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Description
Sometime in November 2019, IRAS issued an undated circular titled “Incorporation of Companies by Medical Professionals and Relevant Tax Implications” (‘the Circular’). There are essentially two objectives of the Circular: (1) To explain what IRAS regards as tax avoidance, and (2) to describe IRAS’ approach to fact situations where medical professionals practise through companies owned by themselves.
The Circular can be seen as a laudable attempt by IRAS to educate taxpayers and make known its approach to a difficult and complex area of tax law and practice. It may be seen as part of IRAS ongoing audit initiatives on private sector medical professionals who practice through companies.
Essentially if IRAS is of the view that there is no basis for running a medical practice through a limited liability company, IRAS has indicated that it will disallow all tax benefits of corporatisation. Further where even if IRAS is of the view that there is a basis for running a professional practice through a company; IRAS has indicated that it will adjust salaries paid by the company to its employees where the salaries are not in IRAS’ view, arm’s length remuneration. The effect of IRAS’ adjustments will mean the loss of tax exemptions and tax rebates normally applicable to companies, and in almost all cases a higher effective tax rate borne by owners of the companies.
The ramifications of the Circular are very wide, and while addressed to medical professionals can potentially apply to any closely held one- or two-man company. This approach taken can also apply to any arrangement where any professional services are provided through a company.
This seminar will address issues arising from the Circular and will include case studies. The speaker will share his personal insights from his experience as a lawyer in ongoing disputes he has with IRAS.
Programme Outline
Background: Principles of Tax Avoidance
- Tax Avoidance vs Tax Planning
- Tax Avoidance and its legal consequences
- How does IRAS determine if tax avoidance has taken place?
- The Court of Appeal’s Three Step Approach
Introduction to the Circular
- Common Arrangements in Tax Avoidance
- Shifting of income derived mainly from one’s personal efforts or skills to a company
- Artificial splitting of income through the incorporation of multiple companies
- Artificial re-incorporation of the same business
- Attribution of income or profit not aligned with economic reality
- Will I be affected? What should I do if I am being audited?
Case studies and Discussion on Specific Aspects of Circular
Q&A Session
Practice Area: Tax
Training Level: Intermediate
2.5 Public CPD Points* / 3 CPE Hours
*For SILE CPD purposes
SILE ATTENDANCE POLICY: Participants who wish to obtain CPD Points are reminded that they must comply strictly with the Attendance Policy set out in the CPD Guidelines. For this activity, this includes signing in on arrival and signing out at the conclusion of the activity in the manner required by the organiser, and not being absent from the entire activity for more than 15 minutes. Participants who do not comply with the Attendance Policy will not be able to obtain CPD Points for attending the activity. Please refer to http://www.sileCPDcentre.sg for more information.
Expert Speaker
Liu Hern Kuan
Head of Tax, Tan Peng Chin LLC
Hern Kuan has wide experience in Revenue Law, having lectured in it at the Law Faculty in NUS, practiced as a tax manager in Big-4 accounting firms and as head of tax in a major law firm. He was also the Chief Legal Officer of the Inland Revenue Authority of Singapore (IRAS) for 10 years. While at IRAS he represented the Comptroller of Income Tax in the leading case on tax avoidance, AQQ v CIT.
Hern Kuan’s tax practice is largely focused on civil and criminal disputes with IRAS and tax planning and structuring, both domestic and international tax.
He has presented many seminars on tax law and was an associate staff lecturer on tax planning and international tax at SIM university.