On 31 Mar 2023, the Inland Revenue Authority of Singapore (IRAS) published the second edition of its e-Tax Guide concerning The General Anti-Avoidance Provision and its Application. The updated guide includes the following main purposes:
- First, it sets out the approach adopted by the Comptroller of Income Tax (“CIT”) to the construction of the general anti-avoidance provision in section 33 of the Income Tax Act 1947 (“ITA”);
- Second, it provides some examples on arrangements, which in CIT’s view, have the purpose or effect of tax avoidance within the meaning of section 33(1) of the ITA. By providing the examples, this e-Tax Guide aims to deter taxpayers from entering into such arrangements. Such arrangements will be subject to the wide powers of the CIT under section 33(1);
- Third, it provides details on the imposition of surcharge under section 33A of the ITA and the circumstances under which remission of the surcharge may be considered.
One of the key changes to the guide involves the inclusion of additional classifications and instances of tax avoidance. The categories include:
- Circular flow or round-tripping of funds;
- Setting up of conduit entity to obtain treaty benefit for the purpose of avoiding withholding tax;
- Assignment of debt to an offshore jurisdiction for the main purpose of obtaining tax advantage;
- Setting up of more than one entity for the sole purpose of obtaining tax advantage;
- Change in business form for the sole purpose of obtaining tax advantage; and Attribution of income that is not aligned with economic reality.
