What are the three possible outcomes in the event of Tax Avoidance?

By Medinex Team | Oct 2024

If the CIT is of the view that there was tax avoidance, section 33 of the ITA will be invoked to vary the arrangement. Depending on the case facts, any, or a combination, of the following three outcomes may occur:

	Option 1	Option 2	Option 3
Outcome	The company structure would be disregarded and all income initially attributed to the company would be taxed in the individual's capacity, IRAS takes action by zeroing on the corporate tax assessment(s) and assessments will be raised on the individual.	In the case of income splitting, income attributable to the same operation would be consolidated to be taxed under one company Tax assessments for the companies will be consolidated under one company.	If the key personnel of the company is not adequately remunerated, the market salary benchmark, if available, or the cost-plus method will be applied to determine the arm's length amount due to the key personnel.
Action by IRAS	Corporate tax assessment(s) will be revised to zero and assessments will be raised on the individual.	Tax assessments for the companies will be consolidated under one company.	The remuneration of the individual will be adjusted accordingly. A corresponding deduction will be allowed to the company for this adjustment.
	From YA 2023, section 33A surcharge is applicable if an arrangement falls within the provisions of section 33 and CIT makes an adjustment to counteract the tax advantage resulting in any tax or additional tax being assessed on the taxpayer. The surcharge is computed based on 50% of the tax or additional tax arising from tax adjustment made under section 33 of the ITA. Please refer to e-Tax Guide "The General Anti-Avoidance Provision and its Application" for more details.
When would I know if the review of my companies has been finalised by IRAS?	IRAS will engage you as it conducts the review. When the review is completed, you will receive a letter of completion of review from the Small Business or/and Corporate Tax Division.

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