a criminal investigation with a view to prosecution.
Under the tax laws, it is an offence to give any false answer, whether verbally or in writing, to any question or request for information asked or made by IRAS. Offenders found guilty of giving false answers to IRAS, with the wilful intent to evade tax or to assist any other person to evade tax, will face a penalty of three times the amount of tax which has been undercharged or would have been undercharged in consequence of the offence, and be liable to a fine not exceeding $10,000 and/or imprisonment for a term not exceeding seven years.
5. Maintain Records
Under the Income Tax Act and the GST Act, persons liable to pay income tax and GST are required to keep their business records for:
- At least seven years, for accounting periods ending before 1 Jan 2007; and
- At least five years for accounting periods ending on or after 1 Jan 2007.
Under the tax laws, it is mandatory to maintain business records in accordance with the records retention requirement. Any person who fails to maintain their business records shall be guilty of an offence and will be liable to a fine not exceeding $5,000 and/or imprisonment for a term not exceeding six months. In the case of a subsequent offence, he or she shall be liable to pay a fine not exceeding $10,000 and/or imprisonment for a term not exceeding three years.
For businesses, we generally need all accounting and business records, source documents such as contracts, invoices, payment vouchers and receipts that substantiate all your transactions, bank statements and payment evidence.
Please refer to:
- Record Keeping Guide for GST- Registered Businesses (PDF, 254KB)
- Record Keeping Guide for Non-GST Registered Businesses (PDF, 334KB)
For individuals, we need all documents and records pertaining to income and assets acquired as well as expenses incurred.
Please make sure that you keep all existing records, including computer records, in accordance with the records retention requirements as provided in the tax laws.
Conclusion of Investigations
Explanation of Irregularities
We will usually meet with you to discuss any findings that we have uncovered during the course of the investigation.
Upon the conclusion of the investigation, we will meet to discuss and finalise the findings and tax assessments and also give you an opportunity to explain any tax irregularities that we have uncovered in the investigation.
Outcome of Investigations
There are 4 possible outcomes arising from a tax investigation:
Where we have established a prima facie case that offences have been committed, we may consider initiating Court proceedings to prosecute you and/or the abettors for tax evasion or tax related offences.
In some cases, you may be given an offer to pay a sum of money (referred to as the “composition sum”) in lieu of prosecution and conviction in court for that offence. Upon acceptance of composition and full payment of the composition sum, no further prosecution action will be taken. Depending on the severity of the tax offence, the composition sum can be up to 400% of the additional tax payable.
- Stern Warning / Conditional Warning
In some cases, stern warnings or conditional warnings may be issued in lieu of court prosecutions. When a conditional warning has been administered, the prosecution is withheld for a period of time, during which you undertake not to commit any other offences. Upon the expiry of the period, and fulfilment of the condition, no further actions will be taken in respect of the case.
- No Further Action
In cases where there is no evidence of wrongdoing, such as in cases where the irregularities arise from technical interpretations, a case may be closed without further action after the appropriate tax adjustments have been made.
Serious Fraudulent Tax Evasion
Under the tax laws, any person who wilfully with intent to evade or to assist any other person to evade tax, shall be guilty of an offence. Offenders found guilty will face a penalty up to four times the amount of tax which has been undercharged
or would have been undercharged in consequence of the offence, a fine not exceeding $50,000 and/or imprisonment for a term not exceeding seven years.
Tax offences in Criminal Records
Tax offences are serious crimes. Anyone who has evaded tax is akin to have defrauded the State of revenue that is meant to fund public services for the society at large. Under the Registration of Criminals Act (Cap. 268), persons convicted of serious registrable crimes, like cheating and robbery, will have their particulars recorded in their criminal records.
With effect from 1 January 2020, the following tax offences have been listed as registrable crimes under the Registration of Criminals Act:
- evading Income Tax, Goods & Services Tax and Stamp Duty;
- promoting abusive PIC arrangements;
- improperly obtaining GST refunds from the Comptroller;
- not complying with notices to provide information to the Comptroller;
- providing false or misleading information to the Comptroller; and
- obstructing IRAS officers in carrying out their duties.
Recent Investigation Activities by IRAS
We will take enforcement actions against non-compliant businesses. All these cases are publicised in the press.
As part of pursuing a fair tax system, and to maintain public confidence in the tax system, we will prosecute taxpayers who intentionally and fraudulently evade their tax obligations.
Refer to tax crime to read about our recent prosecution cases.