Publication Type

Journal Article

Version

submittedVersion

Publication Date

6-2020

Abstract

The issue of whether the incorporating of companies by professionals in Singapore constitutes tax avoidance has attracted considerable attention. The recent case of GCL v. CIT provides some guidance in this area. It reaffirms the general two-part test in CIT v. AQQ, requiring one to first apply the objective predication principle before moving on to consider the subjective bona fides commercial reason exception. It establishes that the mere fact that a professional incorporated a company through which to practise would not be sufficient to constitute tax avoidance, since such an arrangement is common and widely used, with established commercial benefits. However, the salary paid to a professional is subject to scrutiny and cannot be artificially reduced. Doing so may constitute tax avoidance and/or attract an ‘arm’s length’ adjustment under section 34D of the ITA. It also establishes that the ‘personal exertion principle’ has no basis in Singapore.

Keywords

Tax Law, Taxation, Tax Avoidance

Discipline

Asian Studies | Securities Law

Research Areas

Corporate, Finance and Securities Law

Publication

Asia Pacific Tax Bulletin

Volume

26

Issue

2

First Page

1

Last Page

9

ISSN

1385-3082

Publisher

IBFD

Copyright Owner and License

Authors

Additional URL

https://www.ibfd.org/IBFD-Products/Journal-Articles/Asia-Pacific-Tax-Bulletin/collections/aptb/html/aptb_2020_02_sg_1.html

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